Where Has the MSA Money Gone?

January 8, 2007

Through Master Settlement Agreement (MSA) payments and monies from other similar settlements, state governments have unprecedented funds available to them to reduce youth smoking. These settlements provide the states up to $246 billion from tobacco companies over a 25-year period for use in supporting anti-smoking efforts. Future annual payments, based upon inflation and cigarette sales, will continue in perpetuity.

Although the MSA repeatedly mentions "implementation of tobacco-related public health measures," each state decides how its MSA funds are spent. Tobacco companies do not have any input into how the states spend their settlement funds.

So, where has the MSA money gone? When the MSA was signed in 1998, the states held press conferences proclaiming that they would spend the money on smoking education, cessation and research. State attorneys general spoke eloquently about protecting youth and improving public health. For example, Washington Attorney General Christine Gregoire said: "Washington state's proceeds from the tobacco industry settlement should be spent on public-health issues or the integrity of the historic agreement will be violated."

Montana Attorney General Joe Mazurek reported: "This agreement provides significant benefits to Montana and to Montanans. It will settle the state's damage claims against big tobacco. It will provide useful tools to educate the public – particularly young people – about the dangers of tobacco use, and to meet other health-related needs."

However, time has proven these promises to be part of a classic "bait-and-switch" operation. Instead of using the money for its intended purpose, the states have squandered billions of dollars on "pet projects," such as golf courses and horse-breeding farms, roads and bridges, and state-budget deficit reductions – items completely unrelated to the stated purpose of the settlement funds.

In fact, states have spent a large portion of MSA funds on projects totally unrelated to youth-smoking prevention and tobacco control. Projects for which MSA funds have already been spent include:

Dump trucks, golf carts and a course irrigation system, and a new county jail in New York;

Broadband-cable networks in Virginia;

Psychiatric care for prisoners in New Jersey;

Boot camps for juvenile delinquents, alternative schools, and metal detectors and surveillance cameras for schools in Alabama;

Upgrading public television stations with DVD technology in Nevada;

Harbor renovation and museum expansion in Alaska;

Water and sewer improvements in South Carolina;

Pasture and weather monitoring for a thoroughbred association in Kentucky;

College scholarships in Michigan;

New schools in Alaska and Ohio;

City parks and the purchase of undeveloped land in California;

A senior citizen prescription-drug program and property-tax rebates in Illinois;

Medicaid dental services in Maine;

Water Resources Trust Fund and flood-control projects in North Dakota;

Operating expenses for the Carolina Horse Park, truck-driver training, pine-straw farming research and equipment upgrades at a knitting plant in North Carolina;

A People's Trust Fund, which will generate interest income that can be spent at the legislature's discretion, in South Dakota;

Help in balancing the budget, which used four years of MSA money, in Tennessee;

Rural economic development in Georgia;

Tax rebates in several states; and,

Offsetting a revenue shortfall in Wisconsin. (Municipal bonds, backed by future MSA payments, were sold to do so.)
The U.S. Centers for Disease Control and Prevention (CDC) recommended that approximately 20-to-25 percent of the MSA payments go toward smoking-prevention programs. Since fiscal year 2000, states have received $53 billion in MSA payments and securitized proceeds according to the GAO. However, only four states had met or exceeded the CDC's minimum-funding recommendations for tobacco-control programs.

In its analysis of Fiscal year 2006 MSA payment expenditures evaluated since the MSA was signed, the Campaign for Tobacco-Free Kids (CTFK) found:

Only four states funded tobacco-prevention programs at levels that meet the CDC's minimum recommendation.

Only 15 states (including the four above) have committed 50 percent or more of the minimum-funding level recommended by CDC.

Thity-five states and the District of Columbia are spending less than half the CDC's minimum amount of MSA funds for tobacco-prevention programs - or providing no funding at all.

An April 2006 GAO report found that states allocated about 4.7 percent of the more than $5.8 billion in MSA payments and securitized proceeds in fiscal year 2005 for new or expanded tobacco-control programs. The GAO also found that 32 states spent less than 10 percent of MSA monies on tobacco control and some spent nothing at all.

R.J. Reynolds Tobacco Company believes that states should take advantage of having unprecedented funds available to combat youth smoking, and that a significant portion of the states' payments should be spent on preventing tobacco use among minors.

The states' greed penalizes adults who choose to smoke. It's not the tobacco companies that are contributing to the governments' coffers; settlement payments and cigarette taxes are part of the escalating price of cigarettes.

Tobacco-settlement payments have resulted in unprecedented increases in the price of a pack of cigarettes. In 2005, government collections of settlement payments and tax revenues accounted for more than half of the price of a pack of cigarettes. From 1998-2005, the government collected more than $218 billion in settlement payments and cigarette taxes; yet, many states have enacted or are proposing even higher cigarette excise taxes.

Already, the government makes more money off cigarettes per minute than the average family makes in a year. And, government officials continue to expect the 22 percent of the U.S. adult population that smokes to pay even more for cigarettes to cover state budget deficits. For more information, review Quick Facts about tobacco taxes and revenues.

What Can You Do?

State officials should take the opinions of adult smokers into account when reviewing funding and budget issues or voting on proposed legislation. Sometimes it's hard to believe that one voice can make a difference, but it can. And, when many smokers speak out, the message is even stronger. You can:

Find out what is being done with MSA funds in your state. Contact the attorney general's office in your state and your state's elected officials to find out where the money is going.

Ask http://www.brownandwilliamson.com/legal/taxQuickFacts.aspelected officials in your state to replicate what some other states have done to ensure that MSA dollars are spent as intended. Oklahoma residents, for example, voted to amend their state constitution to require that MSA monies be placed into a trust fund that allows only the earned interest to be spent – and spent only on health care.

Write letters to the editor of your local newspaper and ask elected officials to spend MSA funds on youth-smoking prevention.
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