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Tobacco Settlement Funds
By Robert Nelb
As the 2004 presidential election draws near, issues like bioterrorism, medical malpractice reform, and prescription drug coverage have dominated the national dialogue on public health. In a climate where politically controversial issues receive the most media attention, other important health policy issues are being forgotten. Fighting "Big Tobacco" and preventing young Americans from taking up smoking were once problems at the forefront of the nation's awareness, now victims of the nation's short attention span. Six years ago, politicians, lawyers, and executives came together in the groundbreaking Master Settlement Agreement (MSA) against the five largest American tobacco companies. According to this agreement, forty-six states (excluding Mississippi, Florida, Texas, and Minnesota, which settled separately) receive payments totaling over $246 billion over the next twenty-five years. The comprehensiveness of the settlement and the unprecedented amount of money allocated to tobacco prevention programs led many to believe that the "war on tobacco" was over. However, six years later, it is clear that the majority of states are ignoring national recommendations and spending far less money on tobacco prevention programs than expected. Connecticut, for example, spends only 2.4 percent of the minimum amount recommended by the Centers for Disease Control (CDC) on anti-tobacco programs. Though the Master Settlement Agreement was a significant victory against America's tobacco problems, the allocation of settlement money needs to be more carefully reviewed.
Tobacco is the greatest preventable cause of death in the United States. According to the CDC, smoking killed over 440,000 people last year, including nearly 5,000 people in Connecticut. Despite risks now well-known, one in five Americans smoke, and over one million teenagers begin smoking each year. Considering the harm to smokers, but also the effects of second-hand smoke, tobacco use continues to be a major public health problem.
In the 1990s, several state and private lawsuits attacked the tobacco industry's history of deceiving Americans about the harms of smoking, ultimately leading to action at the national level. In 1997, a "global settlement" was reached in which tobacco companies agreed to accept FDA regulations and make large payments to those who had filed lawsuits, in exchange for substantial relief and a cap on litigation payments. A year later, the terms were worked out for the MSA, which provided significant funding to the states. Although the settlement suggested that states allot some of this money to health-related programs, the MSA did not specifically dictate how the money should be spent.
Without legal restrictions, most states simply used the settlement money to fund non-tobacco related programs, hardly changing the amount spent on tobacco prevention. In 2002, Yale professor Dr. Howard Forman and several other researchers took an in-depth look at this spending: "What most states have done with this money is to monetize it to offset budget deficits, which in a certain way is a logical thing for them to do," Dr. Forman said in an interview. "[W]hat we've noticed is that various states seem to pursue their own agendas irrespective of the tobacco settlement."
Connecticut is a striking example of a state that spends very little settlement money on tobacco programs. According to the Campaign for Tobacco-Free Kids, Connecticut receives over $430 million each year from tobacco-related sources, including settlement money and tobacco taxes. Of this, the CDC recommends that Connecticut spend no less than two percent, or $21.2 million, on anti-tobacco programs. However, the state currently spends only 2.4 percent of this minimum recommendation, resulting in less than $500,000 for smoking prevention programs. According to Meg Gallogly of the Campaign for Tobacco-Free Kids, "We feel that states are falling far short…. Only four states are meeting minimum state funding."
The CDC-defined minimum represents a state-specific funding recommendation for the amount of money necessary to support a comprehensive tobacco prevention program. In the CDC's 2002 report on state tobacco funding, nine key components of a comprehensive program were delineated: community programs, chronic disease programs, school programs, enforcement, statewide programs, counter-marketing, cessation programs, surveillance and evaluation, and administration and management. With these goals in mind, estimated funding levels were developed ranging from $6 to $17 per capita for a medium-sized state like Connecticut.
In 2002, after the CDC released its report defining a comprehensive tobacco program, Connecticut responded by issuing a "Connecticut Comprehensive Tobacco Use Prevention and Control Plan." This 103-page plan specifically stated how Connecticut would address all of the components of a comprehensive program. Despite the extensiveness of this plan, even the authors recognized potential funding difficulties. Citing the large disparity between the CDC-recommended minimum and the current available funding, the Department of Health reported that "gearing up for a major expansion to implement a comprehensive tobacco control program will be a challenge."
Even with its poorly-funded tobacco programs, Connecticut still has the fifth-lowest smoking rate in the nation, at 19.5 percent. As a result, some people have questioned whether additional funding is really necessary. However, policy research strongly indicates that increased funding for tobacco programs would benefit public health. The well-funded comprehensive program in Maine, for example, has significantly cut the state's youth smoking rate to one of the lowest in the country, according to the Campaign for Tobacco-Free Kids. The same report showed that Massachusetts's program has cut exposure to environmental tobacco smoke by nearly one third.
Unsurprisingly, cuts in anti-tobacco funding have been shown to result in increased smoking. The Center for Tobacco-Free Kids reported in July 2004 that Florida's consistent cutting of its initially comprehensive program has led to record-high smoking rates among sixth-, seventh-, and eighth-grade students. Likewise, Minnesota's nearly $19 million cut in funding led to a twenty-two percent increase in youth susceptibility to smoking. Such examples indicate that anti-smoking programs cannot be expected permanently to change societal attitudes toward tobacco use - funding must be maintained to keep smoking rates low.
With the current literature indicating the benefits of more funding for tobacco programs, it is important to note Connecticut's reasons for cutting anti-tobacco funding. In 1999, after the settlement, the state allocated about $40 million over two years to a fund for tobacco initiatives. However, a large budget deficit led the government to transfer most of this money to a general fund, leaving less than $1 million in the tobacco prevention fund. Unlike states such as Virginia, where tobacco represents a major economic interest, Connecticut's tobacco industry totals only 0.02 percent of the state's export income. The budget shortfall - and not powerful lobbying or export-revenue concerns - seems to have been responsible for the significant cuts in funding.
Since the MSA created few legal obligations for how states must allocate their money, budgets and other projects have often enjoyed priority over anti-tobacco programs. Yale's Dr. Forman said, "While there's a certain explicit amount of money that is supposed to go towards tobacco programs, you almost have to think about it as two separate things. One is that the money was given to the states by the tobacco companies as part of the settlement. The other is that states have a public health responsibility to their citizens across the broad sphere [of all] health care." By putting almost all settlement money into general funds, states have tended to adopt the interpretation that the money need not be linked directly to anti-smoking, but rather should be used however states believe best. In particular, Dr. Forman explained that because of budgetary problems, "What states have effectively done is forestall tax increases in the present [while still planning to] cut public health funding in the future." For better or for worse, Connecticut and other states have made a trade-off between immediate tax relief and the health benefits of increased anti-tobacco funding.
However, comprehensive tobacco control programs also help to reduce the long-term economic burden of tobacco use. In a 2002 report highlighting State Tobacco Control Programs, the CDC reported that between 1990 and 1998, approximately $3.62 in direct medical costs was saved for every dollar spent on tobacco control programs in California. Satisfaction of immediate budgetary needs, coming at the cost of reduced anti-smoking programs, is more expensive than some states may have taken into account.
Although decisions have already diverted some settlement money to a variety of non-health related causes, action can still be taken to reassess state funding for tobacco programs. Ms. Gallogly of the Campaign for Tobacco-Free Kids suggests that correcting myths is an important step: "The general public thinks that the money coming out of the Master Settlement is going to tobacco prevention, while it's really being spent on roads and other stuff that isn't even health-related." Only by understanding how settlement money is being spent can citizens evaluate state decisions and, if they choose, influence the funding of smoking prevention programs.
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