In Va., Doubts On Spending of Tobacco Windfall

By Anita Kumar
Washington Post Staff Writer
Thursday, February 5, 2009

RICHMOND -- The tobacco farms had already begun to disappear from the state's landscape when Virginia officials started funneling hundreds of millions of dollars to the depressed southern region to try to boost the economy.

Settlement money from a lawsuit against the nation's largest tobacco companies became a funding stream for more than 1,000 projects. It paid for high-speed Internet access in rural areas, upgrades to sewer lines, a scenic trail to honor Virginia's musical heritage and a railroad museum.

When budgets were flush, the tobacco settlement money garnered little attention. But this year, as the General Assembly began discussing higher taxes on cigarettes to pay for smoking-related health-care costs, lawmakers started asking pointed questions about whether the state had properly spent more than $1 billion from the settlement.

"Some of the stuff it has gone to is very controversial,'' said Nelson Link, chief of farm programs for the federal Farm Service Agency, whose family has owned a tobacco farm on the North Carolina border for a century. "You've heard the expression: If you build it, they will come? It hasn't happened like they hoped."

Those who have battled the tax increase contend that the state should have spent more of the tobacco settlement on health-related costs instead of putting the squeeze on cigarette companies again.

Fifty-two states and territories, including Virginia, divided $206 billion that was expected to come from the nation's four largest cigarette makers over 25 years. So far, Virginia has received $1.23 billion, including $350,000 for legal fees.

With little debate, state legislators agreed to split the money this way: 50 percent to revitalize Southside and southwest Virginia, which includes annual payments to tobacco farmers to compensate for lost revenue; 40 percent to help pay for the state's $400 million in annual smoking-related Medicaid costs; and 10 percent to prevent smoking.

A 31-member commission approves grants to 41 cities and counties and issues 45,000 checks to farmers each year.

The Tobacco Indemnification and Community Revitalization Commission has directed $80 million to higher education, including college scholarships, and $96 million to installing 1,600 miles of fiber-optic cable. Last month, members approved spending $100 million to fund centers to research alternative energy sources in four locations in southern Virginia.

Former state senator Charles R. Hawkins (R-Pittsylvania) introduced the bill that created the commission and now serves as its chairman. "Without the tobacco money, I'm not sure where we'd be today,'' he said about the southern part of the state.

Commission officials said several businesses have opened or expanded because of their efforts, including two in southwest Virginia that will create 750 jobs and two in Southside that will create more than 800 jobs. But some new industrial parks sit empty.

"When you look at those projects, [to determine] was that a good move or not, you won't be able to answer that for a long, long time,'' said Del. Clarke N. Hogan (R-Charlotte), who sits on the board and whose district benefits from the money.

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