Holt Liberals must choose how to spend $614-million tobacco settlement
Windfall would reduce deficit, but advocacy groups want most of it spent on anti-smoking programs
It's an unusually good budget problem for a provincial government to have: what to do with an unexpected financial windfall of $614 million.
The Holt government must decide whether to spend that money on programs to help people quit smoking or use it to reduce projected budget deficits.
"When you think of the size of many of the provincial governments' deficits these days — several hundred million dollars — it could be the difference between a deficit and a surplus," says economist Pierre-Marcel Desjardins of the Université de Moncton.
The money will flow from a $32.5 billion settlement in a lawsuit by Canadian provinces and territories against three major tobacco companies over the health-care costs of treating people with smoking-related illnesses.
The settlement was approved by an Ontario judge earlier this year.
Anti-smoking groups, including the Canadian Cancer Society, have called for a "significant" share of the money to be devoted to programs to help people quit smoking and prevent smoking among youth, and to enforcing tobacco restrictions.
"This is a landmark opportunity for New Brunswick to address the leading cause of disease and death in the province," said Rob Cunningham, the society's senior policy analyst.
"It's well-established that sustained, well-funded programs are effective at reducing smoking, and now we have this dramatic problem of youth vaping."
Melanie Langille, the president of NB Lung, said her organization wants a majority of the money to fund quit-smoking programs.
But the Holt Liberals are also projecting a $549 million deficit this year and have been forced to cut spending to keep it from getting even larger.
This year's instalment from the tobacco case, $147 million, would shrink that deficit.
"We are working with our minister of finance and other people on how best to deploy the money that we will collect through this settlement," Health Minister John Dornan said in the legislature on May 14.
"There is no decision yet."
The Opposition Progressive Conservatives have endorsed using a large share of the money on anti-smoking programs.
Health critic Bill Hogan says "all of it" should be devoted to that effort.
"It's a perfect opportunity to fund programs that we don't have to find money to fund," he said.
The settlement amount does not take into account legal fees that must be paid to the law firms who represented the provinces.
According to one court filing, New Brunswick's lawyers will get 3.6 per cent of the total over the two decades or more of the payout.
The specific payment amounts per year may fluctuate depending on a range of factors including the ability of the tobacco companies to pay.
That hasn't stopped two provinces from using this year's money, and estimated amounts in future years, to improve their bottom lines.
Even though it will take years to collect its $520 million total, Newfoundland and Labrador is recording the entire amount on this year's budget, slashing its deficit by more than half.
Quebec has also booked a large part — but not all — of the multi-year total this year.
"You might not want to be cynical, but those two provinces will be facing elections in the next 12 months," Desjardins noted.
He said the most transparent approach would be for provinces to apply each year's instalment to the budget in that year.
New Brunswick announced its lawsuit in 2006 and passed legislation allowing it to file the case in 2008, describing it as a way to hold tobacco companies accountable for promoting a product they knew to be harmful.
"No amount of settlement is going to undo the harms of years and years and years of tobacco use," Langille said.
"But we're hoping that our government will make choices in preventative medicine and supporting those living with tobacco-induced disease right now."
Desjardins said he understands the argument for using the money to fight smoking, but pointed out it is compensation for money already spent on caring for smokers — spending that contributed to budget deficits and provincial debt.
"I don't think there's an obligation to earmark the money for specific programs," he said.
"The money that was spent on health over the past several decades would have either stayed in the pockets of taxpayers or been spent elsewhere. So I think the provinces do have the moral grounds to put the money where they think the priorities are."
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