Skip to comments.15 Years Later, Where Did All The Cigarette Money Go?
Posted on 10/14/2013 10:32:10 AM PDT by nickcarraway
Fifteen years after tobacco companies agreed to pay billions of dollars in fines in what is still the largest civil litigation settlement in U.S. history, it's unclear how state governments are using much of that money.
So far tobacco companies have paid more than $100 billion to state governments as part of the 25-year, $246 billion settlement.
Among many state governments receiving money, Orange County, Calif., is an outlier. Voters mandated that 80 percent of money from tobacco companies be spent on smoking-related programs, like a cessation class taught in the basement of Anaheim Regional Medical Center.
"So go ahead and take a minute or two to write down reasons why you want to quit and we'll talk about them in just a bit," Luisa Santa says at the start of a recent session.
Every year since 1998, this program has been funded by money from the tobacco settlement. The five-part class is free for anyone living or working in Orange County. When they sign up, participants get a "quit kit" full of things like toothpicks and gum. And, if they come for at least three of the five sessions, they get a free two-week supply of nicotine patches.
Making Big Tobacco Pay
In the mid-1990s, Mississippi was the undisputed leader on the tobacco issue. In 1994, Mike Moore, the state attorney general, filed the first state lawsuit against big tobacco.
Individual lawsuits by smokers failed because courts held people responsible for their decision to smoke, but Moore argued that Mississippi shouldn't be forced to pay the costs of treating smoking-related diseases.
"Things such as lung cancer, heart disease, emphysema, low-birth-weight babies and others, we have to pay," Moore told NPR in a 1994 interview. "The state is obligated to pay for those for our citizens that are not covered in other ways, and we feel like they're caused by the tobacco products."
Moore argued that tobacco companies should pay for medical bills, and eventually the courts agreed. That agreement said no ads and no targeting youth. Popular advertising characters like Joe Camel and the Marlboro Man were killed off as a result.
The settlement left the tobacco industry immune from future state and federal suits, but the agreement said nothing about how states had to spend the money. Looking back on it, Moore remembers it was a long slog.
"It was not an easy task," Moore tells NPR's Arun Rath. "When we filed our case here in 1994, my governor actually sued me to try to stop the tobacco case."
The tobacco companies sued Moore as well, he says, and it went all the way to the Supreme Court. "It took me two years before I even had five states who would agree to join the efforts."
Moore is now the CEO of the American Legacy Foundation, a group created by the tobacco settlement. The organization's mission is to create national anti-smoking campaigns, like the famous Truth ads.
The tobacco settlement included money specifically to fund public service announcements, but Moore says most of the settlement money came with no strings attached, and that has made it impossible to hold states accountable.
In Mississippi, where the settlement money was put into a trust fund, a lot of it was spent on things other than smoking prevention and health care, Moore says.
"What happened as the years went by, legislators come and go, and governors come and go ... so we got a new governor and he had a new opinion about the tobacco trust fund," he says. "So a trust fund that should have $2.5 billion in it now doesn't have much at all, and unfortunately that's one of my biggest disappointments.
And it's not just Mississippi; Moore says that all across the country hundreds of millions of dollars have gone to states, and the states have made choices not to spend the money on public health and tobacco prevention.
It's not all bad news in Mississippi, however; Moore says money that was spent on tobacco prevention has helped reduce teen smoking by more than 50 percent in just five years. Adult smoking has been reduced by about 25 percent, and he says it is that way around much of the U.S. as well.
"We need to continue the vigilance," he says. "We have new products coming out e-cigarettes and the like we just need to talk the states into spending the money to do something about it."
The Settlement Aftermath
Myron Levin covered the tobacco industry for the Los Angeles Times for many years and is also the founder of the health and safety news site Fair Warning. He says talking states into spending settlement money on tobacco prevention is a tough sell.
To show the settlement was not just a big money grab, Levin says, there was definitely a feeling that states had a moral obligation to spend at least a sizeable chunk of money on programs to help people quit smoking and to prevent kids from starting.
"So it was understood without being codified into the agreement that states would make a big investment in this," he says. "They haven't."
