WE weren’t blowing smoke in 1998 when lighting up public officials for their hyperbole surrounding the Master Settlement Agreement. Fifteen years ago this month, 46 states (including Oklahoma) reached a settlement with Big Tobacco that would bring billions of dollars to state treasuries, ostensibly to reimburse those states for government-paid health care expenses related to smoking.
Despite our misgivings, the agreement has aided Oklahoma health care in myriad ways. The people are largely responsible for this by protecting settlement proceeds from the vicissitudes of political whim — as has happened in other states and as has happened with another, more recent settlement, the one involving mortgage lending.
Fifteen years ago, state Attorney General Drew Edmondson termed the tobacco settlement “the most important advance in public health since the discovery of a polio vaccine.” The logical shortcoming of this remark is that it likened health problems related to a choice (smoking) to a disease spread by contagion (polio).
The settlement came in an era when society forgot that tobacco usage is a personal choice. We looked instead for a scapegoat. Big Tobacco filled the bill. Its choice was to accept a “master” settlement or face numberless lawsuits from individuals. Another sticking point was the millions of settlement dollars that flowed to politically connected laws firms for a case that never got close to a courtroom.
Also troubling: The settlement didn’t require states to use the proceeds for any particular purpose. A legal premise based on the recovery of health care costs produced money that could (and has) gone to budget items far afield from health care in some states.
We cite the above to provide perspective on a settlement that could have enriched not just law firms but the pet projects of powerful politicians at the expense of smokers saddled with higher cigarette prices. What’s happened since the settlement is that Oklahoma voters directed most of the money to an endowment, the earnings from which go to health care.
Frank Keating, who was governor in 1998, suggested that some of the money go to shoring up underfunded public pension plans. There was no shortage of ideas for spending a projected $2 billion (to be paid out over 25 years), but voter creation of the Tobacco Settlement Endowment Trust (TSET) in 2000 redirected the discussion — and the spending.
This spending has been substantial and not confined to tobacco-related causes in general or smoking cessation in particular. The endowment will continue to support health care for many years. The state’s general fund gets only 25 percent of annual settlement proceeds; the Legislature has consistently and wisely dedicated this share to health care. The other 75 percent flows directly to the endowment.
Anti-tobacco groups have been critical of how the settlement money and tobacco taxes are spent. The Campaign for Tobacco Free Kids, for example, said “only a minuscule portion” of these funds were deployed to fight tobacco use. But such groups likely will never be satisfied with the level of spending.
Oklahoma has taken in more than $1 billion from Big Tobacco since the settlement was reached. TSET’s core endowment balance has reached $790 million. In fiscal year 2013 alone, certified earnings from the endowment reached $33.3 million.
The endowment approach is clearly a success story. Over time, as smoking rates fall, settlement income will decline; the endowment will get lower contributions. But its balance will keep growing and its earnings will keep going to health care concerns, some far afield from tobacco-related problems.
We salute TSET for its stewardship and, yes, Edmondson for his tenacity 15 years ago. Most of all, we salute voters, who made sure the tobacco settlement wouldn’t become a slush fund for politicians.
