Dems criticize using tobacco payments for business loans

HARRISBURG — The governor’s proposed economic development loan fund would count on some money previously used for health care programs to help him to dole out business loans.

Of the $2 billion anticipated for the fund, $220 million would come from the annual payments Pennsylvania receives as a result of a 1998 lawsuit settlement with tobacco companies.

Gov. Tom Corbett said the new loan program, dubbed the Liberty Loan Fund, would combine several existing loan programs into one. He said the new loan program will be easier for companies to navigate and will boost job creation.

But critics say the governor would control who receives funding, by appointing a majority of those running the loan fund. They compared that project selection process to handing out “walking-around-money,” the grants for legislative pet projects that Mr. Corbett criticized in his budget speech.

“Essentially, while he’s said he’s doing away with WAMs and grants, he’s setting up this as his own private WAM fund at the expense of the tobacco programs,” said Rep. Joe Markosek, D-Monroeville, who is the ranking Democrat on the House Appropriations Committee.

Mr. Corbett disagreed, describing the loan fund as a competitive program to select the best projects, not a hodgepodge of subjective grants.

“We’re not going to be picking winners and losers necessarily. We’re not doing it to get votes in any one district,” said Mr. Corbett, referencing how WAM grants had been used to gain votes on legislation that past governors wanted approved. “We’re doing it on the behalf of Pennsylvania as a whole. I consider that to be the way it should be done, rather than everybody running off and picking here and there.”

The new loan fund would gather funding from five business loan programs, including the Commonwealth Financing Authority, created in 2004 to oversee assistance for economic development projects.

The tobacco funds anticipated for the loan program are unlike the other accounts to be consolidated, which involve business projects. When those annual tobacco checks of about $350 million started coming in a decade ago, the Legislature specified amounts to be set aside for smoking cessation, health insurance, care for seniors and other health-related programs.

The adultBasic program, a health insurance plan for low-income adults, was started in 2001 by former Gov. Tom Ridge. It had covered 42,000 Pennsylvanians who were unemployed, or at a job without health insurance, or who earned too much to qualify for federal Medicaid.

Since 2005, under a deal worked out by former Gov. Ed Rendell, the four nonprofit Blue Cross/Blue Shield companies in the state provided about $1 billion for the program. But the Blues decided to end their participation at the end of 2010.

With health care costs rising and with no other source of funding, adultBasic was shut down this month because of a lack of funds. And a health endowment account was drained over several years to fill budget gaps.

On Monday, a lawsuit was filed against Mr. Corbett and other state officials for allowing adultBasic to expire.

Mr. Markosek said there has been “bipartisan agreement” that the tobacco funds are supposed to go toward “repairing the damage done by tobacco companies.”

Susan Hooper, a spokeswoman for the governor’s budget office, said the tobacco settlement funding also was meant as an investment, and that moving the money maintains that aim.

“We’re moving the money because we need the money,” Mr. Corbett said. “I remind everybody, we are $4 billion in debt. That was a decision of the past administration and the way they spent money.”

Noting Republicans’ criticism of Mr. Rendell’s spending policies, particularly in community development, Mr. Markosek said of the loan fund: “It makes me wonder what the majority caucuses would have said if Gov. Rendell had proposed it.”

Spokesmen for the House and Senate Republicans, which hold majorities in both chambers, did not respond to requests for comment.

Other money from the tobacco payments would continue to go toward health-related programs under Mr. Corbett’s budget, including $14.2 million for smoking cessation programs and $59.9 million for health research.

“I’d like to see that kind of money, from a drug like tobacco, be used much more for prevention, drug prevention, drug education, drug treatment,” said Mr. Corbett, following a Chester County event last week.

“That would be my goal years down the road. But right now, that money has already been picked apart and everything. Let’s get our house in order.”

But Mr. Markosek and other legislative Democrats say they will be raising questions as the budget process moves forward, to ensure that those tobacco-funded programs are protected from further diversions.

“We must always look to honoring the original intention of the act from 2001,” said Senate Minority Leader Jay Costa, D-Forest Hills. “My hope and expectation is that this administration will continue to honor that intent and that course of action.”


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