To help guide state governments, in 2007 the Centers for Disease Control and Prevention recommended that states reinvest 14 percent of the money from the settlement and tobacco taxes in anti-smoking programs. But most state governments have decided to prioritize other things: Colorado has spent tens of millions of its share to support a literacy program, while Kentucky has invested half of its money in agricultural programs.
"What states have actually done has fluctuated year by year ... but it's never come close to 14 percent," Levin says. "There are some fairly notorious cases of money being used for fixing potholes, for tax relief [and] for financial assistance for tobacco farmers."
Levin says some states don't have any money coming in anymore because they securitized their future payments with an investor in order to receive a lump sum. That lump sum often went into their state's general fund.
For its part, the tobacco industry has managed to weather the settlement fairly well. New products like smokeless tobacco and electronic cigarettes have put many companies on the road to big sales, Levin says.
"When you are supplying the most widely used addictive product in the world, you have certain advantages," he says. "Their cash flows remain enormous."
One indirect effect of the settlement, Levin says, is legislation that gave the Federal Drug Administration control over tobacco products. President Obama signed the law in 2009.
"Something that could happen, although I wouldn't put a lot of money on it, is they could ratchet down the allowable levels of nicotine in cigarettes to a level that is essentially nonaddictive," he says. "That would be a total game changer."
Nonaddictive cigarettes would indeed be a game changer for people like Susan Hallock, an attendee at the class in Orange County, who says she desperately wants to quit.
"I feel ashamed," she says. "I feel like I have to hide my hand with the cigarette in it."
But the nicotine keeps her coming back, over and over. "I'll smoke like six to eight months and quit. Or a month and quit. It's just different every time."
She's hoping that this time, with the help of the free class, she'll be successful. And she has a real chance: The program has a 50 percent success rate for adults like her.
It probably went to education....for the children you know.
Where did it go?
Democrat coffers, of course. Expensive keeping a watch on that flag on Mars and buying arms for Al Quaida.
“while Kentucky has invested half of its money in agricultural programs.”
Tobacco subsidies no doubt.
It sure as heck didn’t go for any medical treatments of lung diseases!
There were three lawyers in Ohio that got $96 million apiece.
Probably the same black hole the Lottery money drops into.
Six figure pensions for 50 year old retired gubmint employees.
What I can’t wait to see is what happens when it stops...
—IIRC, in Nevada it went into a scholarship program for students who otherwise (academically) didn’t qualify for “college” educations-—
The only thing I have seen is the lame commercials from some state agency claiming that people smoking in one apartment are affecting people in the apartment next door.
The Judiciary, not necessarily the supremes, but ordinary judges, especially fed judges, could be a tremendous influence in returning America to her former self.
“Probably the same black hole the Lottery money drops into.”
That’s EXACTLY what I was thinking and going to post. Here in WA State, IIRC (it’s been years ago)all the extra Lottery money was supposed to go primarily to education, yet we still have initiatives for levies for education on a consistent basis. I suspect that WA isn’t the only state in which that is occurring.
How much do ya think the former MS ag gets from his new gig? Think I’ll go fire up a Marlboro light now. Or “Gold” as they are now known.
They did the same here In Michigan. Passed the Lottery claiming it would help the Schools.
So the Lottery Revenue went to the School fund but the state racheted back the money they ponied up. So they still claim a shortfall and local Districts continually go for Property Tax increases.
“Gone to laywers, every one” (and unions)
Sure seems like the breast cancer awareness outfits got a big boost from someone. Maybe it all went there?
teachers union pensions
In sum, the article does not tell us where the “cigarette money” went.
Wisconsin Democrats blew ours on hookers and booze...and three TV Ads.
Think I’m lyin?
Gubmint entitlements are the most widely used addictive product in the world.
This guy is a genius. Less nicotine in cigarettes. So is you cut the amount in half, people will smoke twice as many!!!! That’s a real game changer genius!
OH how i hate those commerical’s
I once had a relative give me a small cash horde as a gift. A year later, I asked myself the same thing.
Most of it went to buy gold, silver, and bullets.
