States Blow Tobacco Funds on Budget Smorgasbord

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Christine Hall, 202.331.2258

Jody Clarke, 202.331.2252



Washington, D.C., April 13, 2005— States spent two-thirds of tobacco settlement money on government programs unrelated to health care in 2005, according to an annual survey released this week by the U.S. Government Accountability Office (GAO).


Contrary to what many elected officials said back in 1998 when the $240 billion multi-state settlement was signed, most of the money received by the states has not been spent on treating sick smokers or preventing youth smoking.  The settlement, in reality a hidden tax on smokers, was ostensibly a compensation for state Medicaid costs in treating smoking-related illnesses over the years. 


The GAO survey shows states spending a third of the $5.8 billion payment in 2005 on health programs and another quarter on debt service.  None of the money was used to offset tax cuts.  Maryland spent $30 million on legal fees and on enforcing laws targeting non-settling tobacco companies.


The GAO report highlights the fact that states are addicted to tobacco money, despite the fact that the revenue stream is in jeopardy from pending legal challenges to the legality of the tobacco deal and to the amount of annual payments.




Hans Bader

CEI Legal Counsel


[email protected]

Sam KazmanCEI General Counsel202-331-2265[email protected]

Christine HallCEI Communications Director202-331-2258[email protected]