Vaping

Vaping has become popular among people under age 18 who want an alternative to smoking cigarettes, but vaping presents its own health-related problems, according to federal and state health officials.

West Virginia’s annual payment from major cigarette manufacturers dropped by more than $1.6 million, as rising popularity of e-cigarettes and vaping has accelerated the decline in tobacco consumption, members of a state board that monitors tobacco settlement payments learned last week.

The state’s 2019 payment as part of the national Tobacco Master Settlement Agreement was $59.6 million, down from $61.26 million in 2018, members of the state Tobacco Settlement Finance Authority were advised.

Citigroup financial adviser Paul Creedon told the panel Thursday that cigarette sales in 2018 — the year that the 2019 payment is based on — fell 4.72 percent.

“It was a steeper decline than originally anticipated,” he said.

For the first three quarters of 2019, sales have dropped another 5.5 percent, he said, leading cigarette manufacturing giant Altria to accelerate its projections for declines in sales from between 4 percent to 5 percent a year to 5 percent to 6 percent annually.

Creedon said industry analysts point to the rapid rise in popularity of e-cigarettes, or vaping, for the accelerating decline in sales of conventional cigarettes.

However, one factor that could slow that decline, he said, is that a number of localities and the federal government are looking at banning flavored e-cigarette pods, which are believed to be effective in enticing young people to take up vaping.

“The general sense is, if these bans go into effect in a significant way, it could actually benefit combustible cigarettes,” Creedon said.

Asked if legalization of marijuana in many jurisdictions around the country is affecting cigarette sales, he said, “For right now, I don’t think we’ve seen a significant identifiable impact of legal cannabis.”

West Virginia, under then-Attorney General Darrell McGraw, was one of the first states to sue major cigarette manufacturers to help cover the future costs of treating smoking-related diseases.

In 1998, McGraw signed off on the national settlement agreement, worth at least $1.8 billion to West Virginia, to be paid in annual payments in perpetuity, based on total domestic cigarette sales.

In 2007, the state sold the rights to its next 25 years of payments to bondholders, raising $911 million from the sale of tobacco settlement bonds. The state used $807 million of those funds to shore up the then-critically underfunded Teachers Retirement System pension fund, and put most of the remainder into a reserve fund.

That fund was set up to make up the difference in years when the tobacco settlement payment falls below the $62 million minimum annual payment that the state makes to bondholders.

When the agreement was signed in 1998, projections were that cigarette consumption would decline at a steady rate of 3 percent a year. However, the decline accelerated sharply beginning around 2009, as a number of states and municipalities hiked tobacco taxes and many localities enacted strict smoking bans, Creedon noted.

However, bondholders bear the risk should there be a sudden, severe cessation in smoking nationwide.

The five-member board, chaired by Administration Secretary Allan McVey, meets annually to review tobacco settlement fund finances, and to be updated on tobacco consumption trends nationally.

Reach Phil Kabler at philk@wvgazettemail.com, 304-348-1220 or follow @PhilKabler on Twitter.

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