NCPA - National Center for Policy Analysis

TOBACCO FUNDS SHORE-UP STATE BUDGETS, NOT ANTI-SMOKING EFFORTS

June 16, 2004

More than half of the funds states will receive this year from companies bound by the 1998 tobacco settlement will be spent patching state budget shortfalls, says the U.S. General Accounting Office (GAO).

The GAO report, "Tobacco Settlement: States' Allocations of Fiscal Year 2003 and Expected Fiscal Year 2004 Payments," predicts that states will receive $11.4 billion in tobacco money this year. But the GAO found a dramatic increase in tobacco settlement funds spent on budget shortfalls and debt service since 2002, while spending for health care and tobacco control programs has fallen:

  • States will spend 54 percent of settlement funds on budget deficits and an additional 7 percent on debt service payments.
  • Just 2 percent of the funds will go toward tobacco control (anti-smoking) efforts.
  • About 17 percent will go to health-related programs, though much of this spending is unrelated to smoking, such as children's Medicaid and immunization programs.
  • The remaining portions will fund state infrastructure and "general purposes."

The 1998 $240 billion Master Settlement Agreement (MSA) between 46 state attorneys general and the four major tobacco companies does not require states to spend settlement money on treating smoking-related illnesses. But many state officials, then and more recently, claimed a commitment to do so.

Source: Christine Hall, "States Spend Tobacco Settlement on Budget Shortfalls," Heartland Institute, May 2004; based upon "Tobacco Settlement: States' Allocations of Fiscal Year 2003 and Expected Fiscal Year 2004 Payments," General Accounting Office, March 2004.

For GAO study http://www.gao.gov/highlights/d04518high.pdf

 

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