[Senate Hearing 106-1146]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 106-1146

 EFFECTIVE TOBACCO REDUCTION PROGRAMS AND THE USE OF TOBACCO REVENUES 
                 FROM THE SETTLEMENTS, FOR THIS PURPOSE

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                            OCTOBER 5, 2000

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation




86-959              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092250 Mail: Stop SSOP, Washington, DC 20402ï¿½090001

       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
SLADE GORTON, Washington             JOHN D. ROCKEFELLER IV, West 
TRENT LOTT, Mississippi                  Virginia
KAY BAILEY HUTCHISON, Texas          JOHN F. KERRY, Massachusetts
OLYMPIA J. SNOWE, Maine              JOHN B. BREAUX, Louisiana
JOHN ASHCROFT, Missouri              RICHARD H. BRYAN, Nevada
BILL FRIST, Tennessee                BYRON L. DORGAN, North Dakota
SPENCER ABRAHAM, Michigan            RON WYDEN, Oregon
SAM BROWNBACK, Kansas                MAX CLELAND, Georgia
                  Mark Buse, Republican Staff Director
               Ann Choiniere, Republican General Counsel
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 5, 2000..................................     1
Statement of Senator Burns.......................................     5
Statement of Senator McCain......................................     1
Statement of Senator Wyden.......................................     4

                               Witnesses

Coolidge, Francis L., Immediate Past, Chairman, National Board of 
  Directors, American Cancer Society.............................    25
    Prepared statement...........................................    27
Hurson, Hon. John, Delegate, Maryland General Assembly...........    47
    Prepared statement...........................................    49
Montgomery, Betty D., Attorney General of Ohio, Office of the 
  Attorney General, State Office Tower...........................    17
    Prepared statement...........................................    20
Myers, Matthew, President, Campaign for Tobacco-Free Kids........    33
    Prepared statement...........................................    36
Satcher, Dr. David, Assistant Secretary For Health and Surgeon 
  General, Department of Health and Human Services, Accompanied 
  By Terry Pechacek, Associate Director for Science, Office on 
  Smoking and Health, Centers for Disease Control and Prevention.     6
    Prepared statement...........................................     8

 
                      EFFECTIVE TOBACCO REDUCTION 
PROGRAMS AND THE USE OF TOBACCO REVENUES FROM THE SETTLEMENTS, FOR THIS 
                                PURPOSE

                              ----------                              


                       THURSDAY, OCTOBER 5, 2000

                                       U.S. Senate,
        Committee on Commerce, Science, and Transportation,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:30 a.m. in Room 
SR-253, Russell Senate Office Building, Hon. John McCain, 
Chairman of the Committee, presiding.

            OPENING STATEMENT OF HON. JOHN McCAIN, 
                   U.S. SENATOR FROM ARIZONA

    The Chairman. Good morning. I want to thank the witnesses 
for their presence. I would like to discuss this issue a bit 
before we call our witnesses.
    In November 1998, 46 states settled lawsuits they had filed 
against tobacco companies. Over the next 25 years, the 
settlement will pay an additional $206 billion to the states 
involved. Four other states that have reached separate 
settlements with the tobacco industry will receive an estimated 
$40 billion. That's Florida, Minnesota, Mississippi, and Texas.
    At the onset of the litigation, one of the most recurring 
and dominant refrains by state officials pursuing the 
litigation was the critical need to reduce the use of tobacco 
products by children. The settlement funds are now arriving in 
state coffers at a time when most state economies are at their 
greatest. State governments in the United States reported a 
total surplus of $35 billion in 1999. The settlement agreement 
placed no restrictions on the use of the funds.
    While many states are still in the process of determining 
the use of the funds, questions are being raised by public 
health advocates and Members of this Committee about the amount 
of funding that is being devoted to tobacco use prevention and 
reduction programs. Matt Myers, of the Campaign for Tobacco-
free Kids, who we had the great privilege of working with as we 
attempted to pass legislation through the Congress of the 
United States, and has been an advocate of children for many 
years, has stated that of the 30 states that dealt with the 
tobacco settlement money in 1999, only eight provided enough 
new funding for truly comprehensive tobacco prevention and 
cessation programs.
    Much of this funding is being used for other purposes. For 
example, it has been reported that the mayor of Los Angeles 
intends to use $100 million of the city's tobacco settlement 
payment to address lawsuits involving police corruption.
    Today, we will examine a series of recommendations by the 
Surgeon General and the U.S. Centers for Disease Control (CDC) 
about effective programs to reduce tobacco use. This Committee 
will also review the uses to which the states have devoted 
settlement dollars.
    Beginning in 1998, payments from tobacco companies have 
been credited to an escrow account. Each state's annual 
allotment from the account is based on a complex formula that 
accounts for its historical health spending. The total annual 
payments will be adjusted based on a number of factors, 
including the consumer price index and the amount by which 
domestic tobacco sales declined. As a result, a great deal of 
uncertainty exists about the precise amount of funding the 
states will receive.
    Under the terms of the agreement, states must enact certain 
legislation and take other actions to receive their settlement 
payments in full. States must enact a model statute, as drafted 
in the Master Settlement Agreement (MSA), or the payments could 
be reduced. Forty-four states have enacted model statutes to 
date.
    Next, states must achieve state-specific finality under the 
agreement by having their state courts approve the master 
settlement, and all parties must be released from liability 
except for criminal liability. To date, 44 of the 46 states 
that were part of the MSA have achieved state-specific 
finality.
    The Surgeon General and the CDC describe tobacco use as, 
quote, the single most preventable cause of death and disease 
in our society. Annually, tobacco use causes more than 433,000 
deaths, and costs the Nation between $50 and $73 billion in 
medical expenses alone. Their recommended goals for 
comprehensive tobacco control programs focus on preventing the 
initiation of tobacco use by young children, promoting quitting 
among young people and adults, eliminating nonsmokers' exposure 
to environmental tobacco smoke, and identifying and eliminating 
the disparities relating to tobacco use among different 
population groups.
    Commenting on the funding necessary to establish 
comprehensive tobacco control programs, the CDC says the amount 
necessary will, of course, vary from state to state. However, 
it recommends a range of $5 to $20 per person to implement all 
of the components of a comprehensive tobacco control program.
    The CDC has reported that no state--no state--is currently 
implementing all of its recommended program components fully. 
The most comprehensive review of the states' use of tobacco 
funds has been done by the National Conference of State 
Legislatures (NCSL). Similar work has been done by the American 
Cancer Society and the Campaign for Tobacco-Free Kids.
    According to NCSL, as of July this year 44 state 
legislatures have appropriated nearly $8 billion in tobacco 
settlement funds to be placed in endowments, trust funds, and 
general revenue accounts to fund tobacco prevention, health 
care, and education activities. Six remaining states, Arizona, 
Missouri, Oklahoma, Oregon, and Pennsylvania have yet to decide 
how to spend the funds.
    As a group, states are spending a little more than half of 
their money on either health care programs or tobacco 
prevention programs. A mere 9.2 percent of the funds is being 
used for tobacco prevention programs. The vast majority of the 
funding is being used for health care services. However, the 
NCSL report demonstrates that individual states are using the 
settlement funding for a variety of purposes.
    New Hampshire spent all of its fiscal year 2000 funds to 
correct flaws in its education formula.
    Georgia established the one Georgia trust fund and 
appropriated $62 million of the $144.2 million it received to 
attract business to rural regions of the state.
    The Commonwealth of Virginia has allocated $18 million of 
the $179 million it received for fiscal year 2001 to tobacco 
prevention programs. $89.5 million has been used to indemnify 
tobacco growers from the effects of the MSA and revitalize 
tobacco-growing communities.
    Nevada will use 10 percent of the funding for tobacco 
prevention, but some of the money will be used to aid public 
broadcasting television stations develop DVD television.
    Illinois will spend $26.4 million on tobacco prevention 
programs. However, $315 million of the $437.4 million allocated 
to the state for fiscal year 2001 will be used for either a 
property tax rebate or an earned income tax credit.
    I want to say a word about legal fees. In some states, 
legal fees represent more than a quarter of the total 
settlement award, far outweighing the amount of funding used 
for tobacco prevention and reduction programs. Of the State of 
Mississippi's estimated $4.1 billion settlement, attorney's 
fees will eat up $1.4 billion, or 34.1 percent of the funds. 
Michael Horowitz of the Hudson Institute estimates that the 
tobacco settlement will provide $500 million per year to 200 to 
300 lawyers.
    I want to repeat that. The tobacco settlement, according to 
Michael Horowitz of the Hudson Institute, will provide $500 
million per year to 200 to 300 lawyers, most probably in 
perpetuity.
    The state Attorneys General accounted for these statistics 
by stating that the payments to attorneys are from a separate 
and distinct account being paid by the tobacco companies. I 
think that is a disingenuous argument.
    As part of the MSA, the tobacco-free arbitration panel was 
established to oversee payments to the plaintiffs' counsel. The 
inmates were guarding the asylum. However, some attorneys have 
refused to submit their fee requests to the panel, and they 
insist on payment according to contingency fee agreements.
    One example of this is Maryland attorney Peter Angelos. Mr. 
Angelos has previously insisted on full payment on the original 
25 percent contingency fee contract. This would potentially 
result in Angelos' receiving a payment of $1 billion from 
Maryland's $4 billion settlement award.
    A dispute has resulted over this payment in Maryland, with 
leaders of the state legislature claiming that a subsequent 
reduction of half of that fee was agreed to by Angelos due to 
the fact that Maryland State tort law was changed in order to 
assist Angelos in winning the case.
    Three firms representing the state of Wisconsin billed the 
tobacco companies $75 million for the case's 26,284 hours of 
work. Even though this sum was a substantial reduction from the 
firms' original request for $847 million (20 percent of the 
$4.2 billion to be awarded Wisconsin) the reduced sum still 
represents a fee of $2,853 per hour, not bad compensation.
    I would like to thank the witnesses for being here today, 
and I'd like to ask Dr. David Satcher, who is the Assistant 
Secretary of Health and the Surgeon General of the United 
States, to please come forward as our first witness.
    I am sorry. I would welcome you, and how do you pronounce 
your name, Mr. Pechacek--but I would like to first ask for 
opening statements. Senator Wyden.

                 STATEMENT OF HON. RON WYDEN, 
                    U.S. SENATOR FROM OREGON

    Senator Wyden. I am going to be very brief, and I am going 
to have to be in and out this morning because we have other 
hearings at this time as well. First, Mr. Chairman, I want to 
thank you for holding this hearing and for all of your efforts 
since I have been in the United States Senate on this matter of 
protecting children in particular.
    It is very clear that we have significant problems with 
respect to protecting America's youngsters. You have 
consistently worked with me and others who have been active on 
this cause, and I want you to know that we very much appreciate 
your leadership on this issue.
    The Chairman. Thank you very much, Senator Wyden.
    Senator Wyden. Mr. Chairman, it has been almost 7 years now 
since the tobacco executives told me when they were under oath 
that nicotine is not addictive, and it is very clear since that 
time that while some progress has been made on some fronts 
there is still a long, long way to go to protect America's 
youngsters.
    In 1998, the Senate debated whether to require the states 
to spend a portion of the tobacco settlement funds on health 
care. Although it sounded at the time like a significant amount 
of money was being discussed for 39 states and the District of 
Columbia, the 20 percent of total settlement dollars earmarked 
for health programs actually turned out to be less than what 
the CEO's of RJR and Phillip Morris made in compensation in 
just 1 year.
    Mr. Chairman, you, in your opening statement, outlined--and 
I think it is very important that it be part of the record--
some of the flaws in the settlement, some of the problems that 
we have seen since its enactment with respect to how those 
critically used funds have been siphoned off.
    I want to make it clear, I am not against CEO's being 
compensated for their work, but when you have so many states in 
this country spending less on protecting youngsters than the 
executives of just a couple of these companies, and then you 
add on to it the holes in the settlement that you pointed out 
in your opening statement, it is very clear to me that there is 
significant work to be done to reform this program.
    And so I am very pleased that you are holding this hearing. 
I hope the Congress will come back next year and look at a way 
to reform this program to get it back on track so it is doing 
what is essential for the public health, and that is to ensure 
that an adequate portion of these resources is actually spent 
on smoking prevention and cessation with a special focus on 
young people.
    So I look forward to working with you, Mr. Chairman. I am 
very appreciative that you are holding this hearing.
    The Chairman. I thank you, Senator Wyden, and I would like 
to make an additional comment. I think Dr. Satcher will testify 
in states where there have been vigorous anti-youth smoking 
programs, combined with the increase in the cost of a pack of 
cigarettes, we have seen positive results, and I think Matt 
Myers will also agree with this, that in states where they have 
not been doing that we have not seen the reduction in youth 
smoking, so there is a direct connection that frankly was 
derided by some at the time we were working on the tobacco 
bill.
    Senator Burns, welcome.

                STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. Thank you very much, Mr. Chairman. Thank you 
for holding this hearing, and I will be very, very short. When 
we got notification of this hearing we contacted our Attorney 
General's Office in Montana to see how we were doing up there 
and how the funds were being spent, and I am very happy to 
report that our programs are in place, the models are in place.
    And just visiting with some of the public health folks 
across the State of Montana, of all the programs like helping 
people to quit smoking and the health problems and second-hand 
smoke and all these programs, prevention is probably--and 
especially with children--has probably been the most successful 
to this date. The Tobacco-Free Kids are to be congratulated for 
their work in this area and education also as far as tobacco is 
concerned.
    So I just want to report to you that we are doing well in 
Montana, and I am also glad to hear your report this morning. I 
was really concerned that our lawyer friends were not going to 
be justly compensated.
    [Laughter.]
    The Chairman. Thank you very much. I know of your abiding 
concern for them.
    Senator Burns. I have a great concern. I am afraid they 
will just have many hungry days.
    The Chairman. Could I mention to our witnesses, I think we 
are going to have a vote at 10 o'clock, which means we are 
going to have to break, and then I would imagine, if the past 
few days has been true, that there will be an objection lodged 
to the hearing continuing past 11:30, so we will try to 
expedite our opening statements, and I will try to restrain 
myself as well.
    Welcome, Dr. Satcher, and thank you for the wonderful work 
you do in a broad variety of areas. We are proud of your 
service to our country.

STATEMENT OF DR. DAVID SATCHER, ASSISTANT SECRETARY FOR HEALTH 
 AND SURGEON GENERAL, DEPARTMENT OF HEALTH AND HUMAN SERVICES, 
ACCOMPANIED BY TERRY PECHACEK, ASSOCIATE DIRECTOR FOR SCIENCE, 
       OFFICE ON SMOKING AND HEALTH, CENTERS FOR DISEASE 
                     CONTROL AND PREVENTION

    Dr. Satcher. Thank you, Chairman McCain, Members of the 
Committee. I am David Satcher, Surgeon General and Assistant 
Secretary for Health, and I am pleased to appear before you and 
to present testimony on our newest tobacco-related Surgeon 
General's report, which was entitled, Reducing Tobacco Use.
    I am accompanied by Mr. Pechacek, Associate Director for 
Science in CDC's Office on Smoking and Health. He was also 
associate scientific editor of the new report.
    I do want to express my appreciation, Mr. Chairman, 
particularly at what I know is a very busy time in this 
legislative season for your holding this hearing and for your 
continuing concern and leadership on tobacco control. Let me 
just say that this was the 52nd report from the Office of the 
Surgeon General. It was the 29th report on tobacco use. It is 
the first ever to provide an in-depth analysis of various 
methods to reduce tobacco use.
    Our report shows we have the tools, the knowledge, and the 
resources to cut smoking rates in half by the end of this 
decade, and that is the goal of Healthy People 2010. The 
question is, do we have the will? Although our knowledge of 
tobacco control remains imperfect, we know more than enough to 
take on the tobacco control challenges of the 21st Century. Our 
findings tell us that our lack of greater progress in tobacco 
control is a result of our failure to implement proven 
strategies rather than a lack of knowledge about what to do.
    I think the sobering reality is that smoking remains a 
leading cause of preventable death and disease in the United 
States today. More than 400,000 adults die prematurely from 
tobacco-related diseases each year. Today, nearly a quarter of 
U.S. adults and about a third of U.S. teenagers continue to 
smoke, and we believe efforts should focus on promoting 
quitting among adults and youth smokers, preventing young 
people from ever starting to smoke, protecting citizens from 
second-hand smoke, and eliminating racial and ethnic 
disparities in tobacco-related diseases.
    This last goal, eliminating disparities, poses a great 
national challenge. We are wholeheartedly committed to 
expanding our research efforts and designing even more 
effective programs that address the unique cultural, ethnic, 
social, and socioeconomic needs of different populations.
    At the beginning of September I participated in a World 
Federal of Public Health Associations meeting in China. I 
reported at that meeting that today more than 4 million people 
die each year from smoking in the world. By 2030, that number 
will rise to 10 million, 70 percent of whom will be from 
developing countries. The United States is committed to working 
side-by-side with other nations and international organizations 
such as WHO to create a broad framework to curb the global 
epidemic of tobacco-related disease.
    Later this month, the WHO will meet to begin the first 
stage of a negotiation on a framework convention on tobacco 
control. Although the report was developed primarily to guide 
decisions about effective tobacco control programs in this 
country, the report's findings have clear global applications. 
I want to now share briefly with you some of the major 
conclusions of the new tobacco report.
    The report suggests the most serious challenge to our 
efforts to prevent tobacco use is the pervasive ongoing tobacco 
advertising and promotion campaigns by the tobacco industry. 
The industry spent $6.7 billion to market tobacco in the United 
States in 1998, more than $18 million a day. This marketing 
campaign takes place despite overwhelming evidence of the 
adverse health effects of tobacco use.
    The regulation of tobacco sales and promotion is required 
to protect young people from influences to take up smoking, and 
in which many of them become addicted before they are actually 
old enough to legally purchase tobacco, and that is the bad 
news.
    The good news in the report concludes that our major 
methods of reducing tobacco use are effective particularly when 
used as part of a comprehensive control program, and I will 
mention four of those strategies. The first are school 
programs. The report finds that educational strategies can 
postpone or prevent smoking onset in 20 to 40 percent of 
adolescents. School-based programs are most effective when 
combined with mass media programs and the community-based 
efforts involving parents and other community resources.
    Unfortunately, less than 5 percent of schools nationwide 
are fully implementing the CDC school health guidelines. The 
report concludes second that pharmacologic treatment of 
nicotine addiction, combined with behavioral support, will help 
20 to 25 percent of users to quit smoking for good. In fact, we 
now know that if physicians would just ask their patients to 
quit smoking, 5 to 10 percent of their patients would in fact 
quit, and that would represent a two to fourfold increase in 
the quit rate.
    If you go further and add to that programs of 
pharmacological treatment and counseling, 20 to 25 percent of 
users would quit, and that is a tenfold increase in the quit 
rate that we have in this country.
    These findings are critical, because 70 percent of smokers 
actually want to quit, and yet only 2.5 percent are now able to 
succeed in any given year. Addiction is, in fact, a chronic 
disease.
    The Public Health Service recently issued a clinical 
practice guideline that highlights effective treatment methods 
for nicotine addiction. The broad application of this guideline 
could produce some more rapid short-term impact on the 
statistics.
    The report concludes that clean air regulations and 
restrictions of minors' access to tobacco use help to change 
social norms with regard to smoking, and may reduce smoking 
rates directly. The report is clear that optimal protection of 
nonsmokers and smokers requires a smoke-free environment. 
However, despite the existence of numerous laws and policies in 
support of smoke-free schools, work site, and public places, 
only California today meets the Healthy People 2010 objective 
to eliminate exposure to second-hand smoke by the banning of 
indoor smoking or limiting it to separately ventilated areas.
    I want to point out, Mr. Chairman, that almost 30,000 
children per year are estimated to have the onset of asthma 
because of exposure to second-hand smoke.
    The report also concludes that economic approaches to 
tobacco control are good public health policy. It is estimated 
that a 10-percent increase in price can lead to an overall 
reduction in smoking of 3 to 5 percent, and as high as 7 
percent in teenagers.
    The report also notes that the need to improve tobacco 
warning labels in the United States is great. The report shows 
that consumers receive very little information regarding the 
ingredients, additives, and potential toxicity of tobacco 
products.
    I want to conclude by highlighting that the most effective 
approach to controlling tobacco use is the comprehensive 
approach, one that combines education, clinical, regulatory, 
and economic strategies in an integrated program. Comprehensive 
state-wide tobacco control programs funded by excise taxes on 
tobacco products and settlement funds from the tobacco industry 
have emerged as the model for future effort to reduce tobacco 
use. They have been very effective where used.
    Mr. Chairman, let me return to where I began. We know what 
works. We have the public health tools necessary to cut tobacco 
use by 50 percent over the next decade. Every death from 
tobacco use is a preventable death. I hope that this report 
will serve as a blueprint for coordinated national tobacco 
control efforts to reduce the devastation of tobacco-related 
diseases and death in our Nation.
    It is time to exercise our collective will to put this 
blueprint into action. It is not an exaggeration to suggest 
that tobacco control represents the most important public 
health intervention since the development of the polio vaccine. 
The challenge for us is one of will. Do we have the will to 
take advantage of this golden opportunity?
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Satcher follows:]

Prepared Statement of Dr. David Satcher, Assistant Secretary for Health 
     and Surgeon General, Department of Health and Human Services, 
 Accompanied by Terry Pechacek, Associate Director for Science, Office 
   on Smoking and Health, Centers for Disease Control and Prevention

    Good morning, Mr. Chairman and Members of the Commerce Committee. I 
am Dr. David Satcher, Surgeon General and Assistant Secretary of Health 
for the U.S. Department of Health and Human Services. I am pleased to 
appear before you and present testimony on our newest tobacco-related 
Surgeon General's Report, Reducing Tobacco Use. I am accompanied by Dr. 
Terry Pechacek, Associate Director for Science in the Office on Smoking 
and Health at the Centers for Disease Control and Prevention (CDC).
    Mr. Chairman, I want to express my appreciation, particularly at 
what I know is a very busy time in the legislative session, for your 
holding this hearing and for the concern and leadership in tobacco 
control issues that you and this Committee have shown.
    This is the 29th report on tobacco issued by the Surgeon General. 
It is the first-ever to provide an in-depth analysis of the various 
methods to reduce tobacco use. Our report shows that we have the tools, 
the knowledge and the resources to cut smoking rates in half by the end 
of the decade. The question is: Do we have the will?
    In my testimony, I will refer to three important documents that 
contain information that can be used to shape the future of tobacco 
control. First is the Surgeon General's report I just mentioned. This 
report provides a blueprint for achieving the ambitious health 
objectives for the nation, which are laid out in Healthy People 2010--
the second important document, which contains 17 tobacco-related 
objectives. Finally, CDC has made this information more concrete with 
the Best Practices for Comprehensive Tobacco Control Programs, which 
was prepared to help states assess options for comprehensive tobacco 
control programs and to evaluate their local funding priorities. If you 
don't already have copies of these important documents, all three are 
available on-line and I have a few copies with me today.