Then much of it went to pay college tuition.
I bought some beer with what was left.
I think I still have $100 of it.
Most of the money went to the trial lawyers who then kicked back to the Democrat party in the form of "campaign donations".
The rest went into various poitical slush funds.
I thought everybody understood this at the time of the settlements?
IIRC, the law firm for the state of Florida tobacco case pocketed a cool $1 Billion!
“The $206 million invested so far in Kentucky agriculture has helped shake farmers historic allegiance to tobacco, encouraged diversification and upgraded the states cattle industry, the largest in the Eastern U.S.”
“Not only did the money provide incentives, each of the county-level programs diversification, storage, fencing, forage, cattle handling, cattle genetics and on-farm water supplies require farmers who get matching grants or forgivable loans to take training in the subject. Rogers said the programs are helping about 12,000 farmers per year.”
Where did all that cigarette money go? All those fat cat lawyers and politicians . . . . mmmmmm . . . wait a minute . . . those are the same one and the same.
As we speak... sales of Ecigs and vaporizers are skyrocketing - I would guess in 1 year the sales of tobacco alternatives are going to drop "cigarette" taxes to the point where the whiners will want to further ratchet up the taxes. That will further push smokers to ECig/vaporizer where they get their nicotine juice from on-line chemists who are not paying "cig" taxes.
Collapse of a large number of liberal entitlements. Works for me.
I don’t know how old you are or if you are a veteran, so you may or may not remember this. About 1972 or ‘73, some Vietnam vets in WA started to ask questions about war bonuses for WA war vets. Going back to earlier wars, the state had always paid a bonus to those who had seen combat, paid for with a special cigarette tax. When this came up, Olynpia claimed there was no money available to pay such a bonus. A little bit of digging turned up the inconvenient fact that the state had continued to collect that tax over the years, long after all eligible vets had been paid. Oops!! Checks for $200 were soon in the mail.
Much like the Spanish-American War telephone tax that was finally repealed in 2006, it goes to show that once a tax is enacted, it’s nearly impossible to get rid of. Once people forget about it, the money just gets diverted into somebody else’s pet project. So it is with the lottery, which, as we all know, is nothing more than a tax on the mathematically-challenged.
Yep, spent most of it on liquor, poker, and wild women. The rest of it I wasted.
Most of the tobacco money is already spent. In fact, many states pulled a JG Wentworth and have issued bonds to use the money before it ever arrived. They were anticipating the tobacco settlement payments will cover the money they were already spending. The NYT did a story on this back in 2012 when Nassau County was already in this predicament and in danger of defaulting on the bond payments.
State Bonds in Jeopardy as Tobacco Cash Fades
Maybe they’ll get a QTE(Quantitative Tobacco Easing) :)
As I recall, Hillary’s trial lawyer brother got a big chunk of the money.
And they wasted the rest, right?
Oh yeah.. It was only big-time connected rat lawyers who got to launch those lawsuits.
Now that the scumbags got their trillion-dollar tobacco payday, they're looking for the next scam. They once thought they had a slam dunk with global warming. The big DC law firms hired scores of climate litigators just a few years ago in anticipation of another jackpot, but now that the global warming scam has been exposed and left for dead it looks like all they can do is look for some other government-enabled scam.... Maybe a fast-food/obesity scam, something like that. Im sure theyll think of something...
“That will further push smokers to ECig/vaporizer where they get their nicotine juice from on-line chemists who are not paying “cig” taxes. “
E Cigs are available in convenience stores and Walgreens here in MA.
LOL! ‘Zactly! :)
Wow! I'll bet that cost a lot to do and really eats into those billions!
Whadda' ya wanna' bet most of those "classes" etc. are run by someone well connected to some politician somehow and gets a whole lotta $$ to "run" their "clinic" (on the cheap, of course), including kickbacks to the pol who got them the gig?
If they would use the gas tax money to actually repair the roads we would have the best infrastructure in the world. Instead they dump it into the general fund, dole it out in drips and drabs to half patch roads that are falling apart and then yelp about how they have to raise the gas tax to fix the roads