The annual survey conducted by GAO on how states are spending tobacco settlement money
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The annual survey conducted by GAO on how states are spending tobacco settlement money was released yesterday. ?The survey lists broad spending categories and, in the individual state sections, a little more specific info on which programs get money. ?I’ve found one good way to get a micro look at what programs get money in your state, like the Kentucky prawn industry, is a Google news search on “tobacco settlement.”?
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The GAO report is a good tool for highlighting the fact that states are addicted to tobacco and that the money isn’t usually spent on treating sick smokers or keeping kids from smoking, despite all the 1998 rhetoric by public officials. ?And it (the $240 billion MSA tax) is an unconstitutional, dishonest, expensive, inefficient, and regressive way of reducing the smoking rate.? (Did I leave out any deserving adjective?)
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And as my colleague Hans Bader notes,
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- Maryland is spending millions on attorneys fees (presumably for the Angelos firm that got the state legislature to change Maryland tort law retroactively to guarantee that the tobacco companies would lose).?
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- Wyoming is using the money in part to help drunk attorneys (“attorney alcohol compliance”), the poor dears. (Pg. 59).? (j. kidding…)
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- Massachusetts (and a bunch of other states) are using the moneys for their “general fund” — whatever they feel like.
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US states see decline in 2006 tobacco funds -study
Tue Apr 11, 2006 6:24 PM ET
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WASHINGTON, April 11 (Reuters) – U.S. states expect to receive about $5.4 billion in tobacco settlement funds in fiscal 2006, down from $5.8 billion fiscal 2005 and down sharply from prior years because of a halt in bond sales backed by future payments, the federal government said on Tuesday.
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In a new study, the Government Accountability Office said the 46 states participating in the Master Settlement Agreement with Big Tobacco took in a combined average of $9.3 billion during the 2000 through 2004 fiscal years, with a significant portion of that coming from securitized proceeds.
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However, in fiscal 2005, which for most states ended June 30 of that year, only one state, Virginia, sold a tobacco bond, receiving $390 million in securitized proceeds. The remainder of the $5.8 billion states took in that year came from direct proceeds from tobacco companies.
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For fiscal 2006, there are no states planning to sell bonds backed by tobacco settlement funds, GAO said.
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The landmark $206 billion settlement between states and Big Tobacco was agreed to help compensate states for the rising health care costs associated with caring for ailing smokers.
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The GAO said there was about $46.7 billion taken in by states during the first five years that payments were made under the settlement, with $31.1 billion coming from direct payments from tobacco companies and about $15.6 billion from bond securitization proceeds.
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The future of tobacco bond revenues has come under scrutiny by investors and lawyers as U.S. cigarette sales slipped to their lowest level since 1951 last year and tobacco firms participating in the Master Settlement Agreement have lost market share to those not participating.
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Earlier this month, an arbitrator determined that costs associated with the settlement was a significant factor in the participating firms” market share loss, increasing the odds that they may reduce a $6.5 billion payment due April 17. The 1998 settlement allows for reductions under certain circumstances.
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A spokeswoman for the National Association of Attorneys General said on Tuesday there was not any firm indication whether any tobacco makers intend to withhold funds from the payment. States have vowed to fight any efforts by tobacco firms to fight any payment reductions in court.
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The GAO said that the 46 states in fiscal 2005 allocated the largest portion of their combined payments and securitized proceeds — about 32 percent – to health related programs. They allocated 24 percent to debt service for securitized proceeds received in the past.
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For fiscal 2006, health care will remain at 32 percent of proceeds, while debt service will take up 29 percent of the total.
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Five states for fiscal 2006 intend to spend 100 percent of their tobacco settlement proceeds on debt service: California, New York, New Jersey, Rhode Island, South Carolina and Wisconsin, the GAO said. Arizona intends to spend 100 percent of its proceeds on health care, while Pennsylvania intends to spend 91 percent on health care.
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