Overview
    As I am sure you are aware, the need to address the public health 
consequences of tobacco use is urgent. Tobacco use is responsible for 
more than 430,000 deaths each year, or one in every five deaths. It is 
the single most preventable cause of death and disease in our nation, 
and it is well documented that smoking can cause chronic lung disease, 
coronary heart disease, and stroke, as well as cancer of the lung, 
larynx, esophagus, mouth, and bladder. Smokeless tobacco and cigars 
also have deadly consequences including cancer of the lung, esophagus, 
and mouth. In addition to this enormous health burden, the economic 
burden of tobacco use is more than $50 billion in medical expenditures 
and another $50 billion in indirect costs annually. The harmful effects 
of smoking do not end with the smoker--environmental tobacco smoke 
causes an estimated 3,000 deaths from lung cancer each year, and causes 
up to 300,000 episodes of lower respiratory tract infections in 
children each year.
    Surveillance data reported in today's issue of CDC's Morbidity and 
Mortality Weekly Report indicate that the prevalence of cigarette use 
among adults has changed very little during the 1990s--about one-
quarter of adults reporting current cigarette use. Among adolescents, 
smoking prevalence rates steadily increased from 1991-1997, but 
preliminary new data show that the rates have peaked and are starting 
to decline. However, if tobacco-use patterns do not decline more 
rapidly than current trends indicate, an estimated five million persons 
who were less than 18 years of age in 1995 will die prematurely from a 
smoking related disease.

Reducing Tobacco Use: A Report of the Surgeon General
    The good news related to tobacco is that although our knowledge of 
tobacco control remains imperfect, we know more than enough to act now. 
The Surgeon General's Report on Reducing Tobacco Use is the first-ever 
report that provides an in-depth analysis of tobacco intervention 
strategies. This reports offers a science-based blueprint for achieving 
our Healthy People 2010 health objectives to cut adult and teen smoking 
rates in half. One of the key conclusions of our Surgeon General's 
report is that existing state tobacco control programs have provided 
evidence of the efficacy of a comprehensive approach to reducing 
tobacco use.
    This type of comprehensive approach--one that combines educational, 
clinical, regulatory, economic, and social strategies--has emerged as 
the guiding principle for future efforts to reduce tobacco use. 
Evidence shows that multifaceted state tobacco control programs are 
effective in reducing tobacco use in part because they bring about a 
shift in social norms and reduce the broad cultural acceptability of 
tobacco use. Comprehensive approaches combine community interventions, 
counter-marketing, and program policy and regulation.
    The goal of a comprehensive tobacco control program is to reduce 
disease, disability, and death related to tobacco use by: (1) promoting 
quitting among adult and youth smokers; (2) preventing young people 
from ever starting to smoke; (3) implementing public health policies to 
protect citizens from secondhand smoke; and (4) eliminating racial and 
ethnic disparities in tobacco-related diseases.
    To assist states in achieving these goals, the CDC has prepared 
guidelines to help states determine funding priorities and to plan and 
carry out effective comprehensive tobacco prevention and control 
programs. In CDC's Best Practices for Comprehensive Tobacco Control 
Programs, CDC recommends that states establish tobacco prevention and 
control programs that are comprehensive, sustainable, and accountable.
    The guidelines draw on best practices determined by evidence-based 
analyses of excise tax-funded programs in California, Massachusetts, 
Oregon and Maine and in the four states that individually settled 
lawsuits with tobacco companies (i.e., Florida, Minnesota, Mississippi, 
and Texas).
    Evidence from California, Massachusetts, and Oregon--and more 
recent results from Arizona and Maine--indicate that increasing the 
price of cigarettes reduces tobacco consumption rates. In addition, 
evaluations have shown that an adequately funded, comprehensive tobacco 
prevention and control program can result in even more dramatic 
reductions when coupled with price increases. Data from California 
provide the best example of this. The state excise tax was increased 
from $0.10 to $0.35 in January 1989 to fund the new tobacco control 
program. There was an initial and rapid reduction in consumption as a 
result of the January 1989 price increase. If price were the only 
factor in contributing to the declines in California, we would expect 
the rates to drop initially and then follow the similar pattern of slow 
decline experienced by the rest of the country. However, as a result of 
the tobacco control program implemented in California, the rates of 
tobacco use in California continued to decline two to three times 
faster than in the rest of the country throughout the 1990s. Between 
1988 and 1999, per capita cigarette use in California has declined by 
almost fifty percent while in the rest of the country, rates have 
declined by only about twenty percent.
    CDC is conducting an in-depth analysis of state tobacco control 
programs for all 50 states. Evaluation data from the statewide 
comprehensive tobacco control programs indicate that there is a dose-
response relationship between investment in tobacco prevention and 
control and reductions in tobacco use in the state.
``Best Practices''--Program Components
    CDC recommends that states establish tobacco control programs that 
contain the following nine elements:

   Community Programs to Reduce Tobacco Use
   Community Programs to Reduce the Burden of Tobacco-Related 
        Diseases
   School Programs
   Enforcement
   Statewide Programs
   Counter-Marketing
   Cessation Programs
   Surveillance and Evaluation
   Administration and Management

    The Surgeon General's report provides further discussion on the 
specific strategies that might be adopted in each of these areas, and 
reviews the scientific literature about their efficacy, so I will limit 
my remarks to describing the programmatic components included in the 
CDC guidelines and briefly touch on the extent to which they are 
currently being implemented by states.

Community Programs to Reduce Tobacco Use
    To achieve the individual behavior change that supports the non-use 
of tobacco requires whole communities to change the way tobacco is 
promoted, sold, and used while changing the knowledge, attitudes, and 
practices of young people, tobacco-users, and nonusers. Effective 
community programs involve people in their homes, work sites, schools, 
places of worship and entertainment, civic organizations, and other 
public places. To achieve lasting changes, programs in local 
governments, voluntary and civic organizations, and community-based 
organizations require funds to hire staff, provide operating expenses, 
purchase educational materials, provide education and training 
programs, support communication campaigns, organize the community to 
debate the issues, establish local plans of actions, and draw other 
leaders into tobacco control activities. While most states are 
supporting community programs, these programs are not yet reaching the 
entire state population. Evaluation reports from the states of 
California, Massachusetts, and Oregon indicate that very encouraging 
progress has been made by local communities in these states to protect 
nonsmokers from environmental tobacco smoke, limit youth access to 
tobacco products, and restrict local tobacco advertising.

Community Programs to Reduce the Burden of Tobacco-Related Diseases
    Another element of community programs reflects the fact that 
tobacco use increases the risk of development of a number of diseases. 
Even if current tobacco use stopped, the residual burden of disease 
among past users would cause disease for decades in the future. 
Community programs can focus attention directly on these diseases, both 
to prevent them and detect them early. Comprehensive, state-based 
tobacco prevention and control programs can address diseases for which 
tobacco use is a major cause, such as cancer, cardiovascular disease, 
stroke, oral cancers, and asthma.

School Programs
    The recent Surgeon General's Report, Reducing Tobacco Use, 
concluded that educational strategies, conducted in conjunction with 
community- and media-based activities, can postpone or prevent smoking 
onset in 20 to 40 percent of adolescents. Because most people who start 
smoking are younger than age 18, school-based programs that prevent the 
onset of smoking are a crucial part of a comprehensive tobacco 
prevention program. Several studies have shown that school-based 
tobacco prevention programs, which identify the social influences that 
promote tobacco use among youth and teach skills to resist such 
influences, can significantly reduce or delay adolescent smoking. 
Because many students begin using tobacco before high school and 
impressions about tobacco use are formed even earlier, tobacco use 
prevention education must be provided in elementary school and 
continued through middle and high school grades.
    To address this need, CDC collaborates with more than 30 
professional and voluntary organizations to assist schools and agencies 
in developing model policies and guidelines. States are using these to 
implement effective school health programs. However, less than 5 
percent of schools nationwide are implementing the major components of 
CDC's School Health Guidelines to Prevent Tobacco Use and Addiction. Of 
the states that are working to follow the guidelines, such as Maryland 
and Oregon, they struggle to reach all school age children. 
Furthermore, despite Oregon's intensive efforts to implement the 
guidelines, they reach only 30 percent of the school districts.

Enforcement
    The Surgeon General's report concluded that enforcement of tobacco 
control policies enhances their efficacy both by deterring violations 
and by sending a message to the public that the community believes the 
policies are important. The primary areas addressed by local and state 
policies that require enforcement strategies are restrictions on 
minors' access to tobacco and restrictions on indoor smoking in public 
places. As other policy changes (e.g., local restrictions on 
advertising and promotion) are adopted, they also will need to be 
enforced. The state of Florida is implementing an enforcement program 
consistent with CDC's Best Practices.

Statewide Programs
    Also consistent with the Surgeon General's report, funding to 
support statewide programs is a major element of CDC's recommended 
comprehensive approach to the prevention and reduction of tobacco use. 
Statewide projects can increase the capacity of local programs by 
providing technical assistance on evaluating programs, promoting media 
advocacy, implementing of smokefree policies, and reducing minors' 
access to tobacco. Supporting organizations that have statewide access 
to diverse communities can help eliminate the disparities in tobacco 
use among the state's various racial and ethnic groups. Statewide and 
regional grants to organizations representing cities, business and 
professional groups, law enforcement, and youth groups inform and 
involve their membership about tobacco control issues and encourage 
their participation in local efforts. Arizona, California, Maine, 
Massachusetts and Oregon currently have statewide programs that serve 
as ``best practice'' models to reach diverse communities.

Counter-Marketing
    One of the major conclusions of the Surgeon General's report is 
that efforts to prevent the onset or continuance of tobacco use face 
the pervasive and countervailing influence of tobacco promotion by the 
tobacco industry. During the last decade, the industry has spent more 
than $20 billion in imagery advertising and promotions to create a 
``friendly familiarity'' for tobacco products and an environment in 
which smoking is seen as glamorous, social, and normal. This is of 
particular concern since studies show that children buy the most 
heavily advertised brands and are three times more affected by 
advertising than adults.
    To counter this influence, tobacco control programs should 
undertake counter-marketing activities that can promote smoking 
cessation and decrease the likelihood of initiation. In addition, 
counter-marketing messages can have a powerful influence on public 
support for tobacco control intervention and set a supportive climate 
for school and community efforts. Counter-marketing attempts to counter 
pro-tobacco influences and increase pro-health messages and influences 
throughout a state, region, or community. Counter-marketing consists of 
a wide range of efforts, including paid television, radio, billboard, 
and print counter-advertising at the state and local level; media 
advocacy and other public relations techniques using such tactics as 
press releases and local events and pro-health promotional activities; 
and efforts to reduce or replace tobacco industry sponsorship and 
promotions.
    Some states are initiating significant counter-marketing efforts. 
Multifaceted prevention programs, such as the Minnesota Heart Health 
Program and the University of Vermont School and Mass Media Project, 
have shown that comprehensive efforts that combine media, school-based, 
and community-based activities can postpone or prevent smoking in 20 
percent to 40 percent of adolescents. Although the relative 
effectiveness of specific message concepts and strategies is widely 
debated, research from all available sources shows that counter-
marketing must have sufficient reach, frequency, and duration to be 
successful. The Vermont youth campaign, for example, exposed 50 percent 
of the target population to each TV and radio spot about six times each 
year over a 4-year period. This level of exposure is possible only 
through paid media placement.
    The Florida TRUTH campaign has achieved high levels of exposure 
among target aged youth that their evaluation reports suggest are 
related to the their impressive declines in rates of youth tobacco use. 
The award-winning Massachusetts counter-marketing campaign has focused 
on prevention of initiation, promotion of cessation, and protection of 
non-smokers and reports both high levels of exposure to its multiple 
message themes as well as direct impacts on adult attempts to quit and 
prevention of youth initiation rates.

Cessation Programs
    You may be aware that the Public Health Service (PHS) has recently 
published evidence-based clinical practice guidelines on cessation. 
Tobacco dependence is a chronic condition that often requires repeated 
intervention. The PHS Guideline, ``Treating Tobacco Use and 
Dependence,'' provides recommendations which are both clinically 
effective and cost-effective relative to other medical and disease 
prevention interventions.
    Cessation is a particularly important component of tobacco control 
programs, because programs that successfully assist young and adult 
smokers in quitting can produce a quicker and probably larger short-
term public health benefit than any other component of a comprehensive 
tobacco control program. Smokers who quit smoking before age 50 cut in 
half their risk of dying in the next 15 years. In addition, the cost 
savings from reduced tobacco use resulting from the implementation of 
moderately-priced, effective smoking cessation interventions would more 
than pay for these interventions within 3 to 4 years. Unfortunately, no 
state currently has fully implemented the best practices 
recommendations in this area. However, the states of California, 
Oregon, Arizona and Massachusetts have developed innovative approaches 
to increase access to evidence-based treatments for nicotine addiction. 
We encourage other states to follow their lead.

Surveillance and Evaluation
    The Surgeon General's report stressed the importance of expanding 
the science base in support of comprehensive tobacco control programs. 
Hence, a statewide programs must have a sound surveillance and 
evaluation system both to monitor fiscal accountability for state 
policy makers as well as to increase the efficiency and effectiveness 
of program activities. For this reason, the establishment of 
surveillance and evaluation systems must have first priority in the 
planning process. With technical assistance from CDC, California, 
Massachusetts, Oregon, Arizona, Maine, and Florida have established 
comprehensive surveillance and evaluation systems based upon CDC's Best 
Practices' recommendations.

Administration and Management
    An essential component of an effective tobacco control program is a 
strong management structure. Experience California, Massachusetts and 
Oregon has shown the importance of having all of the program components 
coordinated and well-managed. A comprehensive program involves multiple 
state agencies (e.g., health, education, and law enforcement) and 
multiple levels of local government, as well as numerous health-related 
coalitions, voluntary and community groups. Coordination of these 
groups requires high quality program administration and management. 
Many states have difficulty maintaining a comprehensive tobacco control 
program and rely on federal support to maintain key management and 
administrative personnel.

Conclusion
    Only three years ago, tobacco control spending in almost all states 
averaged pennies and nickels per capita. Now all states have a sound 
core funding, and current allocations in those states with expanded 
programs range from $2.50 to more than $10 per capita. While these 
funding sources and levels have contributed to the development of a 
basic capacity within states to conduct tobacco prevention and control 
programs, no state is currently implementing all the components 
recommended in CDC's Best Practices. Approximate annual costs to 
implement all of the recommended program components have been estimated 
to range from $7 to $20 per capita in smaller states (population under 
3 million), $6 to $17 per capita in medium-sized states (population 3 
to 7 million) and $5 to $16 per capita in larger states (population 
over 7 million).
    While the focus of today's discussion is on state efforts to 
address tobacco use, a comprehensive national tobacco control effort 
requires strategies that go beyond state programs. A comprehensive 
national effort should involve the application of a mix of educational, 
clinical, regulatory, economic and social strategies. In each of these 
areas, some of the program and policy changes that are needed can be 
addressed most effectively at the national level. That is why the 
Administration has sought FDA authority to restrict advertising and 
sales of tobacco products to children, and taken actions such as 
establishing smoke-free workplaces to protect the health of federal 
employees and visitors to federal buildings. Even as we have encourage 
states to use their settlement funds to help support tobacco prevention 
programs in states and local communities, we also have increased 
federal support for those programs.
    Progress is being made, but a great deal remains to be done. States 
such as California, Massachusetts, Arizona, Oregon, Maine, and Florida 
are demonstrating that significant reductions in tobacco use rates 
among young people and adults are possible. However, our Healthy People 
2010 objectives, including cutting in half the rates of tobacco use 
among young people and adults, will require a sustained and 
comprehensive effort at both the federal and state level. The Surgeon 
General report and CDC's Best Practices provide the blueprint for what 
needs to be implemented. Prevalence of cigarette use among adults in 
this nation has changed very little during the 1990s. Each year, more 
than 1 million young people continue to become regular smokers and more 
than 400,000 adults die from tobacco-related diseases. We know what 
strategies are effective in controlling tobacco use. What we need now 
is a stronger, sustained effort by government at all levels to 
implement these proven tobacco control strategies. Tobacco use will 
remain the leading cause of preventable illness and death in this 
nation and a growing number of other countries until tobacco prevention 
and control efforts are commensurate with the harm caused by tobacco 
use. We look forward to working with you and our other partners, some 
of whom will be addressing you shortly, to address this urgent public 
health issue.

