States Spend Mega-Billion Tobacco Settlement On Budget Shortfalls

States Spend Mega-Billion Tobacco Settlement On Budget Shortfalls

New Report Shows States Hooked on Tobacco Bucks
March 22, 2004

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Jody Clarke, 202.331.2252



<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Washington, DC, March 23, 2004—States are making billions of dollars each year from the 1998 tobacco settlement, but they’re spending just 2 percent of the money on tobacco control and less than 20 percent on health-related programs according to a new report by the General Accounting Office.


“The $240 billion settlement was sold to the American people as compensation for treating smoking-related illnesses, but it’s the states that have become addicted to tobacco money, spending it on all kinds of unrelated programs,” said Sam Kazman, general counsel for the Competitive Enterprise Institute.


“State attorneys general and anti-tobacco activists at the American Legacy Foundation want smokers—who bear the brunt of the cost of the settlement—to pay for multimillion dollar anti-smoking ads,” said Kazman.  “But it turns out that states themselves are spending very little of their tobacco settlement money on tobacco control.”


“Trial lawyers were awarded an estimated $10-to-30 billion from the settlement.  If anti-tobacco campaigns are so important, why can’t they cough up a few million for the cause,” added Kazman.


States expect to receive $11.4 billion in fiscal year 2004 as a result of the tobacco settlement.  According to the GAO report, 54 percent of the settlement money this year will be spent on budget shortfalls, 17 percent on health-related programs, 7 percent on debt service on securitized funds, 6 percent on general purposes, and 5 percent on infrastructure, with just 2 percent going toward tobacco control.


In the 1998 agreement between 46 state attorneys general and four major tobacco companies, states were not required to spend settlement money on treating smoking-related illnesses.  But many state officials, then and more recently, claimed a commitment to do so.