Nearly a decade has passed since 46 states agreed to divide $206 billion from the nation's largest cigarette companies to cover health-care costs related to smoking.

Virginia's share so far of the $60.7 billion the cigarette companies have paid out: $1.23 billion. About $770 million has been spend on people and areas most affected by tobacco -- farmers, potential smokers and leaf-growing regions.  Some question how effectively the funding has been allocated.

Virginia has spent an average of $65 million a year in settlement money to improve life in the state's tobacco-growing regions.

Projects in the past 10 years include $87 million for technology, much of it for fiber-optic cable for high-speed Internet access in Southside and Southwest Virginia, and more than $40 million to help attract and retain industries and businesses.

Yet the state-appointed commission that doles out the money has not adopted methods of measuring its overall return on investment, an outside group that reviewed the spending noted in a recent report that suggests it do so.

The tobacco commission may consider what recommendations to adopt at its next meeting, scheduled for July 31 in Bristol.

More than $432 million has been funneled to economic development and revitalization projects. Nearly $236 million more has gone directly to farmers and tobacco quota owners, as compensation for large production losses since the late 1990s.

"Despite this spending, population in the region continues to decline, wage rates still lag behind the rest of the state, there is persistent high unemployment and poor educational attainment is still endemic," the panel wrote in its report.

Members of the commission that oversees the spending say it has helped bring some stability and new economic prospects to communities in Southside and Southwest that have suffered as industries such as textiles and tobacco have declined.

"I don't know what would have happened to some of these communities if it hadn't been for tobacco-settlement money," said Charles R. Hawkins, chairman of the Virginia Tobacco Indemnification and Community Revitalization Commission. The 31-member body allocates money from a $1 billion endowment financed with half of Virginia's tobacco-settlement payments.

"We would probably be looking at double-digit unemployment in a lot of these communities" without tobacco-settlement money, said Hawkins, a retired state senator who co-sponsored legislation in 1999 that determined how Virginia's payments are used.

Hawkins appointed an eight-member panel, led by former Gov. Gerald L. Baliles, to review the commission's progress after nearly 10 years.

Baliles declined to comment on the panel's specific recommendations, saying the report speaks for itself.

The findings suggest that the commission would benefit from a performance audit by the General Assembly's investigative arm, the Joint Legislative Audit and Review Commission.

Measuring the commission's return on investments is difficult because of the range of projects it has funded, and because of the dynamics of the regional economies it is seeking to transform, Hawkins said.

"We have made some mistakes along the way, but I think those mistakes have been dwarfed by the accomplishments," he said.

. . .

The commission has provided more than 970 grants for projects in 41 counties, cities and towns in Southside and Southwest Virginia. The result of the spending is visible in those regions, from water and sewer upgrades to community education centers where residents take college-credit classes.

The commission's spending has paid for the installation of more than 1,600 miles of fiber-optic cable. It also has put about $80 million into education and job training, including more than $16 million for about 8,000 scholarships and tuition-forgiveness loans.

Of the $40 million that went into retaining or attracting businesses, $6 million helped Halifax County's industrial development authority finance a building for an expansion of ABB, a manufacturer of small power transformers. The company, which has had operations in South Boston since 1968, was considering moving out of Virginia. But the grant helped seal a deal that led to a 90,000square-foot expansion of its plant, preserving more than 550 jobs and creating 127 new jobs.

In Danville, the commission recently committed $1.6 million as part of a larger state and local incentives package that helped persuade Goodyear Tire & Rubber Co. to make a $200 million investment in its tire factory, which employs 2,200 people.

The panel said that 37 of the 89 grants provided since 2005 through the commission's business opportunity fund program, which helps recruit businesses, have been for amounts of $100,000 or less. Overall, it said a significant number of the commission's grants have been for such amounts and have been for local projects that "may or may not provide a good return on investment" and might not have a regional economic impact.

Some members of the commission agree that the group needs to take a harder look at its funding mechanisms and whether it is having a transformative effect on the economy.

"If you look at them individually, they are good projects and have had some impact," said Barnie Day, a former state delegate from Patrick County who serves on the commission.

"If you asked whether we have made a 100-year difference yet, I think the jury is still out on that."

. . .

In Southside, certain localities have received a larger share of the funding because the commission distributes some of the settlement money based on a formula weighted toward localities that historically have had more tobacco-dependent jobs.

But even localities on the edges of the tobacco-growing belt have seen some benefits. Amelia County, for example, received settlement money for improvements to its industrial park, and a $104,000 grant in 2006 helped the county attract an expansion of furniture maker Old River Cabinets, which employs about 160 people in the Amelia County Business Park.

"If [the commission] had not stepped in with the county and done what they did, we would not be in Amelia," said Victor Morrisette, owner of Old River Cabinets.

The review panel suggested eliminating the formula to target more money for regional projects. It also recommended that the commission put more resources into providing access to higher education for residents of rural areas, noting that "increasing the education levels of young people and adults is the only long-term answer that will lead to economic transformation."

The panel also suggested that the commission is too large and its committee structure is unwieldy. It has nine committees, all but one of them led by a member of the General Assembly, which the panel said has possibly encouraged some grant applicants to shop around among committees for funding.

"It's a good report," said chairman Hawkins, adding that he agrees with some of the recommendations, such as eliminating the funding formula in Southside, a view not shared by all members of the commission.

"To me, [the formula] is the fairest way to do it," countered Del. Thomas C. Wright Jr., R-Lunenburg, a member of the commission. "It makes sense to give at least the economic development portion of the money according to each community's loss."

"I think that we can improve on the job we have, and I think we ought to be willing to take a good, hard look at the way we operate and where appropriate make changes," Wright said. "I do think we have done some good for the tobacco region."
Contact John Reid Blackwell at (804) 775-8123 or jblackwell@timesdispatch.com.