    The Chairman. Thank you, Dr. Satcher.
    We referred earlier to the fact that there are a number of 
states, and we will get into it perhaps with the next panel, 
that simply have not lived up to the commitments they made at 
the time that the tobacco agreement settlement was made, I 
might add, an agreement between lawyers.
    Are you concerned about some states not spending enough of 
their tobacco settlement proceeds on tobacco cessation 
prevention programs, and are there certain states you know of 
that have exemplary approaches. In other words, maybe you could 
give me both sides of this, or parts of this equation.
    Dr. Satcher. We are very concerned that so few states are 
using the settlement funds to implement programs to prevent the 
initiation of smoking by teenagers, programs to help with the 
cessation of smoking, and programs to help strengthen 
regulations to protect the environment. As I pointed out, 
30,000 children a year have the onset of asthma because of 
being exposed to cigarette smoke. We do have very clear 
evidence that these programs make a difference, and they were 
the basis for this report.
    California has had a 50-percent reduction in smoking over 
the last 10 years between 1988 and 1999, and----
    The Chairman. Can I interrupt? They began these programs 
even before the settlement.
    Dr. Satcher. They use excise taxes. California raised the 
excise tax from, I believe, 10 to 30 cents. Massachusetts did a 
similar thing and has had a dramatic reduction in the 
initiation of smoking. More recently, Florida, using a new 
program called TRUTH, has reduced the initiation of smoking by 
teenagers from almost 20 percent per year, and this was a range 
from middle school to high school, down to about 8.9 percent, 
40-percent or more reduction. So we have a lot of evidence, 
including Arizona in recent years between 1996 and 1999.
    We really have not had much reduction in smoking 
nationally. There has been more than a 20 percent reduction in 
some states, again because of initiating programs consistent 
with the settlement agreement, and so we have a lot of evidence 
that where states have initiated programs consistent with these 
recommendations we are seeing results. We are saving a lot of 
lives.
    The Chairman. Would it be possible, Dr. Satcher, and if 
you're reluctant to do this I can understand, but if you could 
inform this Committee, and perhaps in the next report point out 
where states are successfully carrying out the commitment that 
they have made, and I put in quotes the commitments they made 
at the top of the settlement and the results, and the states 
that are not, and the lack of results?
    I think frankly the only way we are going to get the 
governors and the legislatures to use this pot of gold they 
found at the end of the rainbow for the purposes that they 
committed to as a part of the settlement--I do not think any 
Americans would have supported a tobacco settlement that went 
for tax rebates. That is not what this is all about. It is an 
affront, I think, to many Americans to hear these kinds of 
commitments, and I have got a bunch of quotes from the Campaign 
for Tobacco-Free Kids, the American Cancer Society, the 
American Heart Association and the American Lung Association, 
which are really kind of chilling.
    Governor after Governor, Attorney General after Attorney 
General, said ``this is it, we will devote all this money to 
these programs'', and they did not--and they did not in many, 
many cases. But as you pointed out, in some cases they did. 
Massachusetts and California being perhaps the best examples, 
at least of the ones that I have seen. There are other success 
stories, but there are many failures, and so would it be 
possible for you to get into that a little bit for us?
    Dr. Satcher. You are going to hear that from the next 
panel, and they are better prepared right now than I am to talk 
about those states. CDC is, in fact, doing a very comprehensive 
study of the states, and that will be finished in January of 
2001. I usually like to wait for the CDC in terms of what we 
say at our level.
    The Chairman. Perhaps, Dr. Satcher, after they issue that 
report in January we could have another hearing and you could 
prepare yourself at that time.
    Dr. Satcher. I would be delighted.
    The Chairman. We are not talking about a scholastic 
argument here. We are talking about kids dying because the 
assets available are not being used to address the problem, 
which was the promise when the agreement was made. That is a 
bit disturbing, and I understand why it might contribute to the 
cynicism of people about their government.
    Dr. Satcher. I agree 100 percent. What the CDC has told us, 
and it makes sense, is that different states are taking 
different strategies for accessing this money and using it. 
Some states are saying, give us a lump sum right now as opposed 
to the amount we would get over 25 years, and so they will get 
a lump sum of money which is much smaller than what the total 
sum would be, and therefore how they budget this money in these 
various areas is a little bit more difficult for us to evaluate 
until we look at it in more depth.
    But let me just say clearly, and I mentioned that Arizona, 
California, Massachusetts, Maine, and Oregon are states that 
are, in fact, according to what we know right now, implementing 
programs of the kind that we recommend. Some of them have had 
excise taxes working for them even before the settlement fund, 
but they are implementing the programs recommended by CDC.
    The Chairman. And there is not a doubt in your mind that 
these programs work?
    Dr. Satcher. Our data show that if you begin educating 
children in elementary school and you continue your programs 
telling them the harmful effects of tobacco you reduce the 
initiation of smoking between 20 and 40 percent in the states 
where we looked. I mean, that is a lot of lives. That is almost 
a 1/2 million children a year that will not begin to smoke in 
this country.
    Five million children in this country today under 18 years 
of age will die from smoking if things continue as they are 
going now, and so that is how serious this problem is. But by 
the same token, that is how relevant and how critical this 
opportunity is that we have, if states use the tobacco 
settlement funds.
    I mean, even if you want to make the economic argument, we 
spend between 50 and $100 billion a year dealing with either 
medical care for smoking-related diseases or the indirect cost 
from smoking, so in the long run it even makes sense in terms 
of an investment. But the problem is that we are going to find 
ourselves years from now with people continuing to die from 
smoking because we did not implement these programs that we 
know can work.
    And I just want to say one other thing, because I am 
concerned about children especially. I agree with David Kessler 
when he said that smoking is a pediatric disease, because 
children begin to smoke and before they are 18 years of age 
they are addicted, and addiction is a disease. It is not easy 
to quit smoking once you are addicted. Some people can quit 
easier than others, but for most people it is not easy. 70 
percent of smokers would like to quit this year. Less than 3 
percent will quit.
    The other thing I am concerned about with children is the 
fact that almost 30,000 children a year have the onset of 
asthma by being exposed to environmental tobacco smoke, and so 
there are a lot of, quote, innocent victims being affected by 
this. I think to a great extent smokers in a way are also 
innocent victims if they are addicted when they are children 
and they have trouble shaking this addiction. But there are 
also 3,000 nonsmokers a year who die from lung cancer and we 
estimate that between 40,000 and 60,000 nonsmokers die from 
heart disease because they are exposed to smoking environments.
    So we know that the recommendations that we have made can 
make a tremendous difference in this country.
    The Chairman. Well, doctor, I hope you stay involved in 
this issue. I know you have been, and you have been the most 
persuasive spokesperson, not only because of your own personal 
credentials, but the fact that you are the Surgeon General of 
the United States of America, and we are very grateful for 
that, and I would like for you to next year help us get into 
this issue of how this money is being spent.
    If there is no dispute that there is a direct relation 
between the antitobacco use programs and the reduction in the 
use of tobacco, i.e., as you so eloquently illustrate, saving 
thousands and thousands of lives, then it seems to me we ought 
to put the states' feet in the fire to comply with the 
agreement that they made.
    The whole reason, rationale, as I understood, for the 
settlement was not to provide another windfall of money for the 
states, but to achieve a goal of reducing smoking, particularly 
among children, the use of tobacco particularly.
    My friend Joe Garagiola is very interested in me saying the 
use of tobacco rather than just saying smoking. He has been an 
strong advocate against the use of chewing tobacco.
    Again, I want to return to the states who seem to be saying 
here we have got a whole bunch of money, we can give a tax 
rebate, and I think it is really a betrayal, almost, when they 
use this money for other purposes than for what the stated 
intentions were, and again, we have got this report that I just 
referred to earlier, the statements made by the Governors and 
the Attorneys General.
    When the settlement was made all were committed to programs 
which would reduce the use of tobacco, and unfortunately that 
has not been the case, some more egregious than others, so I 
hope you will stay involved in that part of the issue as well, 
because I think the thing that will bring these states, the 
Governors and legislatures around very frankly is a lot of 
visibility.
    Dr. Satcher. Well, we plan to stay involved, and also we 
have tried to be available to states that have asked for our 
support, and I am willing to travel to any state that would 
like our help in assisting to develop these programs. This is 
critical and so we are willing to do that.
    The Chairman. Thank you. Did you have a comment, sir?
    Mr. Pechacek. Just to reinforce the point that a key 
component of the Center for Disease Control's program is 
technical assistance to the states. In response to this issue, 
our guidelines are released not in any way to mandate. This is 
in response to the states. We are providing the budgetary 
guidelines to help states fulfill these types of commitments 
and to develop effective programs, so that is a key portion of 
our overall program.
    The Chairman. Well, I also--to state the obvious there are 
some great success stories out there. California is one of 
them, Massachusetts is another one, and there are other states 
that are great success stories, and I would recommend that the 
states that are not achieving these reductions should probably 
look to what is being accomplished in other states and how they 
did it, as well as your guidelines.
    Dr. Satcher. Mr. Chairman, in part that is what CDC's Best 
Practices outline does. CDC has looked at these successful 
states, and they have pulled together the Best Practices, so 
any state that wants to know what has worked in other states 
can find them in this document, Best Practices, or in the 
Surgeon General's report, Reducing Tobacco Use.
    The Chairman. Thank you. We look forward to seeing you in 
January or February, Dr. Satcher. Obviously, I hope to see you 
before. I hope you will continue the great work that you are 
doing, and we look forward to working very closely with you. 
Thank you very much.
    Dr. Satcher. Thank you, Mr. Chairman.
    The Chairman. Thank you. Since we have this vote on, we 
will take a brief break before we call the next panel, and I 
will be back in 5 to 10 minutes, as quickly as I can get over 
and back.
    [Recess.]
    The Chairman. The Committee will reconvene. Our next panel 
is Betty D. Montgomery, Attorney General of Ohio, Mr. Francis 
L. Coolidge, immediate past chairman, national board of 
directors, American Cancer Society, Mr. Matt Myers, president, 
Campaign for Tobacco-Free Kids, and Mr. John Hurson, delegate 
from the Maryland General Assembly. I believe Mr. Hurson is 
also Majority Leader, is that correct?
    Mr. Hurson. That is correct.
    The Chairman. Congratulations, or should I say condolences?
    [Laughter.]
    The Chairman. We want to begin with Attorney General 
Montgomery. Thank you for being here.

          STATEMENT OF BETTY D. MONTGOMERY, ATTORNEY 
       GENERAL OF OHIO, OFFICE OF THE ATTORNEY GENERAL, 
                       STATE OFFICE TOWER

    Ms. Montgomery. Thank you, Mr. Chairman. It is a pleasure 
to be here. It is a pleasure to be able to be here at such a 
momentous time in our history, where we have had the largest 
civil settlement in the world, and we have an opportunity to 
make a real difference in the public health in this country.
    Ohio began the analysis on this lawsuit back in March 1996. 
A year later we announced our intention to sue, and as we did 
our investigations, as you certainly know, we found a pattern 
of corrupt activity regarding anticompetitive behavior. We 
found violations of consumer laws. We found misrepresentations 
regarding addiction, and the like. You have heard all that 
testimony.
    Most importantly for us and all the Attorneys General was 
the unsettling discovery that there was a pattern of direct 
marketing to minors, with their marketing campaigns, so that as 
you know we ultimately, as Attorneys General, 46 states, 5 
Commonwealths and Territories, and the District of Columbia, 
reached an agreement with the tobacco companies regarding this 
lawsuit.
    This lawsuit was heard around the world. The settlement was 
equally striking because of the work, frankly, of the state 
Attorneys General, and we now have banned certain kinds of 
activities. We have no more billboards. We have tobacco 
advertisements in teen publications banned. Multimillion 
conspiracies to hide the truth about smoking have been exposed, 
and we pray that all of these things are a thing of the past as 
we move forward.
    You know, there are four additional states that settled 
outside of the master settlement agreement. I am very pleased 
to report to you, Senator McCain, that Ohio under the master 
settlement agreement received the fourth largest settlement 
under the master settlement agreement, which would total about, 
over $10 billion by the time we are done in the next 25 years.
    I have been humbled by the fact that Ohio has at this point 
been held as a model for allocating tobacco settlement dollars 
for the public health purpose. I have to tell you I attribute 
that to the fact that from the very beginning we worked very 
closely with the public health community before we filed the 
lawsuit, during the lawsuit, at the time of the settlement of 
the lawsuit, and now, as we are planning our structure on how 
we are going to spend those dollars the public health community 
has been a vital and equal partner in that expenditure and that 
planning.
    In fact, in June of 2000 the Campaign for Tobacco-Free Kids 
quarterly legislative newsletter was kind enough to compliment 
Ohio for our work, and I appreciate that. That was a bit of a 
surprise. As a result of the newsletter and previous national 
and regional seminars our office has been contacted by an awful 
lot of states and legislators to see what model those states 
can use to successfully spend tobacco money to fund smoking 
cessation and prevention programs, as well as other public 
health priorities.
    Senator McCain, I am a creature of the General Assembly. I 
have a great respect for the collective wisdom of the 
legislative body to make decisions, and we were very fortunate 
in Ohio to have both the House and the Senate, under the 
leadership of Senator Finan and Speaker Davidson, as well as 
Governor Taft, collectively believe that the money should be 
focused on intervention and prevention programs.
    As a result, our General Assembly has set up priorities and 
created a blueprint by up-fronting our settlement dollars for 
public health-related trust funds. In fact, at least 43 percent 
of our dollars are spent and are sequestered for public health 
moneys, for public health issues over the next 12 years 
directly. It is very hard to bind a legislature, but we had to 
do everything we can to bind the future legislatures to that 
commitment.
    We credit our success, as I said, to the public health 
community. These groups included the American Lung Association, 
the Heart Association, the Cancer Association. Obviously, the 
Campaign for Tobacco-Free Ohio, the Ohio Department of Health, 
the Ohio Department of Human Services, and the Ohio Hospital 
Association.
    Prior to earmarking the dollars, we frequently met, and I 
asked them at some point as we were going through this process 
to create for me a blueprint, what is it ideally you think you 
need in terms of expenditures of dollars, come back to me with 
the blueprint so we can use that as we work through our lawsuit 
and as we work through the General Assembly.
    When the settlement first appeared possible back in 1998, I 
met personally with the public health community and, in fact, 
the blueprint that they prepared, known now as the state-wide 
tobacco use prevention plan, was ultimately used as a guideline 
for us in subsequent hearings, both in planning hearings as 
well as legislative hearings. The plan utilized the foundation 
concept with governing boards. It specifically focused on 
tobacco prevention and cessation programs, and provided for 
grants to be awarded on a competitive basis while encouraging 
public-private partnerships.
    After developing these recommendations, we created the 
Tobacco Settlement Task Force, which consisted of 15 members, 
and we took testimony from 60 different witnesses. We had over 
a dozen hearings in which we listened to all of the ideas about 
what Ohio should be doing with its dollars. We had sort of a 
pre-legislative meeting and put together, then, a plan, which 
we then presented to the General Assembly. The recommendations 
included earmarking created individual funds for on health 
programs, smoking prevention, biomedical research, school 
facilities, education technology, relief for farmers, and for 
some law enforcement involvement.
    Again, strong leadership by good people in the state who 
were listened to made all the difference in the world. It was 
not without legislative wrangling, as you might expect, Senator 
McCain. We had the same kind of issues we have heard you speak 
about today. We had the debates about tax relief. We had the 
debates about where these dollars should or should not be 
spent, even though we had a very strong recommendation from 
critical members of the legislature.
    I will not tell you that it was an easy process, but at the 
end of the day I think we can say that at this stage we are 
very pleased with the product. Hopefully, now the future 
leaders of this state will have the responsibility of 
determining the uses and allocations, but we think the 
blueprint is a strong enough blueprint that it will be hard for 
them to depart from it.
    Every 6 years the General Assembly will assign a committee 
consisting of Senators and state representatives, including the 
minority parties, to reexamine the use of tobacco moneys under 
the master settlement agreement. This is to ensure, quite 
frankly, that the dollars are being spent the way they were 
intended to address public health issues.
    All the money that Ohio will receive from tobacco will be 
divided into eight trust funds. The trust fund, the Tobacco Use 
Prevention and Control Foundation will include about $1.26 
billion, or over 25 percent of the total dollars we expect to 
get, and that foundation is the heart and soul of our tobacco 
intervention programs and cessation programs made up of members 
of the public health community, made up of members of the 
General Assembly, and public elected officials.
    The Chairman. Ms. Montgomery, I apologize for asking you to 
shorten because of arcane rules of the Senate we do not have a 
lot of time because we will be shut down.
    Ms. Montgomery. Anyway, we have a number of trust funds. We 
will submit the testimony on that. One of the other things we 
have done which is rather unique is also focus dollars in 
biomedical research, particularly directly related to tobacco-
related diseases and the like.
    Mr. Chairman, knowing you have other members here to speak, 
and having been a member of the General Assembly myself, I 
recognize there are other priorities here. I would ask to 
submit the testimony as well as, I have some testimony from 
Christine Gregoire, without whom we would not be sitting here 
today talking about this. As Attorney General of Washington she 
asked, and I would probably request that we could submit the 
letter that she sent to me for the Committee to look at.
    [The prepared statement of Ms. Montgomery follows:]

 Prepared Statement of Betty D. Montgomery, Attorney General of Ohio, 
           Office of the Attorney General, State Office Tower

    Mr. Chairman, Members of the Committee, thank you for providing me 
with the opportunity to provide testimony to you today on how Ohio has 
allocated our tobacco settlement dollars.
    In March of 1996, our office began a careful analysis of potential 
litigation claims against the tobacco industry. A year later, we 
announced our intention to sue.
    Here are just two examples of what we found. Our evidence indicated 
that the industry had engaged in a pattern of corrupt activity by 
illegally building anti-competitive alliances aimed at deceiving the 
general public about the dangers of smoking.
    We also discovered multiple violations of Ohio consumer protection 
laws, such as the industry deceiving the public about nicotine addition 
and their persistent public reference to doubt in the connection 
between smoking and many diseases of heart and lungs.
    However, the primary purpose for filing our lawsuit was that we had 
evidence that the industry was specifically targeting minors with their 
marketing campaigns.
    As you know, on November 23, 1998, the attorneys general of forty-
six states, five commonwealths and territories, and the District of 
Columbia reached an agreement with the major tobacco companies, which 
represented approximately 97.5 percent of the U.S. tobacco sales. At 
least 23 additional manufacturers have since then signed on to the 
agreement and we continue to work with tobacco producers interested in 
joining. Worth an estimated $206 billion over the next twenty-six 
years, the settlement will provide payments to states based on a 
formula developed by the attorneys general.
    This was the lawsuit heard `round the world.' The settlement was 
equally as striking. Because of the work of state attorneys general, 
gone forever are cigarette vending machines, tobacco advertisement in 
teen publications, and multi-million dollar conspiracies to hide the 
truth about smoking.
    Four additional states--Florida, Minnesota, Mississippi, and 
Texas--individually settled with the tobacco industry for more than $40 
billion additional dollars. Ohio received the six largest settlement in 
the country, which will total $10.1 billion over 25 years and payments 
will continue in perpetuity.
    Ohio is held up nationally as one of the model states for 
allocating tobacco settlement funds for public health purposes. In 
fact, in June of 2000, the Campaign For Tobacco Free Kids quarterly 
legislative newsletter started to highlight state achievements in 
earmarking tobacco dollars for public health purposes. That first issue 
highlighted Ohio's achievements. Here's what they said:
    ``This is a victory for everyone who worked hard to see this law 
enacted, a model for the nation and most importantly, a win for kids. 
Way to go Ohio!''
    As a result of this newsletter and previous national and regional 
seminars, our office has been contacted by legislators and public 
health advocates from a number of states to explain how Ohio 
successfully used tobacco money to fund smoking cessation and 
prevention programs as well as other public health priorities. Our 
general assembly has made a strong commitment to public health 
priorities by up fronting our settlement dollars for public health-
related trust funds. In fact, almost $2.3 billion or 47% of our dollars 
that we will receive over the next 12 years will be dedicated to public 
health issues.
    We credit our success in to our regular pre-Master Settlement 
Agreement (MSA) discussions with the public health community. These 
groups included the American Lung Association, the American Heart 
Association, the American Cancer Association, the Campaign for Tobacco 
Free Ohio, the Ohio Department of Health, the Ohio Department of Human 
Services, and the Ohio Hospital Association.
    Prior to the creation of the MSA, we frequently met with these 
organizations to keep them informed about our litigation and 
negotiations. We also asked for their input on various public-health 
provisions in drafting the settlement agreement.
    Although we chose not to have a seat at the negotiating table, Ohio 
was a lead state in drafting provisions of the MSA, and we were 
consulted throughout the negotiation process. When we announced our 
settlement agreement with the tobacco manufacturers, we stood side-by-
side with the public health community.
    In fact, I am not aware of any other state that announced the 
agreement with such strong support from their local public health 
community.
    When the settlement first appeared possible (back in the summer of 
1998), we asked our public health coalition to develop a plan on what 
Ohio could do to best use those settlement dollars, specifically 
focusing on public health purposes. This blueprint, known as the 
Statewide Tobacco Use Prevention Plan, was ultimately used as a guide 
for earmarking our funds. The plan utilized a foundation concept with 
governing boards. It specifically focused on tobacco prevention and 
cessation programs, and provided for grants to be awarded on a 
competitive basis, while encouraging public/private partnerships.
    After developing these recommendations, I announced with the 
Governor and legislative leaders the creation of the Tobacco Settlement 
Task Force. This bi-partisan Task Force was created to review how best 
Ohio could spend our settlement dollars. The Task Force included 15 
members: four from the administration; 10 lawmakers; and myself. We 
took open testimony from 60 different witnesses, including my office, 
tobacco control organizations, educators, public health organizations, 
tobacco growers, the National Council of State Legislatures (NCSL), and 
other interested parties.
    In September of 1999, the Task Force issued recommendations 
(approved by a 14-1 vote), which called for the creation of seven 
separate trust funds. The individual funds created would be focused on:

    1. Health programs;
    2. Smoking prevention;
    3. Biomedical research;
    4. School facilities;
    5. Education technology;
    6. Aid to tobacco farming regions of the state; and
    7. Law enforcement improvements.

