With the control of billions of dollars at stake, Beacon Hill power brokers are engaging in a furious, behind-the-scenes struggle over who will manage the assets, award the lucrative investment contracts, and dole out the high-paying jobs to run the newly

State Treasurer Shannon P. O'Brien is challenging Governor Paul Cellucci over how best to manage and invest the hundreds of millions of dollars that the cigarette manufacturers are giving to Massachusetts for each of the next 25 years under a 1998 national tobacco settlement. O'Brien wants to put the funds under the state's Pension Reserves Investment Management board, which she heads, saying it would save millions each year in overhead, consulting costs, and investment fees. The pension board has $32 billion in assets, and already has a staff and structure in place to handle large amounts of money, she said. Her plan would still allow the new Health Care Security Trust to control the funds. ''The decision to spend unnecessary sums of the tobacco monies on investment fees and administrative costs defies common sense,'' O'Brien said in a letter to Cellucci. O'Brien also said spending for fees and salaries to set up a new entity to manage the trust would conflict with ''the express statutory mandate'' that the tobacco funds be used exclusively for health-related programs. Cellucci is resisting any attempts to be pinned down on the issue, saying the decision should be left to the newly established board - which he controls - that has been set up to manage the fund. Its first meeting is today. ''We don't have any evidence either way this would be the prudent thing to do with the tobacco funds,'' said Cort Boulanger, the administration's fiscal spokesman. ''We are more concerned about the board getting up and running.'' For any Beacon Hill political figure, managing and controlling a huge trust fund opens doors of opportunities. Most particularly, those who win contracts to manage the assets can provide a huge pool of donors for incumbent officeholders. Robert Q. Crane, who spent 25 years as treasurer before retiring in 1990, used the funds to reward his friends and give out lucrative jobs. O'Brien's predecessor, Joseph Malone, raised large sums for his campaigns from the investment advisers and consultants under contract with the pension board. And the state jobs administering such funds are among the highest paying in state government. Scott Henderson, executive director of Pension Reserves Investment Management, makes $149,000. The chief investment officer makes $165,000 a year. The Legislature created the Health Care Security Trust to hold the tobacco funds that are designated for investment. So far, legislative leaders and Cellucci have agreed to spend 30 percent of the revenues received from the settlement each year and invest 70 percent. The fund currently has about $150 million in assets and will eventually be a multibillion-dollar fund. Though Cellucci controls the seven-member new board overseeing the tobacco funds, O'Brien and Attorney General Thomas Reilly each have appointees to it. O'Brien has gained the backing of Reilly in her quest to have the pension board invest the tobacco money. O'Brien wrote Cellucci a letter Sept. 14 asking for him to meet with her and Reilly to discuss the issue. But the governor has not responded.Cellucci aides say they never received the letter, but they say they have a copy of the letter the treasurer sent to Reilly. Deputy Treasurer Michael Travaglini said a member of the governor's staff had called him and told him the letter was delivered to Cellucci's office.

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