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TOBACCO WINDFALL AT RISK FOR COUNTIES

The tobacco-settlement windfall coming to counties throughout the state could be eaten up by payments counties will have to make under a sweeping new health pact reached last week at the Capitol, a state lobbying groupwarned Tuesday.

The new Health Care Reform Act will make it harder for counties to shave property taxes, reduce debt loads and pump money into their own health care programs -- all ideas local governments had for using the tobacco money -- according to the state Association of Counties.

That's because the hundreds of millions of dollars counties across New York were expecting to tap into from the 1998 tobacco settlement will almost certainly have to be used to cover the act's plan to provide coverage for up to a million uninsured residents.

"For any county that felt it could finally stabilize its taxes, this totally throws a wrench in that plan," said Ken Crannell, director of intergovernmental affairs for the New York State Association of Counties.

Gov. George E. Pataki, Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno announced the health care agreement last week.. Erie County Executive-elect Joel Giambra has not said what he intended to do with the tobacco-settlement money. His tax-cut plan was based on using surplus money in the county budget. Giambra is recuperating from surgery for throat cancer, and officials with his administration did not return calls seeking comment Tuesday evening.

A number of states, including New York, sued the tobacco industry over the past several years, arguing that they were owed billions for the cost of treating Medicaid patients who were smokers. The deal, announced in November with 46 states, Washington, D.C., Puerto Rico and Pacific Island principalities, totals $206 billion
over 25 years. New York's share is $25 billion and Erie County is due to get about $550 million.

The state's new plan, the Health Care Reform Act, will cost $9 billion over the next 3 1/2 years for such things as training doctors and covering the costs of hospital care for nonpaying patients. But the cornerstone of the reform act is its plan to cover as many as one million New Yorkers who don't have health insurance. A current state program offers care for uninsured children only.

But unlike the children's program, the new deal will require counties to pay 25 percent of the costs for the uninsured adults to get coverage under a government-subsidized initiative. That could all but wipe out what counties were expecting under the tobacco settlement.

That is not how the health plan was portrayed by Pataki and legislative leaders Friday afternoon when they unveiled it. By Tuesday, details of the new package slowly emerged as rank-and-file members of the Assembly came back in a special session to pass the new measure. The Senate is expected to follow suit next week or by early January.

At its public presentation Friday, the act was portrayed as a system to be paid for on the backs of tobacco companies and smokers. Pataki and the legislative leaders said the state would take the proceeds from the tobacco settlement and pay for part of the health plan. About $450 million more per year would be funded by raising the state's cigarette tax by 55 cents a pack to $1.11, the highest in the nation.

No one mentioned that county governments would be hit for a piece of the pie.

The Pataki administration Tuesday faxed a document to lawmakers showing that the health plan would be a financial boon for county governments.

"They're trying to make it sound like counties are getting a huge win," Crannell said. In fact, by the time the program hits its fourth year of operation, counties across New York will be on the hook for $350 million worth of new costs.

He said that while the health plan does not directly order counties to use the tobacco-settlement funds to pay for the health program, that is, in effect, the pot counties likely will end up having to tap in order to pay for the new mandates from Albany.

Coincidentally or not, say county officials, that is about what the counties are expecting to receive from last year's big settlement with the tobacco industry. That means all those plans counties have for the tobacco funds most likely will have to take a back seat to costs of the new health plan.

"Clearly, there is not a county in the state that was anticipating this major expansion of Medicaid," Crannell said. "It goes against everything we've worked for the past several years."

The Pataki administration defended the deal. Michael McKeon, a spokesman for the governor, said the package continues Medicaid cuts agreed to several years ago. Those Medicaid cuts, he said, will save counties $600 million a year.

"When you look at (the health plan) in its entirety, the counties make out in a major way," McKeon said. He said the overall savings the administration estimates the health plan will save counties does include the local share of the tobacco settlement. "They do have the tobacco funding that the state secured for them," McKeon said. "There's no question this will be a net positive for them."

But Crannell said the Medicaid savings McKeon is talking about had already been planned for by the counties and don't represent any new program cuts that will benefit local governments.

"This is a huge cost shift to counties. It's unbelievable," Crannell said.

Even a Republican ally of Pataki expressed his doubts about the program.

"I think this agreement is potentially a very expensive hit on local taxpayers," said Assembly Minority Leader John Faso, a Columbia County Republican. Faso called on Pataki, Silver and Bruno to hold off passage of the act for a month until all affected sides have a chance to better examine the bill.

"Nobody has seen it. This thing is going to be rammed through here. It is an extraordinary example of how Albany is at its worst," Faso said.

Under the Pataki administration's estimates, the health plan will have a "net benefit" for Erie County of $26 million. The administration comes to that number, though, mostly by including past Medicaid cuts and the tobacco settlement, which it puts at an average of about $16 million a year.

"I'm sorry. I have to laugh," Crannell said when discussing the administration's calculations.

When factoring out the previously agreed-to Medicaid cuts and the tobacco settlement funds, Crannell said the deal will start off costing Erie County $236,000 in 2000. By 2003, the cost will jump to nearly $12 million.

"I think counties are now becoming fully aware of the tremendous loss that's coming here," he said.

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