    These recommendations were then rolled into state legislation which 
specifically earmarked the settlement dollars into 8 trust funds 
addressing these seven stated purposes. Our office continued to play a 
key role in advising the General Assembly, the leadership, and the 
Administration on the intent of the MSA and its provisions, and we 
actively supported passage of the bill.
    Our Governor signed the package on March 3, 2000. The bill 
earmarked settlement dollars through FY 2012, covering a period of 13 
years. Future leaders of my state will have the responsibility of 
determining the uses and allocations of funds received in years after 
that. Please know, the Ohio General Assembly will be required to make 
appropriations every two years since the Ohio Constitution prohibits 
the General Assembly from appropriating for more than a two-year 
period. Although we have a strong standing to commit these dollars for 
the purposes outlined in our tobacco spending bill, these 
appropriations will be scrutinized every two years by the General 
Assembly. We also recognized that the MSA payments are subject to 
numerous adjustments and that while the amount of future payments could 
not be predicted, if we were successful in reducing consumption, the 
payments would decline. Consequently, we divided most payments among 
the funds by share, rather than by fixed dollar amount.
    Every six years, beginning in January 2012, a committee consisting 
of three state senators and three state representatives, including 
minority party representation, will reexamine the use of the tobacco 
master settlement agreement funds to ensure that the spending of those 
dollars remains on target to address public health issues.
    All the money that Ohio will receive from the tobacco industry will 
be divided into the eight trust funds. Each trust fund will retain all 
investment earnings accrued by the particular trust fund.
    Here is a brief summary of the trust funds established by the Ohio 
legislature for the purposes of allocating the proceeds from the 
tobacco settlement. The following trust funds are specific for public 
health purposes:

    A. Tobacco Use Prevention and Control Foundation

        1. $1.26 billion, or 25.3 percent of the total through FY 
2012.
        2. The goals of the 20-member foundation include decrease 
tobacco use by Ohioans, with the emphasis on decreasing use by youth, 
minority, and others who may be disproportionately affected by tobacco 
use.
        3. The Foundation shall carry out, or provide funding to other 
organizations to carry out, research and create programs related to 
tobacco use prevention and cessation.
        4. The Foundation is the trustee of the endowment fund which 
would use a combination of interest and principle to carry out its 
responsibilities. We expect/hope to meet the C.D.C. minimum tobacco 
control guidelines in Ohio, which amounts to $5.48 per capita costs.

    B. Ohio's Public Health Priorities Trust Fund

        1. $252.9 million through FY 2012, or 5.1percent of the total 
received through FY 2012.
        2. Five areas of use:
          a. Not less than 25 percent of the annual appropriations to 
minority health programs
          b. Enforcing (ORC 2927.02) Ohio's underage tobacco use laws
          c. Alcohol and drug abuse prevention programs, including 
programs for adult and juvenile offenders in state institutions and 
aftercare programs
          d. Five percent of the annual appropriations to provide 
emergency assistance to seniors whose health has been adversely 
affected by tobacco use and whose income does not exceed 100 percent of 
the federal poverty guidelines
          e. Partial reimbursement, on a county basis, of hospitals, 
free medical clinics, and similar organizations or programs that 
provide free, uncompensated care to the general public, and of counties 
that pay private entities to provide such care using revenue from a 
property tax levied at least in part for that purpose.

    C. Biomedical Research and Technology Transfer Trust Fund and Its 
Related Commission

        1. $493.5 million, or 9.9 percent of the total received 
through FY 2012.
        2. Twenty-five-member unpaid Commission will provide 
competitive grants to public and private parties in Ohio for ``any of a 
broad range of activities'' related to biomedical research and 
technology transfer.

    D. Southern Ohio Agricultural and Community Trust Fund

        1. $229.0 million--4.6 percent of the total amount received 
through FY 2012.
        2. To provide economic alternatives for tobacco growers.

    E. Law Enforcement Trust Fund

        1. $25.0 million in three installments through FY 2001.--
0.5percent of the total amount received through FY 2012.
        2. Allocated to the Attorney General's Office to make capital 
improvements for the Ohio Peace Officer Training Academy and Ohio 
Bureau of Criminal Investigation laboratory facilities, which serve law 
enforcement agencies across the state.

    The remaining trust funds are specific to education purposes:

    F. Education Technology Trust Fund

        1. Through FY 2012, this trust fund is estimated to receive 
$218.7 million,--4.4 percent of the total settlement received through 
FY 2012.
        2. Pay costs of new and innovative technology at institutions 
of primary and secondary education, including chartered nonpublic 
schools, and public colleges and universities or private nonprofit 
institutions of higher education.

    G. Education Facilities Trust Fund

        1. $1.96 billion between fiscal years 2003 and 2012.
        2. Support the state's Classroom Facilities Assistance Program.

    H. Education Facilities Endowment Fund

        1. $65 million through 2012 and specified percentages of the 
payments from 2013 to 2025.
        2. Permanent source of revenue for constructing, renovating, 
or repairing primary and secondary schools in the state.

    In addition to the tobacco trust funds, the legislation also 
included several other provisions, including:

    A. Department of Rehabilitation and Correction Smoking Regulations

        1. Smoking is prohibited in the buildings of certain state 
correctional institutions.
        2. The bill also requires DRC to provide smoking and tobacco 
cessation programs for prisoners at all state correctional 
institutions, subject to available funding.

    B. Income Tax Reduction Fund

        1. Any year in which tobacco payments to the state exceed the 
amounts estimated by the Office of Budget and Management in the final 
report of the Governor's Tobacco Task Force, the excess is to be 
credited to the Income Tax Reduction Fund.
        2. Used to fund temporary income tax reductions in the 
subsequent calendar year.

    C. Prohibition on Lobbying--Our new law also prohibits using any 
portion of the Tobacco MSA dollars for political activity or lobbying.

    We brought our lawsuit against the tobacco industry because of 
their unscrupulous business practices of specifically targeting minors. 
This historic settlement gives us the unique opportunity to start 
protecting not only our children, but also our communities as a whole.
    I am proud to have helped craft this spending plan through a 
systematic, strategic, and inclusive effort. Our efforts balances the 
health care needs of Ohioans with a number of other needs that were 
neglected because we had spent tens of millions of dollars to pay for 
tobacco-related heath care costs over the past half century.
    In Ohio, credit is due many people--including our governor, leaders 
and members of our legislature, and many committed and involved public 
health advocates--for crafting our plan.
    We have worked together to turn the negative byproducts of the 
tobacco industry's behavior into positive achievements that have a real 
impact on all Ohioans.
    I'm gratified that this plan is seen as a model for other state 
leaders who are also seeking to balance their resources and needs in a 
similar responsible fashion.
    Thank you for the opportunity to provide testimony this morning, 
and I will be happy to answer any questions that you might have.
    Thank you.
                                 ______
                                 
                             Attorney General of Washington
                                       Olympia, WA, October 5, 2000
Hon. John McCain,
Chairman,
Senate Committee on Commerce, Science and Transportation,
Washington, DC.
Hon. Ernest F. Hollings,
Ranking Minority Member,
Senate Committee on Commerce, Science and Transportation,
Washington, DC.

                  Re: States and Tobacco Settlement Dollars

Dear Senators McCain and Hollings:

    As the Washington State Attorney General and the lead negotiator of 
the nationwide tobacco settlement, I respectfully ask that you enter 
this letter into the record. Unfortunately, I am unable to attend the 
hearings on how states are spending the tobacco settlement money and am 
therefore submitting this letter in my stead.
    As you will recall, following the tobacco settlement I requested a 
waiver from Congress that would prevent the federal government from 
seeking a Medicaid recoupment and allow states to keep all the payments 
from the tobacco settlement. I argued that the states would do the 
right thing and spend the money on purposes related to the lawsuit. The 
arguments I made at that time remain just as relevant today.

   Tobacco use is the number one cause of preventable death in 
        the United States today. It takes more lives than AIDS. 
        alcohol, cocaine, heroin. car accidents. homicide, suicide, and 
        fires combined.

   Investing in tobacco prevention will save lives. According 
        to the Centers for Disease Control and Prevention (CDC), a 
        successful prevention plan in Washington conservatively could 
        prevent 70,000 premature deaths.

   Investing in tobacco prevention and control saves taxpayer 
        dollars. The CDC estimates that a successful plan in Washington 
        could save Washington taxpayers $2.5 billion in excess health 
        care costs in its first five years.

   Investing in tobacco control has a proven record of success. 
        Investments by pioneering states like California and 
        Massachusetts made years ago are paying huge dividends today. 
        Consider the following results we heard from experts from those 
        states who testified before our Legislature in 1999.

California

   Every year there are 14,000 less heart attacks and 11,000 
        fewer low-birthweight babies born.

   California's health care system as whole--both private and 
        public--saves approximately $1.2 billion per year.

   State government health care savings are nearly $600 million 
        annually.

Massachusetts

   Since 1992, per capita tobacco consumption has decreased 31 
        percent--over three times the national average.

   Youth smoking rates have remained flat while the national 
        rates skyrocketed.

   By targeting pregnant women who smoke, the percentage of 
        maternal smoking in 1996 was about half of what it was in 1990.

   Because maternal smoking can lead to low birthweight babies, 
        Massachusetts estimates it saves $35 million annually--nearly 
        enough to pay the cost of the entire program.

   Investing in tobacco prevention and control is the right 
        thing to do. To protect the integrity of the settlement, money 
        from the tobacco settlement should be treated as restitution 
        and should be used only for purposes related to the lawsuits. A 
        key element of state lawsuits was that the industry targeted 
        children to be its next generation of addicted smokers. We owe 
        it to our kids to find healthy and positive alternatives to 
        smoking.

    Washington State is making good on its promise. In 1999, the 
Governor and Legislature dedicated all of the settlement dollars due 
our state this biennium into tobacco prevention and control and public 
health programs. Specifically, of the approximately $300 million in 
tobacco payments we expect this budget period, the Legislature invested 
$100 million in a new Tobacco Prevention and Control Account. The money 
is being used to fund an aggressive, comprehensive, and sustained 
tobacco prevention and control plan for Washington State.
    The remainder is earmarked for health care for low-income families 
and to expand health insurance for children. The two main beneficiaries 
are the Basic Health Plan, an income-based health care plan, and the 
Children's Health Insurance Program (CHIP). The settlement dollars 
spent on CHIP will pay for health care for an additional 10,000 kids 
statewide. While I would have liked to see more dollars allocated to 
tobacco prevention and control, I believe the Legislature's dedication 
of all the tobacco dollars for these purposes was a big success.
    I recognize that Washington is in the minority of states who have 
used a significant portion of the money for tobacco prevention and 
public health. Keeping the money for these purposes has been a hard-
fought battle. Many state legislators have erroneously considered the 
tobacco dollars a windfall and used it for a variety of purposes 
unrelated to public health. I believe this is a mistake--but it is also 
a mistake that can be rectified each legislative session.
    In conclusion, I respectfully request that you consider the 
examples set by Washington, and other states who have used the money to 
prevent a new generation of addicted smokers. If we want to save lives, 
enhance the quality of life for all Americans, and stop these enormous 
drains on our budgets from excess health care costs, then we must 
ensure that state tobacco payments are spent in ways consistent with 
the lawsuits.
    Thank you for your leadership on this important health issue. As 
always, I look forward to continue working with you and offer any 
assistance that I can.
        Sincerely,
                                     Christine O. Gregoire,
                                                  Attorney General.

    The Chairman. Without objection. You see, if someone 
objects there is a time limit as to how long our hearings can 
proceed, but I do appreciate your testimony, and your complete 
testimony and that of Christine Gregoire, who is the Attorney 
General of the State of Washington, will be made a part of the 
record.
    Mr. Coolidge, welcome.

  STATEMENT OF FRANCIS L. COOLIDGE, IMMEDIATE PAST, CHAIRMAN, 
      NATIONAL BOARD OF DIRECTORS, AMERICAN CANCER SOCIETY

    Mr. Coolidge. Thank you. I am Francis Coolidge, immediate 
past chair----
    The Chairman. You need the microphone.
    Mr. Coolidge. I am Francis Coolidge, the immediate past 
chair of the American Cancer Society, and on behalf of the 18 
million volunteers and supporters of the society I would like 
to thank you, Senator, and your Committee colleagues, for 
inviting me to speak here today.
    3 years ago, John Seffrin, our CEO, testified before this 
Committee about the need for national legislation to protect 
the health of Americans from the harms of tobacco. 
Unfortunately, what was true then is still true today. One in 
three people who die from cancer dies because of tobacco, and 
despite the master settlement agreement we are still in need of 
national policies to address the tobacco problem in this 
country.
    The society and our partners in the public health community 
had great hopes that the MSA would have a positive impact on 
tobacco control in this country. Unfortunately, the Congress, 
without your support, waived its rights to any of the MSA money 
without requiring that the states spend even a single penny of 
it on tobacco control, and that failure has resulted in a 
dismal record and wholly inadequate spending by the states to 
address the problem of tobacco use.
    According to the new study report produced by the Campaign 
for Tobacco-Free Kids, an average of 7.5 percent of the 
settlement money, less than a dime out of every dollar, is 
going to tobacco control. Only a handful of states have 
allocated even the minimum amount of funding for tobacco 
control recommended by the Centers for Disease Control and 
Prevention, and not a single state-based tobacco control 
program conforms to the CDC's best practices guidelines in this 
respect.
    Unless more of the settlement money is devoted to 
addressing the scourge of tobacco, future generations will 
continue to needlessly suffer from tobacco-related disease and 
death. This represents an extremely costly missed opportunity.
    Let me illustrate the problem by briefly sharing with you 
three experiences, in each of which the society has dedicated 
significant resources. In Maryland, many months of hard work by 
the Society and others, including Mr. Hurson, resulted in 
legislation that established long-term funding allocations for 
tobacco settlement payments, including a first payment for 
program ramp-up of $46 million for anticancer and tobacco 
programs, and payments for the next 10 years of approximately 
$80 million in the same areas.
    The Maryland experience, however, as well as the 
commendable Ohio decision to endow tobacco prevention and 
cessation programs, is the exception. Take the example of 
Kansas where, notwithstanding the efforts of the public health 
community, the state legislature voted to put the first $70 
million of settlement funds into deficit reduction, and the 
state allocated a mere $500,000, an amount well below the $18 
million minimum that CDC recommends for Kansas to invest in a 
comprehensive tobacco control program.
    Lastly, consider Connecticut. That state consistently ranks 
as the country's wealthiest in terms of average and disposable 
income, and since 1995 it has enjoyed a budget surplus, and yet 
during the 2000 legislative session, although Connecticut 
received approximately $110 million in settlement funds, the 
state failed to dedicate any funding to state tobacco control 
efforts. We are deeply concerned, because our experiences such 
as those in Connecticut and Kansas have been far more common 
than that in Maryland.
    While the states have an important role to play in tobacco 
control, this is also a national and global issue in which 
Congress has an absolutely critical role to play. In this 
respect, Mr. Chairman, the society applauds your leadership in 
addressing tobacco control from a national perspective. With 
your indulgence, I will briefly touch on four of the essential 
policies that can only be effectively implemented at the 
federal level.
    First, we must have strong, effective, meaningful 
regulation of tobacco products by the Food & Drug 
Administration. The Nation's deadliest consumer product cannot 
continue to be totally unregulated.
    Second, federal funding for tobacco control and prevention 
programs is another priority. CDC, as you know, plays a unique 
role in advising and assisting all states in their tobacco 
control efforts, and this work leverages state dollars and 
effectively weaves the several state programs into a national 
one. Unless CDC's national tobacco control program is 
adequately funded this year, state programs will fall short of 
their potential.
    Third, the government's coverage of cessation benefits and 
services now falls far short of recommendations made by the 
Surgeon General and other leading public health experts. The 
Medicare, Medicaid, and MCH Smoking Cessation Promotion Act, 
sponsored by Senators Brownback and Durbin, would help work to 
reduce and prevent cancer-related illness and death among key 
at-risk populations and the Society supports its enactment.
    And finally, the federal government has an obligation to 
its taxpayers to hold tobacco companies accountable for their 
well-documented wrongdoings. Right now, the Department of 
Justice is pursuing civil RICO charges against those companies. 
We urge Congress to provide the DOJ funding to pursue these 
claims in fiscal year 2001 and beyond, as necessary.
    The ACS looks forward to working with you and your 
colleagues to address these and many of the other issues I have 
outlined today in my written testimony. We stand ready to join 
with you to protect our children from tobacco use and to help 
those currently addicted to quit. With this federal-state, 
public-private partnership, we will surely save both lives and 
money through a significant reduction in tobacco-related 
disease.
    Mr. Chairman and Members of this Committee, please know the 
American Cancer Society sincerely appreciates the opportunity 
to present our views and thanks you for taking the time out of 
your schedule at this busy time of year to hold a hearing on 
this most important public health issue. I will be pleased to 
answer any questions you may have.
    [The prepared statement of Mr. Coolidge follows:]

 Prepared Statement of Francis L. Coolidge, Immediate Past, Chairman, 
          National Board of Directors, American Cancer Society

    On behalf of the more than 18 million volunteers and supporters of 
the American Cancer Society (ACS), I thank you, Mr. Chairman, and your 
colleagues on the Senate Commerce, Science and Transportation Committee 
for inviting me to present testimony regarding the status of state-
based tobacco control efforts after the Master Settlement Agreement 
(MSA) and the recent Surgeon General's Report on Reducing Tobacco Use.
    I am Francis L. Coolidge, Immediate Past Chairman of the Board of 
the American Cancer Society. The Society is a co-chair, along with the 
American Heart Association, of the ENACT (Effective National Action to 
Control Tobacco) coalition--a public health coalition of more than 50 
national organizations dedicated to reducing the death and disease 
caused by tobacco use. Today, I am representing the American Cancer 
Society, but I bring to this discussion a broad public health 
perspective and an understanding of the goals of the public health 
community in terms of tobacco control and prevention efforts at the 
local, state, and federal levels.
    The American Cancer Society is the nationwide, community-based 
voluntary health organization dedicated to eliminating cancer as a 
major health problem by preventing cancer, saving lives and diminishing 
suffering from cancer, through research, education, advocacy and 
service. Despite the significant recent gains we have seen in 
decreasing overall cancer incidence and mortality rates, approximately 
1.2 million Americans still will be diagnosed with cancer this year and 
more than 550,000 will lose their battle with the disease. As you know, 
tobacco use is responsible for nearly one in five deaths in the United 
States--a needless and tragically preventable loss of more than 430,000 
American lives each year. Tobacco kills more Americans than AIDS, 
drugs, alcohol, car accidents, homicides, suicides, and fires combined. 
A lesser-known but no less grim fact is that more than 30 percent of 
all cancer deaths is attributable to smoking and tobacco use.
    The American Cancer Society has established challenge goals for the 
year 2015--goals that we are pursuing with the cooperation and 
collaboration of the public, private, and non-profit sectors. 
Collectively, we hope to reduce age-adjusted cancer mortality by 50 
percent, decrease age-adjusted cancer incidence by 25 percent, and 
markedly improve the quality of life for all people touched by cancer. 
We know from data and scientific evidence that one of the key steps to 
achieving an accelerated reduction in cancer incidence and mortality is 
tobacco control--especially when it comes to children--through 
meaningful regulation and effective cessation programs that will help 
those currently addicted to quit.
    Mr. Chairman, three years ago next week, the Chief Executive 
Officer of the American Cancer Society, Dr. John R. Seffrin, testified 
before your Committee about the need for national legislation to 
protect the health of American citizens from the harms of tobacco. 
Unfortunately, what was true three years ago, is still true today--one 
in three people who dies of cancer dies because of tobacco. These are 
deaths that could be prevented if our nation seriously and 
comprehensively addressed tobacco and made a long-term investment in a 
sustained campaign to prevent tobacco-related disease and death. Even 
the Supreme Court determined earlier this year that tobacco is 
``perhaps the single most significant threat to the public health in 
the United States.''
    As you know, some minority and ethnic groups and the medically 
underserved suffer from a disproportionate burden of cancer. Similarly, 
large differences in tobacco use exist in the United States. For 
example, in 1997, smoking prevalence was 37.9 percent among American 
Indian/Alaska Native men, 32.1 percent among African American men, and 
27.6 percent among white men. Taking these data into account, it is 
therefore not surprising that there are marked differences in tobacco-
related cancer deaths among different groups within the population. 
This year, it is expected that the rate of lung and bronchus cancer 
death for whites will be 49.3 per 100,000 while for African Americans 
it will be 60.5 per 100,000. No single factor determines the patterns 
of tobacco use among racial and ethnic groups. Data collected 
throughout the 1990s found that teen smoking increased by 80 percent 
among African-Americans; among Hispanics, 34 percent; among Native 
Americans, 26 percent; and among Asian-Americans, 17 percent. Clearly 
this cause for alarm. We know that these trends result from complex 
interactions among many factors including socioeconomic status, 
acculturation, targeted advertising, price of tobacco products, stress, 
and varying capacities of communities to mount effective tobacco-
control initiatives.
    ACS has prioritized the reduction and elimination of the unequal 
burden of cancer as a top nationwide priority. As part of meeting this 
challenge, the Society is working at all levels of the organization to 
advance policies and programs that work to reduce health disparities 
among minority and ethnic populations and the undeserved. Also, ACS 
urges policy makers to take action to ensure that disparities in 
tobacco use and the associated adverse health outcomes are addressed.
    Mr. Chairman, on behalf of the Society's nationwide volunteers and 
staff, again thank you for your ongoing leadership on tobacco issues 
and for providing us this opportunity to discuss with you and your 
colleagues the state-based tobacco control efforts in the post-
settlement environment.

