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The check was in the mail this month as promised, but it was more than $3 million short of what the state expected from its settlement agreement with the tobacco industry.

Hawaii is one of 16 states that saw a "downward adjustment" in the latest payments in the 1998 court settlement, according to an Associated Press report yesterday. The tobacco companies claim that the states missed a deadline in the implementation of laws regulating tobacco sales and promotions.

"The January payment we were expecting was $15.32 million; we received $11,655,000," said Dr. Virginia Pressler, Department of Health deputy director for health resources administration.

"We got a 24 percent reduction in this last payment," Pressler said. "Last year's payment was a 12 percent reduction for all states. They have paid less all along."

Under the settlement, tobacco companies are expected to pay more than $200 billion to 46 states during the next 25 years. The states' lawsuits sought reimbursement of medical expenses for people with smoke-related illnesses.

Hawaii's share is $1.3 billion.

Previous payments were lower because of declines in the volume of cigarette sales and inflation.

This year, according to the Associated Press report from Baltimore, a technical provision built into the settlement cost the states some of the tobacco money.

It required the 46 participating states to pass legislation called the "model act" by June 1999 or risk losing part of their settlement.

Hawaii was one of 16 that failed to meet the deadline. The state Legislature passed the model bill that spring, but it was not signed by the governor until July, according to state officials.

"We are disputing that we did not have the model act in place," said Deputy Attorney General Alex Barrett. "The dispute is still to be resolved.

"Our act was in effect. We should not be subjected to any adjustment. We were in compliance for the last six months of 1999; they're saying we weren't. We filed a protest.

"We haven't lost the money," Barrett continued. "The monies were paid into escrow."

Barrett said the dispute between states' attorneys and the tobacco industry is more complex than the question of a missed deadline.

The major tobacco companies involved in the settlement are claiming they have lost their market share, a premise that is being challenged in various states.

"The larger issue is, did smoking go down as the industry claims it did?" said Julian Lipsher of the Health Department's Tobacco Prevention and Education Project. "The payments are predicated on tobacco sales across the country. But guess who keeps the books."

The Hawaii bill enacted in 1999 established that 25 percent of the settlement money would go for anti-smoking programs and 40 percent would go into a reserve fund.

The remaining 35 percent is appropriated for health promotion and disease prevention. Of that 35 percent, the Legislature provided that 10 percent go for health insurance for needy children.

Last year, Gov. Ben Cayetano vetoed another bill in which legislators tried to designate some of the settlement money for a Healthy Head Start initiative for poor families and for immigrant services.

Tom Ryan, a spokesman for Philip Morris U.S.A., said the tobacco industry itself is not withholding money from the states.

"The determination of the amount that we pay and that the states receive is made by an independent auditor," Ryan said.

The auditing firm is Price Waterhouse, which handles the biannual payments made to states on behalf of the industry.