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A $350 million raid by the state on county governments' proceeds from the historic national tobacco lawsuit settlement would be rescinded under legislation being introduced today by the Republicans who control the State Senate.

The legislation, which observers say the Democratic-led Assembly will be hard-pressed not to also approve, would end one of the biggest unfunded mandates to come out of Albany in recent decades. It would also end worries of higher local property taxes to pay for a new health-care program passed last month by the state.

Backed by the entire Republican membership in the Senate, the new bill, sources told The Buffalo News on Wednesday night, calls for eliminating a 25 percent cost-sharing requirement imposed on counties in December under a new state program designed to provide health insurance for lower-income families. To pay for the plan, part of the sweeping Health Care Reform Act approved last month in a special session, the Pataki administration and the Legislature quietly decided to dip into money coming to county governments from the 1998 settlement by New York and other states with the tobacco industry over costs for treating smoking-related illnesses.

But county governments across New York complained loudly that Albany was stealing money from a fund that many already had earmarked for ideas such as cutting property taxes. Now, in an election year, lawmakers, or at least those in the Senate, apparently have listened to the counties' complaints, sources said.

For Erie County, it will save county taxpayers $13.7 million by 2003, sources in Albany said Wednesday night. Details on savings for other counties were not immediately available, though officials had earlier estimated that the hit by the health care act on Niagara County would total nearly $2 million.

The legislation will be announced today in Albany by Senate Majority Leader Joseph Bruno, R-Brunswick. It will also be unveiled today in Buffalo by Sen. Mary Lou Rath, R-Williamsville, the bill's lead sponsor, and County Executive Joel A. Giambra, whose county coffers would benefit under the plan.

"This was unacceptable," Rath said of the health care deal that dipped into the county's tobacco settlement funds to pay for the health insurance program, called Family Health Plus.

Rath, chairwoman of the Senate local government committee, said the Senate bill will ensure that county governments across the state are held financially harmless for a new program mandated by the state.

The Family Health Plus program came out of the health care act, a sweeping, $9.3 billion law that, among its provisions, sets levels for how much hospitals are paid for training future doctors and for providing care for people who can't or won't pay their bills.

In an original proposal by the Assembly, the Family Health Plus program did not include any local government cost-sharing. But sources say the Pataki administration insisted counties kick in to help fund the program.

The same sources said Bruno has not won himself any favors with the Pataki administration with the introduction of the bill today.

The fact that the original Assembly bill did not include a local funding mandate, and the fact that it's an election year, will make it politically difficult for the Democratic-led chamber not to back the Senate plan, some lawmakers say.

"I believe the Assembly felt early on that it would be appropriate to have the state pick up the (entire) cost of this. But that's not how the final version came out, so I think they're going to be amenable to this," Rath said.

A spokeswoman for Assembly Speaker Sheldon Silver, D-Manhattan, could not be reached to comment.

The fact that every Republican Senate lawmaker is signing onto the bill "is very powerful" and shows that it will be a priority for Bruno in the session, one source in Albany said Wednesday night.

"This puts a lot of pressure on Gov. (George E.) Pataki," the source added.

The legislation would be worth close to $350 million in savings to counties across New York over the next three years.

Bruno is said to have been under tremendous pressure, especially from senators from Western New York and other upstate regions, to "make the counties whole," in the words of one lawmaker.

Details of how the county's share of the health insurance program will now be funded were not immediately available, though Senate Democrats have been pushing to use other, untapped portions of the tobacco settlement funds to hold the counties harmless.

New York will collect $25 billion over the next 25 years from the tobacco settlement, which was part of a broader $206 billion deal by 45 other states, Washington, D.C., Puerto Rico and Pacific Island principalities.

Counties then were to get about half of the state's proceeds.

For Erie County, that amounts to about $550 million during the period.

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