Public Health Community Vision of Tobacco-Control in the Post-MSA 
        Environment
    The American Cancer Society and our partners in the public health 
community had great hopes that the MSA could have a positive impact on 
tobacco control in our nation, especially at the state and local 
levels. As you know, in 1999, ACS joined with our public health 
partners in calling for the entire amount of the state settlement money 
to be returned to the states, as long as Congress required a 20 to 25 
percent set-aside for state and local tobacco control efforts. This 
allocation is the amount that the Centers for Disease Control and 
Prevention (CDC) and other public health experts say is needed to 
establish the most effective tobacco control efforts. Unfortunately, 
the Congress waived its right to any of the settlement money without 
requiring that the states spend any money on tobacco control.
    The failure of Congress to ensure that the states would spend a 
minimum amount of the new money on initiatives to reduce and prevent 
the use, access, and appeal of tobacco products unfortunately has 
resulted in a dismal record and wholesale inadequate spending by the 
states to address the problem of tobacco use. According to a new report 
produced by the Campaign for Tobacco-Free Kids and endorsed by the 
American Cancer Society, on average a mere 7.5 percent of settlement 
money is going to tobacco control. So, for every dollar paid by the 
tobacco industry to the states, less than a dime is going to address 
the problem of tobacco use. Unless more of the settlement money is 
devoted to addressing the scourge of tobacco, future generations of 
children and adults will continue to needlessly suffer from tobacco-
related disease and death. This represents an extremely costly missed 
opportunity.
    We recognize and appreciate that there are many competing funding 
priorities at the state level but maintain that unless states begin to 
spend the CDC recommended amount of money on preventing and reducing 
tobacco use, both state and federal governments will continue to incur 
social and economic tobacco-related costs. Tobacco will cost the US 
economy approximately $100 billion this year alone, and more than $20 
billion will come directly out of federal taxpayers' pockets for 
treating smokers under Medicare, Medicaid, and the Veterans 
Administration health program. On average, each cigarette pack sold 
costs Americans more than $3.90 in smoking-related expenses--an amount 
well in excess of the current average price of a pack of cigarettes. As 
a nation, we cannot afford to continue to incur the huge human and 
economic losses due to tobacco use.
    The CDC recommends that states establish tobacco control programs 
that are comprehensive, sustainable, and accountable. ACS and the 
public health community have long-advocated that a comprehensive 
approach to tobacco control be implemented at the local, state, and 
federal level. As part of this advocacy, the Society urges that the 
needs of special populations be taken into consideration when tobacco 
control programs are developed and implemented. To be responsible and 
responsive, tobacco control efforts at the local, state, and national 
level must address the unequal burden of tobacco-related disease on our 
nation's minority, ethnic, and medically underserved populations. A 
guiding principle of these efforts should be the reduction of 
disparities in tobacco use, tobacco cessation, and health outcomes. ACS 
supports the best practices outlined by the CDC for comprehensive 
tobacco control programs and calls on Congress and state governments to 
ensure that adequate resources are provided so that each state can 
develop and fully implement a program that contains the following 
components:

    1. Community-programs to reduce tobacco use--community involvement 
is essential to reducing tobacco use and local government entities, 
community and business leaders, health care providers, community 
organizations and others can be effective partners and should be 
engaged in tobacco prevention and cessation activities;
    2. Chronic disease prevention/health promotion programs to reduce 
the burden of tobacco-related diseases--this includes cancer registries 
which help public health professionals determine cancer patterns among 
diverse populations, monitor cancer trends, target and evaluate cancer 
prevention and control programs (including tobacco control efforts), 
make rational decisions about resource allocation, and advance 
epidemiological, clinical, and health services research;\1\
---------------------------------------------------------------------------
    \1\ In 1992, Reader's Digest claimed, ``a network of cancer 
registries can be our most potent new weapon against cancer.'' Since 
then, Congress gave CDC the authority to expand cancer registries to 
every state. Unfortunately, current funding is inadequate to support 
this registry network, resulting in the closure of some regional 
registries. In order to reverse this trend, the American Cancer Society 
urge Congress to provide $55 million in funding for FY 2001 to expand 
and improve the collection of information gathered by CDC's state-based 
cancer registry program.
---------------------------------------------------------------------------
    3. School-based health programs to prevent tobacco use and 
addiction--the Surgeon General's recent report on Reducing Tobacco Use 
found that ``educational strategies, conducted in conjunction with 
community and media-based activities, can postpone or prevent smoking 
onset in 20 to 40 percent of adolescents'';
    4. Enforcement of tobacco control policies--enforcement of tobacco 
control policies at the local and state level helps ensure their 
effectiveness by both deterring violators and communicating to the 
public that these policies are important and a priority of the 
community;
    5. State-wide programs and projects for greater capacity and 
reach--state-wide initiatives that involve the public and private 
sector can increase the capacity of local programs by providing 
technical assistance and imparting lessons learned, exchanging contacts 
in particular communities and organizations, and sharing expertise;
    6. Counter-advertising/counter-marketing to counteract pro-tobacco 
influences and increase pro-health messages--the Surgeon General also 
recently reported that efforts to prevent tobacco use face the 
``pervasive, countervailing influence of tobacco promotion by the 
tobacco industry.'' Current scientific suggests that population-based 
measures involving a combination of policy and media interventions are 
the most cost-effective method to decrease tobacco use, particularly 
among children. Therefore these efforts must be increased;
    7. Tobacco use cessation programs to help the 50 million Americans 
currently addicted to tobacco to successfully quit--more than 70 
percent of all current tobacco users have indicated a desire to quit 
and helping them to quit. Helping them to quit can save money and save 
lives as cessation treatment and therapy is proven to be cost 
effective;
    8. Surveillance and evaluation to ensure fiscal oversight and 
effectiveness of programmatic efforts--monitoring and evaluation of 
each component of a comprehensive tobacco control program permits 
policymakers and program staff to adjust and improve activities and 
ensure that public money is being spent in a responsible and effective 
manner;
    9. Administration and management for sound program development, 
implementation, and oversight--experience from California and 
Massachusetts suggests that program success partially depends upon 
sufficient staffing and adequate management infrastructure.

    ACS is pleased that a handful of states (California, Massachusetts, 
Florida, and Oregon) have taken the steps necessary to move their 
states toward comprehensive tobacco control programs that are beginning 
to see tangible results. However, despite the availability of new 
evidence and potential new funding for effective tobacco control 
efforts, no state is currently implementing all of the CDC recommended 
program components fully. With only seven states allocating even the 
minimum amount of funding recommended by the CDC for tobacco control, 
it is not surprising that there is not one state-based tobacco control 
program that conforms to the CDC's best practices guidelines for 
tobacco control.
    The American Cancer Society is disappointed with this overall 
``state of the states'' with regard to tobacco control and is extremely 
concerned about the short-term and long-term health consequences of 
this failure to invest adequately in preventing and reducing tobacco 
use among both children and adults.
ACS State-based Efforts to Secure MSA Funding for Tobacco Control
    These disappointing results are certainly not for a lack of effort 
on the part of ACS and our public health partners. Since the MSA was 
signed, ACS staff and volunteers have worked tirelessly with 
legislatures in all 50 states to secure adequate appropriation of 
tobacco settlement funds for comprehensive tobacco control programs. 
For the past two years, this issue has dominated our public policy 
agenda across the country. We have educated the public through town 
hall meetings and mass media, organized coalitions with literally 
hundreds of youth, health, education, and social service organizations 
to send a singular message to each legislative body, and hired 
additional staff to press each state to fund a sustainable, 
comprehensive statewide tobacco control program that meets minimum CDC 
requirements. Most importantly, we have collaborated with state health 
departments to develop concrete plans to implement comprehensive 
community tobacco control programs that meet national standards for 
effectiveness and demonstrate good stewardship of state dollars.
    Yet, for the most part, our calls to action for policy makers to 
take advantage of this once-in-a-lifetime opportunity to end the 
scourge of tobacco and to decrease health care costs for generations to 
come have fallen on deaf ears. While a small number of states have 
invested tobacco settlement funds at a level sufficient to implement a 
statewide tobacco control program, the vast majority have woefully 
under-funded this program area. In his recent report the Surgeon 
General wrote that ``. . . [o]ur lack of greater progress in tobacco 
control is more the result of failure to implement proven strategies 
than it is the lack of knowledge of what to do . . . Tobacco use will 
remain the leading cause of preventable illness and death in this 
Nation and a growing number of other countries until tobacco prevention 
and control efforts are commensurate with the harm caused by tobacco 
use.'' The American Cancer Society has heeded Dr. Satcher's call to 
level the playing field and we are working nationwide to help secure 
funding for comprehensive tobacco control efforts at a level 
commensurate with the damages tobacco inflicts.
    I would like to share three specific state examples where the 
Society has dedicated significant resources in an effort to ensure that 
a meaningful portion of settlement dollars is dedicated to an effective 
tobacco use prevention and cessation program. In Maryland we have a 
positive example of a state that has made an investment sufficient to 
reduce tobacco consumption that will ultimately improve long-term 
health and decrease health care costs. As a second example, we call 
your attention to Kansas, which has earmarked money for tobacco 
control, but has done so at a nominal level leaving us little hope of 
impacting tobacco use rates. Third, in Connecticut, which since 1998 
has received more than $250 million in settlement funds, only $5 
million has been earmarked for tobacco control, of which only $4 
million has been expended.
    In Maryland just this April, we saw many months of work come to 
fruition in the form of legislation that established long-term funding 
allocations for tobacco settlement payments. The funds will be spent on 
20 health and education programs focused on three main issue areas: 
tobacco prevention, education, and cancer. In the first payment for 
program ramp-up, $30 million was allocated to anti-cancer programs and 
$16 million was allocated for tobacco programs. For the next ten years, 
approximately $80 million annually is earmarked, $50 million for anti-
cancer programs and $30 million for tobacco prevention programs, 
including $10 million for a tobacco prevention media campaign. ACS 
proudly led the Maryland coalition that achieved this success, funded 
radio and print ads to educate the general public and legislators about 
the importance of spending settlement dollars wisely, and provided 
other resources to help advance this proposal through the legislative 
process. We are confident that the vision shown by Maryland 
policymakers this year will reduce suffering, save lives, and control 
health care costs for generations to come.
    The Maryland model, however, is far too rare, and the Society's 
experiences at the other end of the spectrum, have been far too 
prevalent. Take for example, Kansas, where the Society joined 44 other 
organizations, along with Kansas Attorney General (AG) Carla Stovall, 
to advocate funding for a comprehensive statewide tobacco control 
effort at the CDC recommended minimum of $18 million annually. Attorney 
General Stovall has a particularly keen interest in seeing that the 
money is spent in the spirit of the MSA, as she was the first 
Republican AG to enter the multi-state suit against the tobacco 
industry. Despite the multi-faceted citizen-based effort organized by a 
statewide coalition of which ACS is a member, a lingering budget crisis 
overshadowed the Kansas legislative session, and consequently a 
decision was made to put the first $70 million of settlement funds into 
deficit reduction. The remaining tobacco settlement funding was divided 
among several issue areas focusing on children and juvenile crime, with 
only a fraction actually going to tobacco prevention. The mere $500,000 
allocation is well below the amount CDC recommends that Kansas invest 
in a comprehensive tobacco control program.
    While the programs established to enhance the lives of children 
will benefit the future of Kansas, they unfortunately will do nothing 
to reduce the human and economic toll that tobacco takes on Kansans. 
Thus, in Kansas, the tobacco use problem will continue unabated unless 
the state significantly increases the tobacco control appropriations 
budget line in the next legislative session.
    The outcome of the state settlement funding fight in Connecticut 
has been one of the most disappointing experiences for the Society 
volunteers and staff working at the state level to secure settlement 
money for comprehensive tobacco control programs. Connecticut 
consistently ranks as the country's wealthiest state in terms of 
average and disposable income, and since 1995 the state has enjoyed a 
budget surplus. In 1995, ACS partnered with Connecticut Attorney 
General Richard Blumenthal to form a statewide coalition known as MATCH 
(Mobilize Against Tobacco for Children's Health). Since then, the MATCH 
Coalition has grown to include more than 70 statewide agencies, with 
ACS often serving as the coalition's official voice.
    Attorney General Blumenthal, while one of the first state AGs to 
sue the tobacco industry, was also the very last to sign onto the MSA 
because he was not convinced that individual state legislatures and 
governors would spend the money for the purpose the MSA was 
negotiated--to keep children from becoming addicted to tobacco and to 
alleviate the financial and social burden caused by tobacco use. To 
date, Attorney General Blumenthal's fears have been realized--
especially in his home state. Despite the fact that the MATCH 
Coalition, unified with one voice, asked the state legislature and the 
governor for the CDC recommended minimum of $21 million to carry out a 
comprehensive tobacco control program, the state failed to meet the 
challenge. During the 2000 legislative session, although Connecticut 
received approximately $110 million in settlement funds, the state 
failed to dedicate any funding toward state tobacco control efforts. In 
fact, $1 million still remains unspent from the original $5 million 
allocated to tobacco control in 1999, the only settlement dollars yet 
to be dedicated to tobacco control in Connecticut.
    We are deeply concerned that our experiences in Connecticut and 
Kansas have been more common than that in Maryland. As detailed in the 
Campaign for Tobacco Free Kids report released this week, only seven 
states have invested enough to ensure decreased tobacco use rates, and 
only eight more have appropriated enough to stand a chance at affecting 
a real change in tobacco use rates. This nation deserves better. It is 
a national shame that only 15 states have taken steps to reap long-
lasting benefit from the largest health-related legal settlement in 
history.
    The American Cancer Society stands willing and able to help develop 
and implement effective comprehensive tobacco control programs in each 
state and county in this country. However, it appears that without a 
significant shift in the attitudes and priorities of policy makers at 
all levels of government, the historic opportunity to reverse our 
nation's largest health burden will be wasted.
Congressional Role in Tobacco Control
    While the states have an important role to play in tobacco control, 
this is also a national and global issue in which Congress has an 
absolutely critical role to play. In this respect, Mr. Chairman, the 
American Cancer Society appreciates the leadership role you have played 
in addressing tobacco control from a national perspective, and we look 
forward to working with you and your colleagues to pass effective 
tobacco control legislation. With your indulgence, I will briefly 
discuss several essential policies that can only be effectively 
implemented at the federal level.
    First, we must have strong, effective, meaningful regulation of 
tobacco products by the Food and Drug Administration (FDA). The 
nation's deadliest consumer product cannot continue to be totally 
unregulated. FDA regulation over tobacco products should be consistent 
with the agency's regulation of every other product intended for human 
consumption. Any deviation from agency precedent should be fully 
justified on public health grounds.
    Federal funding for tobacco control and prevention programs is 
another priority. CDC, for example, plays a unique role in advising and 
assisting all states and territories in their tobacco control efforts. 
This federal role leverages state dollars and effectively weaves the 
state programs into a national program. Unless CDC's National Tobacco 
Control Program is adequately funded, state programs will fall short of 
their potential. ACS respectfully requests that Congress allocate this 
critical public health program $130 million for FY 2001. Other federal 
agencies, including the National Institutes of Health and the Substance 
Abuse and Mental Health Services Administration (SAMHSA), also have 
important roles to play.\2\ Federal funding for tobacco control 
programs remains far below the amounts justified by the magnitude of 
the problem and the opportunity we have to save lives and reduce 
suffering.
---------------------------------------------------------------------------
    \2\ This year, the American Cancer Society joined with more than 40 
other cancer-related organizations in an unprecedented collaboration as 
``One Voice Against Cancer'' to call upon Congress to appropriate a 15 
percent increase for the National Institutes of Health (NIH), $4.1 
billion for the National Cancer Institute, and $622 million for the 
cancer-related programs, including the National Tobacco Control 
Program, at the CDC.
---------------------------------------------------------------------------
    Congress also has an essential role to play in helping current 
tobacco users break their addiction. The federal government is the 
single largest provider and funder of health care services, yet the 
government's coverage of cessation benefits and services now falls far 
short of recommendations made by the Surgeon General and other leading 
health care experts. There is now overwhelming evidence that covering 
effective cessation is a good investment in both financial and human 
terms. Recent studies have shown that there are health benefits for 
individuals who cease their use of tobacco products, irrespective of 
their age at cessation. As mentioned above, approximately 70 percent of 
current tobacco users would like to quit and one barrier they 
experience is lack of insurance coverage for cessation. The ``Medicare, 
Medicaid and MCH Smoking Cessation Promotion Act,'' sponsored by 
Senators Brownback and Durbin, would help provide Medicare and Medicaid 
beneficiaries and pregnant women served by state-based Maternal and 
Child Health Programs access to important tobacco cessation services 
and work to reduce and prevent tobacco-related illnesses and deaths 
among those populations.
    The federal government also has an obligation to its taxpayers to 
hold tobacco companies accountable for their well-documented 
wrongdoing. Right now, the Department of Justice (DOJ) is pursuing 
Civil RICO charges against the tobacco companies. The federal judge 
overseeing the case ruled late last week that the RICO claim has legal 
merit. Unfortunately, tobacco industry allies in Congress have been 
trying to block funding for this lawsuit. This would effectively give 
the tobacco companies immunity for their violation of federal laws, and 
would deny American taxpayers their day in court. We urge Congress to 
provide the DOJ funding to pursue the RICO claims in FY 2001 and 
beyond, as necessary.
    Another important tool to hold tobacco companies accountable is to 
impose prospective penalties on companies based on their share of the 
illegal youth market. This would reverse the perverse economic 
incentives now in place and stimulate the companies to compete with 
one-another to reduce their share of the youth market. Unfortunately, 
this measure has not yet been embraced by Congress.
    There is a whole range of international tobacco control issues that 
also remains the responsibility of Congress, rather than the states. 
For example, negotiations begin in Geneva next week on a global treaty 
to promote tobacco control across borders. Congress has a proper role 
ensuring that the US plays a leading role in encouraging a strong, 
effective treaty. There are many other ways that Congress can promote 
tobacco control, multilaterally, bilaterally and unilaterally.
    Please note that this is not an exhaustive list of issues that must 
be addressed by Congress. I have not touched on the need for higher 
federal tobacco taxes to reduce consumption, especially among children; 
stronger tobacco product warning labels; safeguards to prevent Internet 
tobacco merchants from preying on children and violating tax laws; 
stronger restrictions on tobacco advertising that harms children; and 
limits on candy-flavored bidi cigarettes and other youth-oriented 
tobacco products.
    As you know, despite the historic settlement with the states, the 
tobacco industry and its products continue to wreak havoc on the health 
of our nation. While the public health community and many of our 
nation's public health and policy leaders had high hopes that the 
settlement would be the magic bullet to our nation's tobacco woes, it 
is clear that we continue to have our work cut out for us.
Conclusion
    Mr. Chairman, we believe that it is imperative that the states set-
aside the CDC recommended amount for comprehensive sustained tobacco 
control efforts. ACS remains committed to working at the state level to 
ensure that adequate resources are appropriated to fund both state and 
local efforts to prevent and reduce tobacco use among both children and 
adults. Our state-based staff are dedicated to ensuring that a majority 
of states--sooner rather than later--make significant investments of 
their settlement money into comprehensive, tobacco control programs 
that adhere to the best practices as outlined by the CDC.
    However, equally important to this effort is the role of Congress 
in enacting complementary policies and programs. While we recognize we 
are in the waning days of the 106th Congress, we respectfully call upon 
Congress to ensure that CDC is provided adequate funding to support 
both state-based tobacco control and cancer registry efforts which will 
work to ensure that states have high quality, timely data and technical 
assistance to bolster their tobacco control efforts. And, as planning 
begins for the next Congress, we urge you to once again join with the 
public health community in providing meaningful regulatory authority 
for the FDA.
    ACS looks forward to working with you and your colleagues in the 
107th Congress to address many of the other issues I have outlined 
today in my testimony. We stand ready to work with you to protect our 
children from tobacco use and to help those currently addicted to quit. 
With this federal-state, public-private partnership, we will surely 
save both lives and money from a significant reduction in tobacco-
related disease.
    Mr. Chairman and Members of the Committee, please know the American 
Cancer Society sincerely appreciates the opportunity to present our 
views and thanks you for taking the time of our your schedules at this 
busy time of year to hold a hearing on this most important public 
health issue.
    I shall be pleased to answer any questions you may have.

    The Chairman. Thank you, Mr. Coolidge.
    Mr. Myers, welcome back before the Committee.

