Board May Use Tobacco Payout for Fiscal Woes

As supervisors begin debating how to address the county’s financial problems next month, one of the first issues they will tackle is whether to dip into $8.3 million in tobacco settlement funds.

Supervisors recently learned the county may receive the entire tobacco payment by April 15, raising the possibility that the money can be tapped to bail the county out of a projected $5-million deficit.

A majority of supervisors on Monday indicated they are willing to use at least a portion of the money to pay for millions of dollars in unanticipated expenses brought on by last year’s mental health care merger and a federal Medicare lawsuit--the primary causes of the county’s fiscal woes.

Supervisors John K. Flynn and Kathy Long said such payments would be a legitimate use of the tobacco settlement money, generated by a states’ lawsuit against major tobacco companies to recover the costs of treating smoking-related illnesses. Keith Jajko, senior aide to Supervisor Judy Mikels, said the Simi Valley supervisor, who is out of town, would also probably support a bailout plan since the costs are related to health care.

“The whole funding system of the Health Care Agency is going through some changes,” Jajko said. “It could be good to have the settlement money in the bank, so to speak, to cover unforeseen costs.”

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Supervisor Frank Schillo, however, said he is unwilling to use the tobacco settlement to pay for costs related to last year’s merger. Schillo cast the sole dissenting vote in October, when supervisors decided whether to use $3 million in tobacco settlement funds for the first of five annual payments to settle a $15.3-million federal lawsuit related to Medicare billings in the Behavioral Health Department.

“Instead of using new money to pay for old problems, I’d like to see that money used for things like housing for the mentally ill,” Schillo said. “It’s a lot of money, and it’s coming in on a regular basis for a period of time. I want to be able to look back and say, ‘Look what we did with that money.’ ”

In a Dec. 3 report to supervisors, Health Care Agency Director Pierre Durand said payouts associated with the merger and lawsuit will cost at least $4.1 million this year. Last week, the board agreed to spend $1 million to cover the cost of a monitoring program for health-care billings and indicated it would look for a way to pay the bill without decimating the agency’s budget.

Using the tobacco settlement to cover some of those costs is a good option, Flynn said.

“Those costs have added up enormously,” the Oxnard supervisor said. “We need to look at how that money could be used to help out the Health Care Agency.”

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Flynn said he also favors passing a resolution or ordinance that would formally designate all money generated by the settlement--expected to average $9 million annually for the next 25 years--for health-related programs only.

Doing so would remove the temptation of county leaders to divert that money to other uses, Flynn said. In Orange County, for instance, supervisors are considering using the money to build new jails and retire the debt from the county’s bankruptcy five years ago. Under the current proposal, just 20% of Orange County’s share of tobacco funds would go to health-related programs.

“It’s better to say up front where that money should go,” Flynn said. “If you don’t, then everyone’s uncle and brother and sister come looking for it.”

At least two other supervisors, Schillo and Long, say they might support a nonbinding resolution. But the added step of adopting an ordinance, which would formally restrict how the money could be spent, is not necessary, the supervisors said.

“There are enough needs in the health-care arena that this board or future boards will see the value of using 1/8the tobacco money 3/8 as a mechanism for paying for them,” Long said.

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A committee headed by Schillo and Mikels is expected to meet next month to begin hashing out how the tobacco settlement will be spent. Once this year’s funding problems are dealt with, there is an array of options, supervisors said.

A majority favor expanding housing for people with serious mental illnesses. Long said she would like to see the county’s former psychiatric hospital converted to a transitional home for mental-health patients leaving the hospital.

It would cost about $1 million to fix dilapidated plumbing at the facility on Hillmont Avenue, adjacent to the county hospital, Long said. But the conversion would result in 30 extra beds for those with serious mental illnesses, she said.