Commentary

Tobacco Settlement Dollars Go Up In Smoke in Latest Government Scam

By Deroy Murdock
August 8, 2000
For the latest example of governmental bait-and-switch, look no further than your ashtray. Attorneys general from 46 states sold the public on the 1998 “Master Settlement Agreement” as a way to collect “damages” from the major tobacco companies and spend these sums to rescue teenagers from nicotine addiction.

“I think all sides recognize that there’s a really historic opportunity to change the nature of the industry and save a generation or at least a big part of it,” Connecticut Attorney General Richard Blumenthal told the Hartford Courant. Texas’ then-Attorney General Dan Morales, who settled separately with Big Tobacco, told the Dallas Morning News that he was interested in “moving forward and doing what’s best for our children’s health.”

But a recent report by the National Council of State Legislatures paints a far-less touching picture. The NCSL studied 44 states that plan to spend $8.19 billion in tobacco settlement funds this year and next - a small down payment on the $206 billion of tobacco industry money they expect to redistribute through 2025. Of this sum, $754.2 million or just 9.2 percent is dedicated to tobacco prevention.

The oft-invoked “children” are seeing less than a dime of every dollar extorted on their behalf.

The settlement also was to reimburse states for Medicaid expenditures on tobacco-related ailments. Instead, says NCSL’s Lee Dixon, “States have chosen to increase access to all healthcare services rather than for specific diseases.”

So if few of these dollars are keeping teenagers from spending their retirement years on respirators and recouping the costs generated by those already ill, where, oh where has that money gone?

This pot of cash now finances general spending, government buildings and scientific research. Scholarships and business development funds are coming. The tobacco companies are paying to upgrade TV stations. And $537 million, supposedly secured for tobacco-free kids, instead will benefit tobacco farmers.

A hefty 46.5 percent of the money the NCSL analyzed does go to health care. However, much of it is earmarked for general medical programs rather than smoking prevention and treatment. The $3.8 billion that 38 states are spending on health services and long-term care includes, among many items, $57 million for Wisconsin’s Badgercare program, a new $20 million Indiana Prescription Drug Fund and $1 million worth of Medicaid dental services in Maine. New Jersey’s prisoners also can look forward to psychiatric care.

Scientists are key beneficiaries of these tobacco dollars. Illinois devotes $1.65 million to the Argonne Rare Isotope Accelerator. Connecticut will spend $4 million for a Biomedical Research Trust Fund and a Biomedical Research Fund. Ohio also has dedicated $493.5 million to biomedical research through 2012. Smokers are buying Arizona a new $20 million state laboratory.

Much of this tobacco money is going into general expenditures not remotely related to preventing or treating lung cancer or emphysema. Michigan is spending 75 percent of its settlement funds on scholarships for high school students who pass a state-wide test. New York will allocate $250 million next year for debt reduction. Forty-five percent of North Dakota’s money will finance a Water Resources Trust Fund. South Dakota’s People’s Trust Fund will generate interest income that can be spent on whatever the legislature wishes. The One Georgia Fund will dedicate $63 million to rural economic development. While only spending $5 million on youth smoking prevention, Illinois will drop $22.1 million to improve state buildings. Two Nevada PBS stations received $2 million to develop high-definition TV capabilities in exchange for airing anti-tobacco ads. The NCSL identifies a full $1.86 billion going to budget reserves and such “other uses.”

In a related matter, the War on Tobacco’s high cigarette levies actually aided suspected terrorists. Federal officials on July 31 indicted 18 people for allegedly smuggling cigarettes from low-tax North Carolina to Michigan, which taxes smokers 75-cents-per-pack. Each truckload of cigarettes yielded some $10,000 in profits, authorities estimate. This money, prosecutors say, went to Hezbollah. Three defendants are accused of spending their black-market bucks on computers, night-vision gear and global-positioning systems for the Lebanese militant group. One confidential source described these outlaws as “extremely anti-United States,” the New York Post reports. “Their meetings invariably include readings from the works of Ayatollah Khomeini.”

All of this said, I am no friend of tobacco. Spark up near me and watch me wince. There are only a few things worse than sucking in a blast of cigarette smoke, among them watching politicians and lawyers shake down a still-legal industry to boost government largesse, all - naturally - in the name of “the children.”

Deroy Murdock is a Senior Fellow with the Atlas Economic Research Foundation and a policy advisor to the Cato Institute.