            STATEMENT OF MATTHEW MYERS, PRESIDENT, 
                 CAMPAIGN FOR TOBACCO-FREE KIDS

    Mr. Myers. Mr. Chairman, it is a pleasure to be here. My 
name is Matthew Myers. I want to start out by thanking you for 
your leadership. You have made a difference, and we look 
forward to continuing to work with you on this issue.
    The Chairman. In the interests of straight talk and a 
complete record, I also failed.
    [Laughter.]
    Mr. Myers. We were deterred for a time.
    I have three points that I am going to make in my testimony 
today. First, that too often the states have failed to use the 
settlement money as it was intended, just as you said, and I 
would like to provide you some details.
    Second, the need for action has never been greater. Despite 
the hope and promise of the MSA, the evidence shows the tobacco 
marketing that has the greatest impact on our children has not 
seen a fundamental change and, if anything, has even increased 
in the last 2 years.
    And last, the need for Congress itself to act has not 
dissipated. We have not seen a fundamental change in the 
tobacco industry, and the same reasons that motivated this 
Congress to move forward 2 years ago are as real today.
    Let me try to provide you some concrete numbers, if I may, 
about how the states are doing. As you know, we have provided 
the Committee with a brand new report, a score card on how the 
states are doing, that itemizes them one by one. It is not a 
pretty picture. Of the 44 states that have acted, only 15 have 
provided substantial new money. That means more than 50 percent 
of what the CDC has recommended as a minimum standard. Only 
five, or a third of those, actually either meet or come close 
to the CDC's standard, and in several cases these states are 
not using settlement money.
    What we also see is that, in addition to those 15, 14 
others have allocated what we call modest amounts of money, 
between 25 and 50 percent of what the CDC allocated, far too 
little to make a truly fundamental difference, a change we all 
think is necessary. And--excuse me, I got that number flipped 
around. It was 11 are between 25 and 50 percent, and it is 14 
who fall under the 25 percent figure.
    What that does is paint us a picture of a set of states 
that are haves and have-nots. It is a pleasure to be on a panel 
with representatives from two of the states that are role 
models that have taken their commitment seriously and during 
the process of allocating----
    The Chairman. Do you see any connection, Mr. Myers, between 
those who have allocated the money and those who have not, and 
the results as far as reduction of the use of tobacco?
    Mr. Myers. There is a direct connection. As you correctly 
noted, in the State of Florida, where we have a program that is 
2 years old, we see a 40-percent reduction in tobacco use among 
middle school students and an 18-percent reduction in high 
school students. In the Commonwealth of Massachusetts, we have 
seen a 16 percent reduction since 1996 in teenage tobacco use.
    Massachusetts is an interesting study, and I do not have 
this in my written testimony. If you compare Massachusetts to 
Rhode Island, which is using most of the money to repeal a car 
tax and virtually none for a comprehensive tobacco prevention 
program, during the same period of time that Massachusetts saw 
a 16-percent reduction, Rhode Island saw an actual increase in 
tobacco use among their children.
    We are not talking about experimental programs. We actually 
know how to reduce tobacco use among kids.
    Let me also point out something different, and that people 
do not often focus on. Massachusetts and California have 
programs to reduce tobacco use among pregnant women who smoke. 
Both of them succeeded in reducing tobacco use among that 
population by between 45 and 50 percent. Just in terms of the 
number of healthier babies that were born, babies who did not 
need long-term care, those programs paid for themselves.
    My second point to you, sir, is that the need for action is 
no less today than when you first became involved. The hope had 
been that the master settlement agreement would bring about a 
different attitude and a different set of actions by the 
tobacco companies.
    The master settlement itself, even if it was fully 
implemented in total good faith by the tobacco companies, only 
addresses less than 25 percent of the marketing dollar of the 
tobacco companies. But what we have seen is all too typical of 
the tobacco companies. In the year after the master settlement 
agreement, tobacco advertising in magazines with high youth 
readership, more than 15 percent, actually went up, not down. 
That is a stunning, stunning condemnation of the tobacco 
industry's good faith.
    And when you look at the kind of advertising we are talking 
about, all you have to do is look at this chart over here. Or 
let me show you a relatively recent edition of Rolling Stone, 
where the woman who you probably do not know, because I do not 
know who she was, but my teenage son told me who she was, the 
woman who plays Buffy the Vampire Slayer, in this, and look at 
the kind of advertising we are talking about. Or in this 
edition, where we have Britney Spears, the teenage heartthrob. 
In both cases, face to face, Marlboro advertising. Or even a 
more recent edition, within the last 2 months, what we see, 
another one of these magazines, and you open it up, and you see 
the kind of advertising that is just directly targeted to these 
sorts of kids.
    We went to retail stores, and we looked at what happens in 
retail stores since the master settlement agreement. Again what 
we found is advertising went up, not down. If you look at this 
photo that we have over there, all too often, that is the kind 
of thing we are seeing. That is not the good faith change we 
hoped to see.
    And while billboards came down, the master settlement 
agreement permits outward-facing signs in convenience stores, 
and outdoor signs right on convenience store land. Good faith 
would have been that we would have no longer seen them. The 
reality is, we see more of them today than we saw before.
    The master settlement agreement eliminated the ability of 
tobacco companies to put their brand name on T-shirts and other 
goods. We thought that was going to be a great step forward. 
Have the tobacco companies complied in good faith? Well, to the 
letter, maybe, yes, but let me show you that advertisement for 
Kool. You buy a package of Kool, and what is next to it? I 
would actually like to hand this to you later on, a little 
pocket radio, which is exactly the sort of thing you would find 
a young adolescent--this does not appeal to people your age and 
my age.
    The unfortunate reality of what we see is that the tobacco 
industry responded to the master settlement agreement as they 
so often have before, as something to get around, and we are 
also seeing it in ethnic marketing, too. Here is a magazine 
targeted to Latinos, many Latino youth, and if you open it up 
it is filled with the same kind of advertising that we see 
here. Here is a Marlboro ad, and here is a Virginia Slims ad, 
appealing to, again. And what we are talking about here is by 
and large in this case a female population that does not smoke, 
who they are reaching out to.
    A long way of saying, sir, we have a long way to go. The 
master settlement agreement was a good, solid attempt by the 
Attorneys General, but the states have not lived up to their 
commitments and the tobacco companies have not really changed, 
I would like to also focus on one other important area, because 
the master settlement agreement was designed to force the 
tobacco companies to tell us the truth about the health effects 
of smoking.
    You held a hearing where you sat here and they weaseled 
around on addiction. You do not have to go back to 1994. The 
tobacco companies tell us they have turned over a new leaf, 
that they are going to tell the truth on these issues. If you 
go to their web sites and you watch their ads, you would think 
it is really true, but let me give you a couple of quotes of 
what they are really saying when people are not looking, what 
they are really telling people out there.
    A good example. Despite acknowledging on their web sites 
that there is an overwhelming consensus about the health 
effects of smoking, less than a year ago Phillip Morris, under 
oath, filed an affidavit in court in New York and they said, 
and I quote a specific quote exactly, ``it has not been 
scientifically established whether cigarette smoking causes any 
of these diseases in humans.''
    On the issue of addiction, which I would have hoped we 
would have put to bed, let me again quote from the sworn 
affidavit from Phillip Morris a year after the master 
settlement agreement, and I quote, ``nicotine in cigarettes is 
not addictive under objective, scientifically verifiable, 
pharmacologic criteria used to define that term.''
    Unfortunately, they may be spending hundreds of millions of 
dollars to tell the American public they have changed, but the 
facts do not support that conclusion.
    Sir, we hope that we can push the states, with your 
assistance, to live up to their promise. We also think it is 
essential to recognize that there is truly important unfinished 
business in this body. The authority for the Food & Drug 
Administration is a top priority. We need the kind of 
comprehensive legislation that you have championed.
    We should not be giving the tobacco companies breaks 
through the Foreign Sales Corporation legislation. That does 
not make any sense whatsoever, and we ought to ensure that the 
special interests of the tobacco industry do not have Congress 
intervene to cut off the Department of Justice's lawsuit 
against the tobacco companies. That lawsuit ought to be decided 
on its merits, and that is even more important today, now that 
the judge in the district court has permitted that lawsuit to 
go forward.
    I want to thank you for continuing to champion these 
issues. We in the public health community offer you our full 
support, and to work with you and the type of public officials 
we have up here today to really tackle this problem. As Dr. 
Satcher said, this is real life and death. If we can reduce by 
50 percent the number of kids who smoke, we are talking about 
saving millions of our children's lives. There is virtually 
nothing else we can do that can have that kind of public health 
impact.
    Thank you very much.
    [The prepared statement of Mr. Myers follows:]

     Prepared Statement of Matthew Myers, President, Campaign for 
                           Tobacco-Free Kids

    Good morning Mr. Chairman, and Members of the Committee. My name is 
Matthew Myers. I am the President of the National Center for Tobacco-
Free Kids, a national organization created to protect children from 
tobacco by raising awareness that tobacco use is a pediatric disease, 
by changing public policies to limit the marketing and sales of tobacco 
to children, and by actively countering the special interest influence 
of the tobacco industry.
    Mr. Chairman, I want to thank you for your continued leadership on 
the issue of tobacco control. Many others and I are very grateful for 
your willingness to stand up for our kids and take on the tobacco 
companies. During the past year you have been attacked by allies of the 
tobacco companies, but you have not backed down, and today's hearing is 
further evidence of your commitment to protecting our children and 
reducing the death toll of tobacco.
    I also want to thank Senator Hollings for his leadership, 
particularly his recent efforts to ensure that the Department of 
Justice is able to move forward with its lawsuit against the tobacco 
companies. I also want to again express our desire to continue to work 
with Senator Hollings on efforts to assist tobacco farmers. I believe 
we can simultaneously protect the public health and help family farmers 
and their communities reduce their economic dependence on tobacco 
production. For years, the cigarette companies have tried to blame the 
plight of the American tobacco farmer on public health initiatives and 
declining smoking rates. But it has become increasingly clear that the 
primary cause has been the decisions of the cigarette companies. The 
tobacco companies have chosen to maximize their profits by relying on 
less-expensive foreign labor and cheap foreign-grown tobacco while 
sacrificing the economic well being of the American tobacco farmer.
    My testimony today will focus on a few key points:

    1. A report being released today by the Campaign for Tobacco-Free 
Kids, the American Heart Association, the American Cancer Society, and 
the American Lung Association demonstrates that too often states are 
not living up to their promise to spend the tobacco settlement money to 
reduce tobacco use.
    2. The need for comprehensive, effective prevention programs has 
never been greater because tobacco company promotional expenditures 
that affect children continue to rise. The Master Settlement Agreement 
has eliminated or reduced some types of advertising and promotions, but 
the evidence shows that the tobacco companies are continuing the 
marketing practices that have the greatest impact on our children.
    3. And finally, we believe the federal government must show 
leadership on the issue of tobacco. State and local efforts will not be 
enough. There are a number of positive steps Congress can take in the 
next session to reduce tobacco use and there are a number of issues 
that are of immediate concern to us and others in the public health 
community. For example:

   The next Congress should grant the Food and Drug 
        Administration (FDA) the authority to regulate tobacco products 
        just as FDA regulates other products consumed by Americans.

   Language in a number of appropriations bills designed to 
        block the Department of Justice lawsuit against the tobacco 
        companies should be rejected. This Congress should adopt the 
        Hollings amendment to provide funding for the lawsuit and 
        reject special legal protections for the tobacco companies

   The Foreign Sales Corporation legislation that recently 
        passed the House should be amended to end the current tax 
        subsidy of tobacco company exports.

State Spending on Tobacco Prevention and Cessation
    The states' tobacco settlement, known as the Master Settlement 
Agreement (MSA), presented the states with a unique opportunity to 
reduce the terrible burden exacted by tobacco on America's families and 
communities.
    We have issued regular reports tracking whether and to what extent 
the states are living up to their original promise to use a significant 
portion of the settlement funds to attack the enormous public health 
problem posed by tobacco in the United States. Virtually every state 
legislature has now had the opportunity to make at least an initial 
decision about how to spend the billions of dollars that they are 
receiving from the tobacco companies.
    Our latest report shows that too often the states are not living up 
to their promise to spend the settlement money to reduce the death toll 
from tobacco. Fifteen states have made substantial commitments to fund 
tobacco prevention and cessation, but of those states, only five met 
the minimum funding levels recommended by the U.S. Centers for Disease 
Control and Prevention (CDC) for effective programs. Eleven additional 
states committed only modest amounts to new tobacco prevention and 
cessation programs (less than one-half the minimum amount recommended 
by the CDC). Fourteen states have committed minimal amounts to tobacco 
prevention and cessation (less than 25 percent of the minimum amount 
recommended by the CDC). Three states committed none of the settlement 
money to tobacco prevention. One of these, California, currently has a 
comprehensive tobacco prevention program funded by state cigarette 
excise taxes, but two have no existing tobacco prevention program. One 
state placed its funds into a trust fund that would permit, but not 
require any of the funds to be used for tobacco-related purposes, and 
six states have not yet acted at all. Finally, of the four states that 
had comprehensive programs prior to the MSA, only one has used funds 
from the settlement to enhance its tobacco prevention efforts.
    The tobacco settlement has resulted in an increase in the amount of 
money being spent at the state level on tobacco prevention and 
cessation, but the numbers are woefully short of what the CDC has 
concluded represents the absolute minimum necessary to fund a truly 
effective, sustained comprehensive program.
    The new funding levels for tobacco prevention only sound large in 
comparison to the amount states have traditionally spent on tobacco 
prevention. When the public health problems posed by tobacco are 
compared to other health problems, it is clear that the amount the 
states are spending on tobacco prevention today pales in comparison to 
the magnitude of the problem, as well as to the amount spent by the 
tobacco companies to promote the problem.
    It is not enough to claim, as some will undoubtedly do, that more 
of the money in many states is to be spent on other ``health'' 
programs. These cases were brought to reduce the death toll from 
tobacco. There is no single public health action that will save more 
lives than a dramatic reduction in the number of people who die from 
tobacco use. By investing in tobacco prevention now, states will save 
money in the long term, and see their health care costs decline along 
with tobacco consumption. And in all states, the investment in tobacco 
prevention can be made while still leaving the majority of the 
settlement funds available for other worthy causes.

Comprehensive Prevention Programs Work
    The states' failure to fund tobacco prevention is tragic because 
the evidence is now conclusive that comprehensive state programs work. 
As others have pointed out, including the Institute of Medicine in its 
March, 2000 report entitled ``State Programs Can Reduce Tobacco Use'', 
and the Surgeon General in his August, 2000 report, entitled ``Reducing 
Tobacco Use,'' we know how to reduce tobacco use and the harm it 
causes. The Surgeon General found that our country could make 
unprecedented progress and reduce tobacco use by 50 percent in one 
decade through implementation of currently used comprehensive 
prevention and cessation programs. These reports make clear that state 
funds spent on tobacco prevention and cessation are not experiments or 
learning opportunities. To the contrary, they are proven strategies 
that will produce important results for the health of our country.
    The Surgeon General's prediction is grounded in experience. In the 
six states with comprehensive tobacco prevention programs (California, 
Massachusetts, Oregon, Arizona, Florida and Mississippi), the results 
have been impressive. For example, in Florida smoking was reduced by 40 
percent among middle school students and 18 percent among high school 
students in less than two years. Between 1996 and 1999, smoking among 
high school students in Massachusetts decreased by 16 percent. Since 
1988, tobacco consumption in California has declined by 50 percent, 
compared to 30 percent for the country as a whole.

Need for Effective Programs Never Greater--Continued Industry Marketing 
        and Targeting of our Kids
    Two years after the state settlement, the tobacco companies are 
spending more marketing their products than the states are spending on 
tobacco prevention and cessation. According to the most recent official 
report of tobacco industry spending by the Federal Trade Commission, in 
1998 the tobacco manufacturers spent $6.7 billion, or more than $15.5 
million each day, to promote their products. In contrast to the $6.7 
billion in annual tobacco industry marketing expenditures, the National 
Conference on State Legislatures estimates that in FY 2000 and FY 2001, 
the legislatures appropriated a total of approximately $168 million and 
$430 million, respectively, of the tobacco settlement money for tobacco 
prevention and cessation out of a total of more than $8 billion they 
received.
    The need has never been greater. Even if fully enforced the MSA 
impacts less than 20 percent of cigarette marketing. Tobacco company 
promotional expenditures that affect children actually increased in the 
year after the state settlement. Recent studies show that tobacco 
advertising in magazines read by significant numbers of children, like 
Sports Illustrated and Rolling Stone, has increased by 33 percent since 
the MSA (see attachments). And one of these studies found that tobacco 
advertising in magazines reaches a huge majority of kids with alarming 
frequency and that this reach has increased dramatically since the 
settlement for several brands. The study found that eight of the top 
ten cigarettes brands each reached at least 70 percent of 12 to 17 year 
olds five or more times with magazine advertising in all of 1999. 
Marlboro, Kool and Winston each reached at least 89 percent of youth 
with that frequency in 1999.
    Shortly after these studies were released Philip Morris announced 
that it would suspend advertising in magazines with more than a 15 
percent youth readership. However, this action was taken only after 
they were caught red-handed and publicly chastised. Other companies 
continue to advertise in magazines with a significant youth readership 
and of course Philip Morris could reverse its decision.
    Similarly, advertising in convenience stores, which three of four 
teens visit once a week, has jumped substantially since the MSA (see 
attachment). These studies and other direct evidence provide proof that 
the claims of Philip Morris and the other tobacco companies that they 
have changed are not born out by the facts.
    It is also important to note that this continued advertising aimed 
at kids violates both the MSA and the tobacco companies' own publicly 
stated policies on advertising. The MSA prohibits the tobacco companies 
from taking any action, directly or indirectly, to target youth. Brown 
and Williamson Tobacco Co. has stated publicly that its policy is to 
not advertise in publications with more that 15 percent youth 
readership, yet it has refused to cease advertising in such 
publications. Neither self-regulation nor the MSA has proved effective 
at stopping the tobacco companies from targeting kids. That is why we 
need for the states to invest in comprehensive tobacco prevention 
programs and for the Congress to grant the FDA the authority to 
regulate tobacco.
    It should not surprise us that the industry continues its marketing 
to kids, as well as its double talk and its efforts to evade, 
circumvent and subvert restrictions imposed upon it. The tobacco 
industry loses 2 million smokers every year to death or quitting, and 
it must replace them in order to stay profitable. Virtually no one 
becomes a smoker after age 18. Almost 90 percent of regular smokers 
began at or before age 18.
    And their marketing works. Kids are susceptible and receptive to 
marketing. Studies show that kids are up to 3 times as sensitive as 
adults to cigarette advertising. Almost 90 percent of all adult smokers 
begin smoking when they are 18 or younger. Sixty percent of kid smokers 
smoke the most heavily advertised brand--Marlboro. Eighty-six percent 
of kid smokers choose the 3 most heavily advertised brands, while only 
one-third of adult smokers do. And we see the effects of tobacco 
company targeting of ethnic populations when over 80 percent of African 
American high school seniors who smoke choose Newport.

Continued Industry Double Talk on Basic Issues of Health
    As you can see, despite the settlement of the suit by the states 
Attorneys-General almost two years ago, despite the specific promises 
as part of that settlement not ``to target youth,'' despite all the 
public promises since that time not to market cigarettes in magazines 
with youth readership, despite a multi-million dollar public relations 
campaign to convince the public that tobacco companies are responsible 
corporate citizens, the plain truth is that the industry has continued 
its historic pattern of misdeeds, bad acts, double talk and deadly 
deception.
    I want to address specifically Philip Morris' multi-million dollar 
TV ad campaign touting the MSA and their philanthropic efforts in the 
community as evidence of change. As the examples of continued marketing 
to kids show, this public relations campaign is aimed at creating an 
illusion of change, and blocking meaningful government action at the 
federal and state levels to protect our kids and reduce the disease and 
death caused by tobacco. Unlike some of the other tobacco companies, 
Philip Morris can't even bring itself to make a clear admission that 
tobacco is addictive and leads to disease and death.
    Despite publicly acknowledging on its website that ``there is 
overwhelming medical and scientific consensus that cigarette smoking 
causes lung cancer, heart disease, emphysema and other serious diseases 
. . .'' Philip Morris, in papers filed with a federal court in New York 
in November of 1999, stated ``it has not been scientifically 
established whether cigarette smoking causes any of these diseases in 
humans . . .''
    Despite publicly acknowledging on its website that ``Cigarette 
smoking is addictive, as that term is most commonly used today,'' 
Philip Morris, in papers once again filed with the federal court in New 
York in November 1999, stated that nicotine in cigarettes is not 
`addictive' under objective, scientifically verifiable pharmacological 
criteria used to define that term.''
    In sworn testimony for the Engle tobacco trial in Florida, Philip 
Morris CEO Michael Szymanczyk states: ``The company's position is that 
there is an overwhelming scientific and medical consensus that smoking 
causes lung cancer and disease.'' When asked if Philip Morris ever 
agreed with that consensus, Szymanczyk states: ``We have not.''
    Does this sound like a reformed industry? I don't think so.

The Need for Federal Action to Reduce the Toll of Tobacco
    There is much that state and local governments can do to reduce 
tobacco use, particularly among our children. But the federal 
government should also take action and provide leadership on this 
nationwide problem.

