AP Story on today's tobacco hearing

      Note the reference to the Hutchison bill's "instability"


                          Copyright 1999 Associated Press
                                      AP Online

                     March 15, 1999; Monday    18:02 Eastern Time

SECTION: Financial pages

LENGTH: 590 words

HEADLINE:   Fed, States Near Deal on Tobacco

BYLINE: LAURIE KELLMAN
AP-Tobacco-States ,0623

DATELINE: WASHINGTON



BODY:
    Senators and state officials talked of compromise Monday on whether
states
would give the federal government a piece of the $246 billion tobacco
companies
agreed to pay to settle health-related lawsuits.

   At issue was a measure approved this month by the Senate Appropriations
Committee that would prevent the government from using Medicaid law to
claim a
share of the money.

   The Clinton administration has threatened to seek what it says is the
federal
share unless states agree to spend settlements exclusively on
health-related
matters. State officials contend the states should be able to use the
money as
they please, even on sidewalks, roads or tax cuts.

   " I t may be that we can reach some accommodation,"  said Sen. Arlen
Specter,
R-Pa., chairman of the Appropriations subcommittee on labor, health and
human
services. As he prepared his amendment. to the measure, Specter asked state
officials to provide' 'general set of standards"   they could accept for
how to
spend the money.

   " I think we're entitled to know where it's going to be spent,"   Specter
said.

   The request underscored the instability of the full committee's March 4
approval of Sen. Kay Bailey Hutchison's amendment to a $1.9 billion
emergency
spending bill, tempered by continuing political heat that surrounds the
tobacco issue since the death last year of a $516 billion Senate
settlement.

   The tobacco industry settled with the states in November, but what to
do with
that money has sparked new contention between Washington to the 50 state
capitals.

   Tobacco companies agreed to pay $40 billion over 25 years to settle four
state lawsuits and another $206 billion in a broader deal with the other 46
states.

   Hutchison said Wednesday her amendment would prevent' 'the Big Brother
federal government"   from dictating spending priorities to states that
fought
for and won the settlement.

   " I am going to try to keep you from dictating to the states what they
should
do with money that I think they've earned, " Hutchison told Mike Hash,
deputy
administrator of the Health Care Financing Administration.


       The Clinton administration contends states must share proceeds of any
    lawsuits involving Medicaid, because the federal government pays 57
    percent of
    that program's cost.

       Hutchison's legislation would bar the white House from using Medicaid
    law to
    recoup the money, and supporters see a critical need to move swiftly
    because
    legislatures want to decide quickly how to spend the money.

       AlISO governors have challenged the federal position on the ground
    that the
    states earned every penny of the settlement by filing and settling lawsuits
    against tobacco companies. States, the governors believe, should be able
    to use
    the dollars as they please, however they choose to spend them.

        , 'After bearing all the risks and expenses in the arduous negotiations
    and
    litigation, ... we are now fully entitled to all the funds awarded to us,"
    Kentucky Gov. Paul Patton told Specter's subcommittee.

       The administration fired back Monday with a letter from Donna Shalala,
    secretary of health and human resources, urging Appropriations Committee
    Chairman Ted Stevens of Alaska and ranking Democrat Robert Byrd of West
    Virginia
    to reject the states' challenge to the government's claim.

       The whole matter, said Specter, is so legally uncharted that it's
    likely to
    wind up in court once again. Instead, he asked Patton and state officials
    from
    Texas and Pennsylvania to get back to him with a list of spending
    requirements
    they could accept.



    LANGUAGE: ENGLISH

    LOAD-DATE: March 15, 1999