The Virgin Islands' $50 million share of a national tobacco settlement has, in a sense, already been spent. A bill passed last year by the 22nd Legislature, and signed by former Gov. Roy Schneider, splits the territory's proceeds between government employees' retroactive wages and health care.
This, and further terms of the $206 billion settlement reached last year between a coalition of U.S. attorneys general and the tobacco industry, was the subject of a speech given Monday by Assistant Attorney General Alva Swan before the League of Women Voters of the Virgin Islands.
"As matters now stand, the Virgin Islands recovery from tobacco litigation . . . excluding the interest, will be $49,510,102.11," Swan said. "But with interest over the intervening years, the territory will receive far in excess of $50 million."
The $206 million will be paid out to the states and territories over 25 years. Thus, beginning in April 2000, the Virgin Islands' will receive a total of $34 million over 25 years. The territory will receive an additional $15 million over 10 years from a secondary agreement of the settlement.
Overall, the territory should receive about $2.8 million a year.
"The question I am going to anticipate is whether we can shorten the time from 25 years to five years, where that $50 million can have a greater impact. The answer is still no, it can't be done," Swan said. "The payment structure may be a blessing in disguise in that we will not be able to spend all $50 million at one time, as we would if the funds were available to us in a lump sum payment."
Act 6220, however, severely limits what current and future administrations can use the tobacco money for. Under Act 6220, passed by the V.I. Legislature in 1998, 50 percent of the money from any tobacco settlement must be deposited into the Union Arbitration Award and Government Employees Increment Fund — the source used to pay employees' salary increases and retroactive wages.
The other 50 percent goes into the Health Care Revolving Fund.
"And that folks, will exhaust the entire settlement proceeds, and exhaust it to the exclusion of any other worthy cause or program, health care or otherwise," Swan said. "My suggestion is to encourage you to lobby your senators to amend the act to make the distribution of the tobacco settlement fund more equitable.
"By so doing the Legislature may be convinced that there are other pressing issues of concern to all of us. So much so that the act can be amended to pay for health care costs and for programs that will discourage youth smoking. That is the entire basis of the settlement," he said.
Depositing funds into the Health Care Revolving Fund does not guarantee money will be used for health care, Swan said.
"I am aware that many residents would prefer that a portion of the tobacco settlement be earmarked for improving long term health care. On a personal note, so would I and so would Gov. Turnbull," Swan said. "A further problem with the provision of the Act is that, at various times, the Health Care Revolving fund has been used for salaries.
"The prospect therefore is that the entire proceeds from the Virgin Islands' share of the tobacco fund, all $50 million, could conceivably used to pay retroactive wages, as well as current wages, over the 25 year-life of the settlement."
Swan said Attorney General Stridiron is also interested in putting some of the proceeds into a "Rainy Day Fund," that would assist residents in recovering from natural disasters such as hurricanes. The fund was created in the late 80s, but money has never been deposited into it, Swan said.
After the meeting, LWV President Erva Denham said that, while the organization has not formed an official position on the settlement, it supports using the funds to pay for health care costs.
The LWV will most likely begin lobbying senators to amend Act 6220, she said.
"We still need one of two pieces of information. We still need to know if there are any strings attached to the funds," she said.
The territory is receiving a smaller share not only because it has a smaller population but also because it has a lower percentage of smokers than most states, Swan said.
"The average percentage of smokers in the Virgin Islands is 9 percent. The national average is 22 percent of the population," he said. "Much of the recovery was geared to the number of percentage of smokers in the population."
Several states and territories sued the tobacco industry over the cost of treating smokers and nonsmokers for smoking related illnesses.
Under the settlement, the tobacco industry must also fund, at $25 million per year for ten years, a foundation to study and develop programs to reduce youth smoking.
The settlement also restricted the tobacco industry's ability to advertise; they can no longer use billboards, sponsor sporting events, or target teens with promotions such as the now infamous and discontinued Joe Camel.
The territory is not responsible for any more litigation costs, Swan said.