Special Report: State Tobacco Settlement

Our reports assess and rank the states based on whether they are funding tobacco prevention programs at the minimum levels recommended by the CDC, which usually amount to 20 to 25 percent of a state’s annual settlement proceeds and an even smaller percentage of a state’s total tobacco revenues from the tobacco settlement and tobacco taxes. The findings for this year:· Only four states – Maine, Delaware, Mississippi and Arkansas – currently fund tobacco prevention programs at minimum levels recommended by the CDC.· Only eight other states are funding tobacco prevention programs at even half the minimum levels recommended by the CDC.· Thirty-three states are spending less than half the CDC’s minimum amount. Another five states – Michigan, Missouri, New Hampshire, South Carolina and Tennessee – and the District of Columbia allocate no significant state funds for tobacco prevention.· In the current budget year, Fiscal Year 2004, the states cumulatively plan to spend $541.1 million on tobacco prevention programs. This amounts to just 33.8 percent of the CDC’s minimum recommendations for all the states, which total $1.6 billion.· Over the past two years, the states have cut total annual funding for tobacco prevention by 28 percent, or $209 million (from a high of $749.7 million in Fiscal Year 2002 to $674.4 million in Fiscal 2003 and $541.1 million in Fiscal 2004). These cuts have decimated three o f the nation’s longest standing and most successful tobacco prevention programs, in Florida, Massachusetts and Oregon, and they have seriously hampered some of the nation’s most promising new programs, including those in Indiana, Maryland, Minnesota, Nebraska and New Jersey.· While many states have cut funding for tobacco prevention, the tobacco industry increased its marketing expenditures by 66 percent in the three years after the settlement to a record $11.45 billion a year, or $31.4 million a day, according to the Federal Trade Commission’s most recent annual report on tobacco marketing. While the FTC report was for calendar year 2001, there is strong evidence that tobacco industry marketing expenditures have continued to increase. Based on the latest FTC figures, the tobacco companies are spending more than twenty dollars marketing their deadly products for every dollar the states spend to prevent tobacco use. Put another way, the tobacco companies spend more in three weeks marketing their products than all 50 states spend over a full year trying to prevent tobacco use.· The states this year will collect $19.5 billion in tobacco-generated revenue from tobacco taxes and the tobacco settlements. It would take just 8.2 percent of this total for every state to fund tobacco prevention programs at the minimum levels recommended by the CDC ($1.6 billion for all the states). The states are spending only about one-third of what the CDC recommends for tobacco prevention, amounting to only 2.8 percent of their total tobacco revenue. (Looking only at settlement money, the National Conference of State Legislatures recently reported that in Fiscal 2004 states are spending just three percent of their tobacco settlement money on tobacco prevention.)· At least 20 states and the District of Columbia have also sold to investors, or securitized, their rights to all or part of their future tobacco settlement payments for a much smaller, up -front payment, or have passed laws authorizing such action. Several states used the revenue generated to balance budgets for just one year. Securitization eliminates or reduces the amount of settlement money available to fund tobacco prevention and meet other needs in the future.Five years after the 1998 state tobacco settlement, we are at a critical juncture in determining the settlement’s long-term impact. Our nation has made important progress in recent years in reducing youth tobacco use with a comprehensive approach that includes well-funded tobacco prevention and cessation programs in some states, cigarette price increases, smoke-free air laws, and the American Legacy Foundation’s campaigns. But continued progress in reducing youth smoking, and acceleration of the slow decline in adult smoking rates, will not occur unless more states use more of the billions of dollars they are receiving from the tobacco settlement, and from tobacco taxes, to fund comprehensive tobacco prevention and cessation programs based on the recommendations of the CDC. If they do, the 1998 state tobacco settlement could yet mark a historic turning point in the battle to reduce tobacco’s terrible toll. If they do not, it will be a tragic missed opportunity for the nation’s health