FDA Jurisdiction over Tobacco Products
    Perhaps most importantly, Congress should pass legislation giving 
the Food and Drug Administration (FDA) authority over tobacco products. 
The Supreme Court in its ruling this year on FDA authority called 
tobacco the nation's most significant public health threat, 
particularly for children and adolescents, and made clear that the 
obligation to protect our kids from tobacco falls squarely on Congress.
    Real FDA authority must include oversight of the sale, marketing 
and manufacture of tobacco products. The MSA impacted only 20 percent 
of cigarette marketing, and FDA should be given the authority necessary 
to stop tobacco marketing to children. The tobacco companies have 
proven, time and again, that they will exploit every loophole they can 
find to continue targeting kids for addiction. They will not be stopped 
until Congress gives the FDA strong, enforceable authority to regulate 
tobacco.
    Unlike the manufacturer of any other product consumed by Americans, 
tobacco companies continue to escape even the most basic oversight for 
health and safety. Tobacco companies are not required to test additives 
for safety purposes, inform consumers what is in their products or take 
any action to make their deadly products less harmful or less 
addictive.
    The lack of government regulation or oversight of the tobacco 
industry leaves American consumers uninformed and at risk. For example, 
just yesterday a new study was released showing that R.J. Reynolds' new 
Eclipse cigarettes expose smokers to greater amounts of several cancer-
causing chemicals compared to two ``ultralight'' cigarette brands 
already on the market. The study casts doubt on RJR's claims that 
Eclipse ``may present smokers with less risk of cancer'' and other 
tobacco-related diseases. When RJR announced the test marketing of 
Eclipse in April, the company claimed that smoking Eclipse produces 80 
percent less carcinogens than a ``typical ultralight.'' Without FDA 
regulatory authority to verify health claims, RJR can continue to make 
claims, and American consumers will end up being human guinea pigs. 
Past experience with so-called `reduced-risk' products show that they 
turn out to be marketing frauds aimed at getting more people to start 
and continue a lethal habit.
    Explicitly granting the FDA authority over tobacco products would 
not subject the tobacco industry or its products to more intensive 
governmental scrutiny than other industries or products. It would 
simply apply to tobacco products the same kind of regulatory oversight 
that already applies to all other legal, and far less harmful, products 
consumed by Americans. Even Macaroni and Cheese, another Philip Morris 
product, is more regulated than tobacco. The time for Congressional 
action granting FDA the authority over tobacco is decades past-due.

Reject Special Legal Protections for the Tobacco Companies
    Tobacco industry supporters in Congress have tried this year to 
attach a never-ending array of misguided amendments to a host of 
appropriations bills in an effort to derail the Department of Justice 
lawsuit against the tobacco companies. Congress should adopt the 
amendment offered by Senator Hollings during Committee consideration of 
the Commerce-Justice-State appropriations bill to provide DOJ with the 
funding needed to pursue the lawsuit. Just last week, a U.S District 
judge ruled that the lawsuit may proceed under U.S. racketeering 
statutes, repudiating claims that the suit had no merit. The United 
States Senate should take immediate action to assure funding for the 
lawsuit so that the American people have their day in court.

Foreign Sales Corporation Repeal and Extraterritorial Income Expansion 
        Act
    The House of Representatives recently passed the Foreign Sales 
Corporation Repeal and Extraterritorial Income Expansion Act. This 
legislation would continue special tax benefits of more than $100 
million a year for the tobacco industry. These enormous tax breaks are 
nothing other than a subsidy, at American taxpayer expense, for the 
tobacco industry to export death and disease abroad. Numerous products 
already are excluded from this legislation for public policy reasons. 
Tobacco companies should also be excluded and should not receive a tax 
break.
    As smoking rates decline in the West, U.S. tobacco companies are 
aggressively recruiting smokers in developing nations. The World Bank 
estimates that between 80,000 to 100,000 children become addicted to 
cigarettes every day worldwide. Already, tobacco use kills about four 
million people every year. Based on current trends, the World Health 
Organization predicts that tobacco will kill ten million people per 
year by 2030, with 70 percent of those deaths occurring in developing 
countries. The government of the United States should work to prevent 
this public health catastrophe, not to promote it. We urge that this 
gift to the tobacco companies be debated fully in the Senate. There 
should be an up-or-down vote.
    Mr. Chairman, thank you for the opportunity to testify today. I 
sometimes worry that legislators believe we solved the problem of 
tobacco and children with the MSA. Nothing could be further from the 
truth. Much more work needs to be done at the local, state, and federal 
level. I look forward to continuing to work with you and other Members 
of this Committee to take advantage of the many opportunities for 
Congress to protect our children from tobacco.




Camel His Advertised in the Past Year in the Following Magazines:
    Glamour--19.81% youth readership and 2,882,000 youth readers
    Hot Rod--31.14% youth readership and 2,937000 youth readers
    Mademoiselle--23.66% youth readership and 1,540,000 youth readers
    Rolling Stone--28.17% youth readership and 3,318,000 youth readers
    Spin--32.03% youth readership and 1,316,000 youth readers
    Sports Illustrated--22.55% youth readership and 7,254,000 youth 
readers
    Vibe--42.23% youth readership and 2,864,000 youth readers
    Vogue--18.88% youth readership and 2,353,000 youth readers

    
    

Kool Has Advertised in the Past Year in the Following Magazines:
    Glamour--19.81% youth readership and 2,882,000 youth readers
    Hot Rod--31.14% youth readership and 2,937,000 youth readers
    Mademoiselle--2366% youth readership and 1,540,000 youth readers
    Motor Trend--25.21% youth readership and 2,131,000 youth readers
    Rolling Stone--28.17% youth readership and 3,318,000 youth readers
    Spin--32.03% youth readership and 1,316,000 youth readers
    Sport--32.99% youth readership and 2,605,000 youth readers
    Sporting News--30.01% youth readership and 1,190,000 youth readers
    Sports Illustrated--22.55% youth readership and 7,254,000 youth 
readers
    Vibe--42.23% youth readership and 2,864,000 youth readers
    TV Guide--16.05% youth readership and 8,131,000 youth readers
    Essence--17.49% youth readership and 1,593,000 youth readers
    Star--15.17% youth readership and 1,518,000 youth readers

    
    

Marlboro Has Advertised in the Past Year in the Following Magazines:
    Elle--23.4% youth readership and 1,059,000 youth readers
    Glamour--19.81% youth readership and 2,882,000 youth readers
    Hot Rod--31.14% youth readership and 2,937,000 youth readers
    Mademoiselle--23.66% youth readership and 1540,000 youth readers
    Motor Trend--25.21% youth readership and 2,131,000 youth readers
    Outdoor Life--20. 33% youth readership and 1,867,000 youth readers
    Popular Mechanics--17.52% youth readership and 2,301,000 youth 
readers
    Rolling Stone--28.17% youth readership and 3,318,000 youth readers
    Spin--32.03% youth readership and 1,316,000 youth readers
    Soap Opera Digest--16.65% youth readership and 1,503,000 youth 
readers
    Sport--32.99% youth readership and 2,605,000 youth readers
    Sporting News--30.01% youth readership and 1,190,000 youth readers
    Sports Illustrated--22.55% youth readership and 7,254,000 youth 
readers
    TV Guide--16.05% youth readership and 8,131,000 youth readers
    Vogue--18.88% youth readership and 2,353,000 youth readers

    
    

Newport Has Advertised in the Past Year in the Following Magazines:
    Essence--17.49% youth readership and 1,593,000 youth readers
    Outdoor Life--20. 33% youth readership and 1,867,000 youth readers
    Popular Mechanics--17.52% youth readership and 2,301,000 youth 
readers
    Rolling Stone--28.17% youth readership and 3,318,000 youth readers
    Spin--32.03% youth readership and 1,316,000 youth readers
    Sporting News--30.01% youth readership and 1,190,000 youth readers
    Sports Illustrated--22. 55% youth readership and 7,254,000 youth 
readers
    Star--15.17% youth readership and 1,518,000 youth readers

    
    

Virginia Slims Has Advertised in the Past Year in the Following 
        Magazines:
    Elle--23.4% youth readership and 1,059,000 youth readers
    Glamour--19.81% youth readership and 2,882,000 youth readers
    Mademoiselle--23.66% youth readership and 1,540,000 youth readers
    Rolling Stone--28.17% youth readership and 3,318,000 youth readers
    Vibe--42.23% youth readership and 2,864,000 youth readers
    TV Guide--16.05% youth readership and 8,131,000 youth readers
    Vogue--18.88% youth readership and 2,353,000 youth readers
    Essence--17.49% youth readership and 1,593,000 youth readers
    Soap Opera Digest--16.65% youth readership and 1,503,000 youth 
readers
    Self--15.98% youth readership and 814,000 youth readers

    
    

    The Chairman. Thank you, Mr. Myers. Thank you for your 
impassioned and dedicated advocacy to this issue for many 
years, and you have brought great credibility, and we thank you 
for it.
    Majority Leader Hurson. Thank you, sir.

   STATEMENT OF HON. JOHN HURSON, DELEGATE, MARYLAND GENERAL 
                            ASSEMBLY

    Mr. Hurson. Mr. Chairman, my name is John Hurson. I am the 
Majority Leader of the Maryland House of Delegates of the 
Maryland General Assembly, and before I go on I would just like 
to also tell you how much, Mr. Chairman, I support your 
activities on campaign finance reform. We have talked about 
that. I hope to see you in Annapolis helping us pass that as 
well.
    The Chairman. It will be my pleasure, sir.
    Mr. Hurson. I am speaking on behalf of the National 
Conference of State Legislatures, where I serve as chairman of 
the Assembly on Federal Issues, which is the policy making arm 
of the conference. It is a pleasure for me to be here as part 
of this distinguished panel to discuss how the states have 
responded to the tobacco settlement.
    I would like to take this opportunity to thank the Surgeon 
General and the Centers for Disease Control for their 
extraordinary assistance to the states as we go through this 
process. I would also like to acknowledge the work of the 
American Cancer Society and Tobacco-Free Kids. In Maryland we 
have worked very closely with them and with the rest of the 
advocacy community to try to make our initiative as strong as 
it possibly can be.
    That being said, I know that I and my colleagues in the 
state legislatures and across the Nation are not always as 
receptive to my fellow panelists' recommendations as they might 
like us to be. However, I urge them to continue to participate 
in the process and to spend even more time in the Nation's 
state capitols working on these important issues, and I know 
that the National Conference of State Legislatures, and in my 
role as chairman of their Assembly on Federal Issues, will work 
to promote the best practices that we have going across the 
states in states like Ohio and Maryland, so that other states 
can adopt those practices.
    I would like to submit the report the State Allocation of 
Tobacco Settlement Funds, published in August of this year by 
the Health Policy Tracking Service of NCSL, in its entirety for 
the record.*
---------------------------------------------------------------------------
    * The information referred to has been retained in the Committee 
files.
---------------------------------------------------------------------------
    The Chairman. Without objection.
    Mr. Hurson. This report provides a state-by-state breakdown 
of expenditures for fiscal years 2000 and 2001. Two years after 
the signing of the agreement in November 1998, the largest 
single expenditure category so far is health care in the 
states. If you include tobacco prevention and cessation and 
long-term care as part of the health care, it represents 55 
percent of appropriated expenditures. Breaking that down, we 
have 43 percent of the expenditures, and this is combining all 
the states' expenditures, of the appropriated funds are 
dedicated to health care.
    Much of that is in the states' match for SCHP and also for 
medicaid spending, 9 percent is set aside for tobacco 
prevention and cessation, 3 percent for long-term care, 2.5 
percent for research, 6.5 percent for services for children and 
adults--adolescents, I am sorry--5.9 percent for education, 
much of that actually is to our academic health centers for 
research in tobacco, 6 percent for budget reserve, 6 percent 
for tobacco growers, and 17 percent miscellaneous.
    Some states have not actually made their final decision on 
either how to manage the account or what programs to support 
for the funding. Some of these states are putting the question 
directly to the people of the state through the ballot 
initiative process, like Oregon. Last year, the people of 
Louisiana adopted a spending plan for their settlement dollars 
through the ballot initiative. This year, six states, Arkansas, 
Arizona, Montana, Oklahoma, Oregon, and Utah will take the 
tobacco settlement expenditure question directly to the voters 
via the ballot initiative.
    The Maryland cigarette restitution program had a two-
pronged approach, focusing on tobacco prevention and cessation, 
$18.1 million, and cancer reduction, $30.8 million. My written 
testimony includes the dollar amounts for specific components 
of these programs, but the numbers really fail to tell the 
story of what we are trying to do.
    As part of the tobacco prevention and cessation initiative 
we have awarded a contract to conduct a baseline study of 
tobacco use by youth and adults in Maryland. We have actively 
engaged the assistance of our local governments to assist in 
the overall effort, and the state is providing technical 
assistance to local governments.
    I might add here that one of the things we are hoping is 
that by giving some of this money to our local governments, 
they will in fact increase their own spending on some of these 
initiatives.
    Maryland has obtained a grant from the MSA-established 
American Legacy Foundation to develop a state-wide youth 
movement against tobacco use. Our cancer prevention education 
screening and treatment program is well underway. We have 
already published a baseline cancer report. Fifteen local 
jurisdictions have already received cancer planning grants and 
are proceeding. We have also offered assistance to our tobacco 
growers, a small but important part of our economy.
    What is ahead for the states? States are going to continue 
to make adjustments in their tobacco settlement spending plans 
and I need to emphasize, particularly after what I have heard 
here, states are going through the process of getting this 
thing going. It has been 2 years. Many of the states had to 
implement the model legislation first. The issue of recoupment 
had to be settled as well before states knew exactly where 
their budgets were going to be.
    The tobacco settlement also leaves plenty of room for 
additional state legislative initiatives regarding youth 
access. The settlement establishes eight areas of state 
legislation and regulation that the industry is prohibited from 
lobbying against.
    There is a provision in the MSA that prohibits the 
manufacture of cigarettes in packages of less than 20, and 
prohibits the sales of cigarettes in packages of less than 20. 
These provisions sunset December 31, 2001, unless the states 
enact legislation prohibiting these practices. Maryland will 
consider that issue in the coming session.
    This is likely to be priority legislation in many states 
across the Nation in our next legislative sessions, but we need 
help as well at the federal level. Gray market cigarettes are a 
product that is manufactured for foreign sale but is diverted 
back to the United states by third parties for domestic sale.
    The Balanced Budget Act of 1997 made the reimportation of 
tobacco products produced domestically for foreign sale illegal 
for everyone except product manufacturers, but failed to 
include provisions for cigarettes manufactured overseas for 
sales overseas that is diverted to the United States market.
    As a result, foreign-source product is becoming the 
dominant source for gray market cigarettes. These cigarettes 
are typically sold at below-market prices, making them much 
more attractive to young people. In addition, every pack of 
gray market cigarettes sold displaces the sale of domestic 
packs, lowering payments to states through the MSA, since 
payments are based on the sale of and the market share of 
domestic product.
    Forty-four states have enacted legislation in the area, but 
state legislation cannot fully resolve this problem. I would 
urge you to support legislation recently approved by the Senate 
Finance Committee that includes provisions that would address 
the growing problem of gray market cigarettes. This legislation 
will assist in our efforts to reduce youth access to tobacco 
and will also help states stabilize our tobacco settlement 
funding.
    And again I repeat, in my leadership role at NCSL I will 
continue to help urge states to adopt models like Maryland and 
Ohio as their way of dealing with the tobacco settlement. I 
thank you and applaud your hearing here today to focus interest 
on this issue.
    [The prepared statement of Mr. Hurson follows:]

  Prepared Statement of Hon. John Hurson, Delegate, Maryland General 
                                Assembly

    Mr. Chairman and Distinguished Members of the Committee:
    My name is John Hurson. I am the Majority Leader in the House of 
Delegates of the Maryland General Assembly. I am speaking on behalf of 
the National Conference of State Legislatures where I serve as the 
chairman of the Assembly on Federal Issues, the policymaking arm of the 
conference.
    It is a pleasure for me to be here as part of such a distinguished 
panel to discuss how the states have responded to the tobacco 
settlement. I would like to take this opportunity to thank Surgeon 
General Satcher and the Centers for Disease Control and Prevention 
(CDC) for the extraordinary assistance they have provided to states. 
The CDC staff have provided technical assistance to many legislatures 
and their materials ``best practices'' are widely used as models. My 
own state is working in partnership with the CDC to move forward on our 
tobacco initiative.
    I would also like to acknowledge the work of the American Cancer 
Society and Tobacco Free Kids. In Maryland we are working hand-in-hand 
with the advocacy community to try to make our initiative as strong as 
it can be. That being said, I know that I and my colleagues in 
legislatures in Maryland and across the nation are not always as 
receptive to my fellow panelists' recommendations as they might like. 
However, I urge them to continue participating in the process and to 
spend even more time in the nation's state capitols working on these 
important issues.

Master Settlement Agreement
Overview
    On November 23, 1998 the Attorneys General of 46 states, Puerto 
Rico, the U.S. Virgin Islands, American Samoa, the Northern Mariana 
Islands, Guam and the District of Columbia signed an agreement with the 
five largest tobacco manufacturers, ending a four-year legal battle 
between the states and the industry that began in 1994 when Mississippi 
became the first state to file suit. Four states (Florida, Minnesota, 
Mississippi and Texas) had previously settled with tobacco 
manufacturers for $40 billion. This Master Settlement Agreement (MSA) 
settled all antitrust, consumer protection, common law negligence, 
statutory, common law and equitable claims for monetary, 
restitutionary, equitable and injunctive relief alleged by any of the 
settling states with respect to the year of payment or earlier years. 
The MSA cannot be modified in any way unless all the parties agree to 
the modification.
    The Master Settlement Agreement did not include specific provisions 
for tobacco growers and impacted communities, but did call for 
participating manufacturers, tobacco growers and state officials from 
tobacco producing states to continue a dialogue. The National Tobacco 
Growers Settlement Trust was agreed to on July 19, 1999. In the 
agreement, the 14 tobacco producing states (North Carolina, Kentucky, 
Tennessee, South Carolina, Virginia, Georgia, Ohio, Indiana, Florida, 
Missouri, West Virginia, Alabama, Maryland, and Pennsylvania) agreed on 
a formula for the distribution of a $5.15 billion trust fund. Under the 
agreement, the funds would be distributed to the states using the quota 
system used by the U.S. Department of Agriculture (USDA).
What Have States Been Doing Since the Adoption of the MSA?
    Under the provisions of the agreement, states were required to 
begin implementation of the settlement agreement immediately. States 
that had suits pending were required to begin actions to settle the 
suits and to get the consent decree implementing the settlement 
agreement filed by December 11, 1998. The other states were required to 
file the necessary paperwork by December 23, 1998. This began the 
process of obtaining state specific finality, the trigger for access to 
the funds. State courts reviewed the consent decrees and addressed 
challenges to the implementation of the settlement agreement in the 
states. States have until December 31, 2001 to obtain state specific 
finality. Failure to achieve state specific finality by the deadline 
would effectively remove the state from the MSA. Currently, all but two 
states (Arkansas and Missouri) have achieved state specific finality.
    The most immediate task for state legislatures was: (1) to resolve 
the Medicaid recoupment conflict with the Administration and Congress; 
and (2) to consider and enact the ``model statute \1\'' included in the 
settlement agreement. This model statute is designed to provide a level 
playing field between participating and non-participating tobacco 
manufacturers. Failure to enact the model statute could result in a 
significant reduction in a state's allotment by triggering the 
nonparticipating manufacturers adjustment. I am pleased to say that the 
Medicaid recoupment issues was successfully resolved in the spring of 
1999. I am also pleased to report that the Model Statute has now been 
enacted by all of the states included in the Master Settlement 
Agreement.
---------------------------------------------------------------------------
    \1\ Under the MSA, if in any year the total aggregate market share 
of the participating manufacturers decreases more than 2 percent and an 
economic consulting firm determines that the provisions of the MSA were 
a significant factor contributing to the market share loss, payments to 
states may be reduced based on that loss. This reduction in state 
payments is called the non-participating manufacturers (NPM) adjustment 
This analysis is done annually. A state's enactment of the model 
statute is significant because if there is an NPM adjustment in any 
year, a state's payment will not be reduced at all if that state has 
passed and has in force the model statute. Payments to the states that 
do not have a model statute or qualifying statute in full force and 
effect will be reduced to cover the entire NPM adjustment. This could 
result in a state losing its entire payment for that year. If a state 
enacted the model statute, but the statute is overturned or invalidated 
by a court action, the state would pay no more than 65 percent of its 
payment toward the NPM adjustment in that year. If a state has enacted 
a ``qualifying statute'' as opposed to the model act in the MSA, and 
the qualifying statute is struck down by a court, the state will not 
enjoy any of the protections afforded states that enact the model act. 
In other words, those states would be subject to the full NPM 
adjustment in that year and would not enjoy the benefits of the 65 
percent cap.
---------------------------------------------------------------------------
Managing the Tobacco Settlement Funds
    The next task for states was to determine how the state would 
structure the settlement funds. Should a trust fund or endowment be 
established? Should the state consider bond securitization? Should the 
funds just go into the general fund and be appropriated under the 
regular process?
    According to our most recent information, 26 states have created 
trust funds and four states have established endowments. Trust funds 
are usually subject to the appropriations process and the principal is 
available for expenditure. The fund is usually maintained as separate 
accounts in the state treasury. Five states (Idaho, Kansas, Louisiana, 
Minnesota, Mississippi, and New Mexico) have established endowments. 
Utah will establish an endowment if a proposed ballot initiative is 
adopted by the people in November. Most endowments limit expenditures 
to income generated from investments. The principal is never spent. The 
other states are generally appropriating the funds from the general 
fund, but are establishing spending guidelines through legislation.
    Finally, some states are considering bond securitization, which 
permits a state to receive a discounted lump sum payment up front. 
South Carolina enacted legislation to securitize its tobacco payments 
beginning in 2001, shielding the state from inherent instability in the 
tobacco settlement funding structure (pending state and federal 
lawsuits, volume reductions etc.). Florida and Iowa enacted legislation 
authorizing securitization, but additional legislation would be 
necessary to move forward. Three jurisdictions in New York (Westchester 
and Nassau counties and New York City) have securitized the funds they 
received from the state settlement. Arkansas would authorize the 
issuance of revenue bonds if the tobacco settlement ballot initiative 
is adopted by the voters.

