September 12, 2014

State Tobacco Settlement Funds Not Spent ‘Up Front’

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CAPITOL WATCH State Capitol Photo 1

M. Scott Carter

M. Scott Carter

M. Scott Carter reports on politics, legislation and other issues from the State Capitol.


 

 

Though cigarette manufacturers continue to pay state governments billions of dollars following a landmark 1998 lawsuit, much of that money isn’t actually going to government budgets, the investigative website ProPublica reported.

According to ProPublica, “a large chunk” of tobacco settlement funds were being paid to investors after many state governments cut deals to get cash up front by trading away decades worth of future tobacco income.

In its study, ProPublica reported that investors have been pledged $2.6 billion of the $6 billion set to be paid out this year by tobacco companies. Those deals included the states of California, New York, Alaska and New Jersey.

Nationwide, about $36 billion in tobacco settlement bonds remain outstanding.

However, things are different in Oklahoma.

Because Oklahoma voters approved a constitutional amendment to protect the funds, Oklahoma’s tobacco settlement trust has a balance of close to $1 billion, Deputy State Treasurer Tim Allen told Oklahoma Watch.

Oklahoma’s fund, Allen said, did not leverage its tobacco revenue for up-front money.

“This is an ‘Oklahoma did the right thing,’ story,” he said.

Allen said former state treasurer Robert Butkin and former Attorney General Drew Edmondson helped develop the state question that protected Oklahoma’s tobacco settlement funds.

“We’re the only state with a constitutionally-protected tobacco settlement endowment fund,” he said. “Each year, the investment earnings are certified by the board of investors, and that money is available for expenditure on health-related efforts by the board of directors.”

In 2014, Oklahoma received $77.2 million in tobacco funds, he said.

Allen said about 75 percent of the annual payment goes directly to the Oklahoma Tobacco Settlement Endowment Trust Fund. The remainder, he said, is divided between the attorney general’s evidence fund and the Oklahoma Legislature for health-related appropriations.

Nationwide, ProPublica reported, states are spending only about 15 percent of the $3.3 billion the Centers for Disease Control recommends they should for tobacco control.

  • A question to think about. Would this happen in today’s political climate in Oklahoma?