By David S. Broder
Washington Post Staff Writer
Monday, February 23, 1998; Page A09

The nation's governors were warned yesterday by Senate leaders of both parties not to count on getting any money from a national tobacco settlement.

After a closed-door luncheon session of the National Governors' Association (NGA), Senate Majority Whip Don Nickles (R-Okla.) said he had told the state executives that neither Democrats nor Republicans were inclined to give the tobacco companies immunity from future lawsuits for smoking-related costs. Without that, the offer from the companies of $368.5 billion over 10 years to settle the issue will be pulled off the table.

Nickles' prediction was backed by Sen. Byron L. Dorgan (D-N.D.), representing the minority leadership. Both said Congress was more likely to raise tobacco taxes, but said those proceeds probably would remain in Washington, rather than being shared directly with the states.

The governors came to town ready to argue for receiving 55 percent of the money in a national settlement. Few if any states have included the funds in their budgets, but many governors said the settlement, which was negotiated by state attorneys general, entitled them to a healthy share of the funds. "There's a strong feeling that it's our money," said Ohio Gov. George V. Voinovich (R), the NGA chairman. Michigan Gov. John Engler (R) added, "The governors are over the top about the White House building all kinds of spending dreams on our tobacco money."

Dorgan endorsed proposals from the Clinton administration to finance a variety of education programs and other domestic initiatives from the proceeds of a cigarette tax, but Nickles said Senate Republicans want to use that revenue to finance anti-smoking measures and bolster health care spending.

Nickles did offer the governors more hope of getting money from the Highway Trust Fund before the spring construction season begins. He said it might be possible to pay out all of the gasoline tax money that comes into the trust fund over the next six years without "technically" breaking the spending caps in the 1997 budget agreement.

Nickles also said the highway issue may be dealt with in separate legislation, before the overall budget resolution and in time to keep payments to the states flowing before the current May 1 deadline arrives.

Dorgan, however, warned the governors to "keep the heat on" the Republican leadership if they want to have the money in hand this spring.