NCPA - National Center for Policy Analysis

States Mull Dipping into Tobacco Funds

July 11, 2001

Roughly half of the 46 states that are participating in tobacco settlements are looking for ways to cope with weakening revenues brought about by the limp economy. Some are considering using a portion of the payments they are receiving from tobacco companies to bridge budget gaps this year and perhaps next, depending on the direction of the economy.

  • Tennessee lawmakers are mulling a plan to spend $560 million to bolster the state's budget for the next 12 months.
  • Wisconsin plans to "securitize" its future tobacco payments -- which would involve selling to investors rights to those future payments in exchange for a smaller lump sum up front.
  • By 2024, tobacco companies are expected to have paid out $206 billion and in many states payments already made have been piling up while lawmakers decide what to do with them.

Antismoking groups, which stand to benefit if the funds are kept intact and directed toward them, oppose such plans.

But some state legislators and finance officials ask why not use those untapped funds, rather than raising taxes or cutting spending in order to balance their budgets.

Source: Will Pinkston, "Strapped States Eye Tobacco Funds," Wall Street Journal, July 11, 2001.

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