Developing Spending Plans for the Tobacco Settlement Funds
    I would like to submit the report, State Allocation of Tobacco 
Settlement funds: FY 2000 and 2001, published August 1, 2000 by the 
Health Policy Tracking Service at NCSL, in its entirety for the record. 
I will briefly summarize the highlights of the report here.
    Approximately, 43 percent of the appropriated funds are dedicated 
to health care, 9 percent is set aside for tobacco prevention and 
cessation; 3 percent for long term care; 2.5 percent for research and 
6.5 percent for services for children and adolescents. The remaining 
funds are used for education (5.9%); tobacco growers (6%); budget 
reserve (6%) and miscellaneous other spending (17%).
    My colleagues across the country are working very hard to be 
responsive to the citizens of their respective states and have made 
extraordinary efforts to obtain input from the people in their states 
regarding the disposition of these funds. As you know, if we as elected 
officials fail to see the signal or heed the call, the voters have a 
way of letting us know exactly how they feel. I am confident that the 
decisions of my colleagues in legislatures east, west, north and south 
and all places in between are enjoying a very high level of support 
from the citizens in their states.
    While I am only aware of two states (Indiana and Illinois) that 
have current plans to fully implement the Centers for Disease Control 
and Prevention's (CDC's) best practices guidelines for tobacco 
cessation and prevention activities, I know that many states are using 
these guidelines as a model and to set goals. I urge this Committee to 
continue to support the CDC in these outreach and technical assistance 
activities.

Implementing the Tobacco Settlement in Maryland
    Maryland is moving quickly to implement the provisions of the 
Maryland Cigarette Restitution Program (CRF). We are working closely 
with health advocates, our local health departments and academic health 
centers to make this a successful initiative. It is a two-pronged 
approach focusing on: (1) Tobacco Prevention and Cessation; and (2) 
Cancer Reduction.
    The Tobacco Prevention and Cessation Program is a $18.1 million 
program that provides $2.3 million for statewide public health 
activities; $7 million for local public health activities (administered 
primarily by county government); $5 million for countermarketing; $3 
million for surveillance and evaluation; and $800,000 for program 
administration.
    The $30.8 million Cancer Reduction initiative includes $15 million 
for academic health centers; $12.8 million for local public health 
activities; $2.3 million for surveillance and evaluation; and $800,000 
for program administration.

November 2000 Ballot Initiatives
    Last year Louisiana adopted a constitutional amendment, through a 
ballot initiative, establishing the Millennium Trust and the Louisiana 
Fund within the state treasury. These Millennium Trust supports 
education and academic health center programs. The Louisiana Fund 
provides funds for Medicaid, attorney general enforcement activities 
related to the tobacco settlement, smoking prevention and cessation 
programs and other health-related activities. This year six states 
(Arkansas, Arizona, Montana, Oklahoma, Oregon and Utah) will take the 
tobacco settlement expenditure question directly to the voters via 
ballot initiative.

   Arkansas--a comprehensive tobacco settlement expenditure 
        plan that includes funds for tobacco prevention and cessation, 
        education, and research.

   Arizona--two separate ballot initiatives, both would provide 
        funds for health care for low-income adults and children. One 
        of the initiatives replaces tobacco tax funding with tobacco 
        settlement funding for some health programs.

   Montana--establishes a trust fund, comprised of 40 percent 
        of the tobacco settlement, the proceeds of which can be used 
        for tobacco disease prevention programs and state programs 
        providing benefits, services, or coverage that are health care 
        related.

   Oklahoma--establishes a Tobacco Settlement Endowment Trust 
        Fund, funded by 50 percent of state settlement payments 
        beginning July 1, 2002, phasing up to 75 percent of state 
        settlement payments in 2007, and thereafter. The fund would be 
        used to support tobacco prevention and cessation programs, 
        health care, education, other children's services and programs 
        for seniors.

   Oregon--two separate initiatives, one creates a tobacco 
        settlement trust fund, the earnings from which would fund 
        health care for low-income individuals; the other established 
        the Health Security Fund and all expenditures from the fund 
        would be limited to ``health programs,'' including 
        transportation of the elderly and disabled, housing for the 
        disabled and for low-income families and other programs 
        established as eligible by state law.

   Utah--amends the constitution to establish a permanent state 
        trust fund consisting of the state's tobacco settlement funds, 
        the assets of which will be invested by the state treasurer. 
        Income from the trust fund will be put into the state general 
        fund and be subject to appropriations.

What Are the next Steps for States?
State Legislative/Adminstrative Initiatives
    States will continue to make adjustment in their tobacco settlement 
spending plans. The tobacco settlement also leaves plenty of room for 
additional state legislative initiatives regarding youth access. After 
a state has attained state specific finality, tobacco companies are 
prohibited from opposing certain kinds of state or local legislation, 
laws or administrative that are intended to limit youth access to and 
consumption of tobacco products. The settlement establishes eight areas 
of state legislation/regulation that the industry is prohibited from 
lobbying against. The restrictions apply to legislation, laws or 
administrative rules that:

   Limit youth access to vending machines.

   Include cigars within the definition of tobacco products.

   Enhance enforcement efforts to identify and prosecute 
        violations of laws prohibiting retail sales to youth.

   Encourage or support the use of technology to increase the 
        effectiveness of age-of-purchase laws (e.g. the use of 
        programmable scanners, scanners to read drivers' licenses, or 
        use of other age/ID data banks).

   Limit promotional programs for non-tobacco goods using 
        tobacco products as prizes or give-aways.

   Enforce access restrictions through penalties on youth for 
        possession or use.

   Limit tobacco product advertising in or on school 
        facilities, or the wearing of tobacco logo merchandise in or on 
        school property.

   Limit non-tobacco products that are designed to look like 
        tobacco products, such as bubble gum cigars, candy cigarettes 
        etc.

    There is a provision in the MSA that prohibits the manufacture of 
cigarettes in packages of less than 20 and prohibits the sale of 
cigarettes in packages of less than 20. These provisions sunset 
December 31, 2001, unless a state enacts legislation prohibiting these 
practices. I am certain that many state legislatures will consider this 
and other youth access issues during the 2001 legislative session.
Supporting the Passage of Federal Legislation on Gray Market Cigarettes
    ``Gray Market'' cigarettes are product that is manufactured for 
foreign sale, but is diverted back to the United States by third 
parties for domestic sale. These cigarettes are typically sold at below 
market prices, making them more attractive to youth. In addition, every 
pack of gray market cigarettes sold, displaces the sale of a domestic 
pack, lowering payments to the states through the MSA, since payments 
are based on the sale of and the market share of domestic product. 
While 44 states have enacted legislation in this area, state 
legislation cannot fully resolve the problem.
    The Balanced Budget Act of 1997 (BBA `97) made the reimportation of 
tobacco products produced domestically for foreign sale (Export 
Labeled) illegal for everyone except product manufacturers. 
Unfortunately, BBA `97 had no similar provisions for product 
manufactured overseas for sale overseas (Foreign Source) that is 
diverted to the United States market. As a result, Foreign Source 
product is becoming the dominant source of gray market cigarettes.
    I would like to take this opportunity to urge your support of 
legislation recently approved by the Senate Finance Committee that 
includes provisions that would address the growing problem of gray 
market cigarettes by:

   Banning Foreign Source tobacco products not intended for 
        sale or consumption in the United States;

   Limiting the reimportation of previously-exported tobacco 
        products to only the original manufacturer, its authorized 
        agent or authorized warehouse;

   Applying criminal penalties for the diversion-before-export 
        of tobacco products manufactured domestically for export only;

   Making all export labeled tobacco products contraband by a 
        date certain to eliminate the enforcement confusion created by 
        the legal status of export labeled product that was ``removed'' 
        prior to January 1, 2000;

   Require the forfeiture and destruction of all gray and black 
        market product seized; and

   Clarify the law regarding purchases of products for personal 
        use at duty-free stores of a limited quantity of cigarettes.

    I thank you for this opportunity to discuss tobacco settlement 
issues with you and would be happy to answer questions.

    The Chairman. Thank you, sir, and thank you for taking the 
time to be with us.
    Attorney General Montgomery, I just want to quote from the 
letter from Christine Gregoire, the Attorney General of the 
State of Washington. She said, I recognize Washington is in the 
minority of states who have used a significant portion of the 
money for tobacco prevention and public health. Keeping the 
money for these purposes has been a hard-fought battle. Many 
state legislators have erroneously considered the tobacco 
dollars a windfall and used it for a variety of purposes 
unrelated to public health. I believe this is a mistake, but it 
is also a mistake that can be rectified in each legislative 
session. I hope she is correct in the rectification.
    Mr. Myers, do you share the concern that Majority Leader 
Hurson expresses about the gray market situation?
    Mr. Myers. I think the gray market situation is a real 
problem. I think we need to put it in perspective as well. Your 
bill 2 years ago sought to look at the whole problem of cross-
border sales, black market and gray market, and I think 
combined they pose a real problem.
    In the 2 years since that time, what we have discovered is 
a virtual explosion of evidence about the potential for black 
market. And if you will remember when you were working on the 
legislation, every time we talked about the cost and a number 
of other steps, we kept hearing threats there would be a black 
market.
    What I would urge is, this Congress take a close look at 
both sets of problems and try to solve in a unifying manner the 
problem of cross-border sales. It is affecting our ability to 
reduce tobacco use in the states here. And as well we have an 
increasing problem because of the manufacturing plants in 
Mexico that many of our companies have actually purchased in 
the last 2 years. So I think it is a problem we need to 
approach very carefully, but with really strong legislation.
    The Chairman. Mr. Coolidge, do you share that concern?
    Mr. Coolidge. I do, and I would reiterate something that is 
in our written testimony, and that is that there is presently 
underway an effort to draft a framework convention that I think 
has to be supported by Congress if we are to bring a global 
perspective to this issue. It is something that cannot be 
limited to our Nation's borders. It is an international problem 
and requires international solutions, and I urge Congress to 
help identify and enact those solutions.
    The Chairman. Thank you.
    Majority Leader Hurson, first I would like to say that 
without objection we will put the report entitled, Show us the 
Money, and Update on the state's Allocation of the Tobacco 
Settlement Dollars, which was compiled, as I mentioned earlier, 
by the Campaign for Tobacco-Free Kids, American Cancer Society, 
American Heart Association, and American Lung Association, and 
Majority Leader Hurson, I appreciate the fact that sometimes 
these things do take time, but let me just quote a couple of 
items from the report that these organizations have compiled.
    Article, USA Today, January 15, 1999, Connecticut Attorney 
General Richard Blumenthal has teamed up with antismoking 
advocates to propose legislation for spending the state's $5.5 
billion settlement with big tobacco. Under the plan, 45 percent 
go to education, prevention and cessation initiatives, 45 
percent to health programs, and 10 percent would be invested in 
an endowment fund.
    Connecticut legislature appropriated $5 million over 2 
years for tobacco prevention, CDC minimum recommendation is 
21.2 million a year. There's a long list of states here, 
Illinois Attorney General Jim Ryan wants half the state's $9.1 
billion windfall from the national tobacco lawsuit to go to 
health and antismoking programs, and he wants the legislation 
now to keep Washington's hand out of Illinois' cookie jar.
    Ryan's plan would earmark 50 percent of the money for 
uninsured children, smoking cessation, antismoking education 
programs, helping police enforce tobacco restrictions on 
minors. That was January 23, 1999. Illinois has allocated $28.5 
million for tobacco prevention. The CDC minimum recommendation 
is $64.9 million.
    The list goes on and on of the states who have had an 
opportunity already to take action, and unless that action is 
reversed, it is pretty clear that they will not comply with, 
again, the commitments that they made.
    I did not make these commitments when this master 
settlement agreement was made. The states did, and I have got 
to say, Attorney General Montgomery, I do not know if the 
Attorneys General were able to speak for the states or not, but 
everyone understood that this money was not going to go for tax 
rebates. At least, that was the distinct impression that 
Americans were given.
    So I do not expect you, Majority Leader Hurson, to be 
responsible for these other states, but you do wear another 
hat, and so I wonder if you could respond.
    Mr. Hurson. Well, it is difficult to respond. I would only 
just get onto the last point that you made. It really is 
somewhat of a structural issue. The Attorney Generals did 
settle this case, and there was great expectation that they 
could, in fact, lead their legislatures and their Governors to 
do those things. I am sure it is hard. I do not think the U.S. 
Attorney General could speak for Congress.
    But it is a difficult structural issue, and I would only 
point out, and I cannot speak for my colleagues in Connecticut 
or Illinois. I can tell you that the operative word, when we 
looked at passing legislation on this issue, was feeding 
frenzy. When we finally got the Governor's bill in front of 
us--in fact, it was not a bill. The Governor just wanted us to 
give him the money and he was going to spend it himself, and we 
decided to draft a bill, which I thought was a wise idea.
    But the thing that most dominated the legislature at that 
point was many, many, many pressures from a lot of groups who 
saw this as their salvation, and we made a commitment as a 
legislature to use this money primarily for the things that the 
CDC has recommended. Other legislatures have not been able to I 
suppose withstand some of those pressures.
    But the one thing I would point out is this is--and the 
reason this hearing is so important and such a good idea is 
that this is an ongoing process. I think some of these 
legislatures will reverse themselves and take another look at 
the use of these funds. Maryland may, in fact, change its use. 
I mean, that is possible as well, so there has got to be 
vigilance on the part of all of the advocacy communities to be 
down there in the state capitols and making sure that the 
message that we are hearing here today is heard loud and clear 
in those state legislatures.
    So again, I commit the NCSL, which has already committed 
itself to continue to provide guidance and work with the CDC, 
try to get our colleagues across the country to recognize the 
value of those recommendations, and to follow them when we use 
these funds.
    The Chairman. I thank you.
    Attorney General Montgomery, I have a list in front of me 
that will be included in the record of the tobacco settlement 
attorneys' fees. Some of them vary from 1.3 percent of the 
settlement to as high as 34.1 percent of the settlement. For 
example, Mississippi, the total settlement was $4 billion. 
Mississippi attorney's fees were $1.43 billion. In Florida, $13 
billion settlement, $3.43 billion attorney's fees.
    God bless the State of Maine. The State of Maine enacted a 
law that gave an hourly rate. An hourly rate. It seems that 
that has some logic associated with it. Some of the other 
percentages have not been settled.
    I understand, and I would like for Majority Leader Hurson 
to comment on that, that there is an individual in Maryland 
that wants a billion-dollar settlement. It will be very 
interesting what that hourly rate might be.
    Attorney General Montgomery, I am very concerned, because 
you will argue and Attorneys General will argue that's a 
separate pot of money. It all comes--as Mr. Myers will testify, 
it all comes from the tobacco companies. It does not fall down 
from heaven. So when you--you have got 25 percent, 34 percent, 
Connecticut $900 million estimated out of a $3.6 billion 
settlement, 25 percent South Carolina, $3 billion out of $12 
billion, and those are in addition to the settlement, but they 
are that percentage of the settlement. It all comes from the 
same place.
    Now, do you think that these attorney's fees are fair and 
equitable?
    Ms. Montgomery. Mr. Chairman, I cannot stand here and say 
to you that these dollars are not anything but excessive. In 
Ohio, I was measured in entering this lawsuit. We did a year's 
long study, and when we did get into it we did a lot to try to 
control those fees, so that the states would not be, as many of 
them are now, subject to lawsuit for the contingency fee 
percentage.
    The fallout of this tobacco suit has been enormous, the 
whole sense of whether an Attorney General can hire at 
contingent fees, and whether there is any control over who 
makes those decisions, what percentages and that. I believe 
that the Attorneys General collectively have learned a great 
deal in this lawsuit. I do not think, any Attorney General in 
the quiet of their own chambers is not now saying that we have 
learned a great deal from what has happened here.
    I am not going to be here to say to you that I think that 
these dollars are defensible. They are a huge amount of 
dollars, and I believe that the legislatures, you see the NCSL 
and some of the legislative associations looking to open 
dialogue, sometimes with a bomb, sometimes with legislation.
    I am fortunate that I am able to talk to my legislature and 
my Governor. But there is a huge public policy debate, a huge 
public policy issue that I think clearly we have to continue to 
debate here, and particularly in terms of the size of these 
settlements.
    The Chairman. Majority Leader Hurson.
    Mr. Hurson. I would agree with the Attorney General of 
Ohio. The fees that we are looking at in Maryland are 
excessive, and the legislature tried to address that issue. The 
Attorney General had negotiated a 25-percent contingency fee, 
and they were about to lose their case in court and so they 
came to court--or they came to the legislature to get the law 
changed, literally to help them, and in that process we cut 
that fee in half.
    It is still a lot of money, and now the legislative 
leadership and the Attorney General are urging the attorney to 
go directly to the fund first and determine what kind of 
payment he will get from them before using up the state's 
money, or getting some of the tobacco settlement from the 
state. He has refused to do that, and we are in court as a 
result of that. It is very unfortunate.
    We are in the process now where we are having to withhold 
some of the funds, to escrow some of the funds, that we have 
already appropriated for cancer research. We cannot start the 
research programs that follow the CDC recommendations, some of 
those programs, because we have to escrow the funds until that 
lawsuit is settled, and it's very unfortunate.
    The Chairman. How long do you estimate that will be?
    Mr. Hurson. We hope we are going to settle it during the 
next year, but literally this year, in this fiscal year we are 
escrowing funds that could go to cancer research and smoking 
cessation because of this issue, and it is very, very 
unfortunate.
    The Chairman. Has Mr. Angelos shown a willingness to 
negotiate?
    Mr. Hurson. Mr. Angelos always negotiates.
    [Laughter.]
    Mr. Hurson. We are continuing to talk with him, and the 
Attorney General is doing that.
    The Chairman. Mr. Myers, do you want to comment on the 
situation?
    Mr. Myers. We have focused our energies on trying to make 
sure that the states spend the money to protect the public 
health, to be candid with you, and so we have not followed each 
state decision all that closely. Our real concern has been to 
make sure that the money the states actually got were used to 
maximize the effort to reduce tobacco use, particularly among 
our children.
    The Chairman. Mr. Coolidge.
    Mr. Coolidge. Again, we have not taken an official 
position. However, I must say, as you said and know better than 
anyone, this whole development proves yet again that when you 
dump a lot of money into the political scene it is like dumping 
a lot of blood in front of a shark. There is a feeding going on 
here, and personally I find that this is greed beyond your 
wildest dreams of avarice.
    The Chairman. Well, I am reminded, when I look at these 
attorneys' fees, of the line that was used about the 
missionaries that went to Hawaii, they have done very well by 
doing good, and so I just think it is very harmful to the whole 
public perception of what was intended here, and Mr. Myers and 
Mr. Coolidge, your organization is made up of thousands and 
thousands of volunteers. That is what makes your organization 
work.
    You would have thought that the legal community would have 
done some of this anyway in a voluntary fashion, particularly 
when we are talking about the goals that we are trying to 
achieve here, saving lives of children. That does not seem to 
be the case as far as some of the lawyers who were involved in 
the settlement.
    I do not know what can be done, frankly, about it, because 
of the master settlement agreement, but I hope that we do not 
have--well, I hope that the weight of public opinion will have 
some effect here. That usually is sometimes helpful.
    I want to thank you all for being here. We will have 
another hearing, probably in January or February, after the 
next report is made available. I thank you very much for your 
participation, and I think this has been very helpful, and Mr. 
Myers, we will continue to make efforts and Majority Leader 
Hurson, we would like to work with you on this gray market 
issue as well, and the black market issue.
    We anticipated that, by the way, when we talked about this 
issue that there would be a dramatic increase in gray market/
black market activity, so we would like to have a look at that, 
and I will do whatever I can to see the legislation that is in 
the Finance Committee move forward. I do not know if that is 
possible this year or not.
    I thank all of you for being here, and this hearing is 
adjourned.
    [Whereupon, at 11:15 a.m., the Committee adjourned.]

