Snuff the Facts
By Peter Van Doren
Assistant Director of Environment Studies
January 16, 1998
Smokers shoulder a heavy government-imposed financial burden. Some of it they pay
directly, through cigarette taxes. Some they pay indirectly, as in the ... liability
settlement between the states and tobacco companies, which will ultimately come out of the
pockets of cigarette consumers. ... How well off are the people who bear that burden?
Families with less than $30,000 a year in income earn only 16 percent of total income in
the United States, but they pay about 47 percent of federal tobacco taxes. In addition,
African Americans are more likely to be smokers than are whites. Thus, absurdly heavy
taxation of cigarettes hits hardest those who can least afford it and redistributes
resources from poorer blacks to more affluent whites.
So why are politicians going after smokers and tobacco companies? For the same
reason that Willie Sutton robbed banks: there's a lot of money there. The 25 percent of
the population that smokes is a convenient unorganized source from which the rest of the
population can extract revenue. Taxing smokers because we can take their money easily is
theft (more often than not from people who can ill afford to be robbed) dressed up in good
State House News Service
October 20, 1999
Reilly: $98M Tobacco Settlement Check
May Arrive Within Weeks
By Elisabeth J. Beardsley
STATE HOUSE NEWS SERVICE
STATE HOUSE, BOSTON, OCT. 20, 1999 ... Attorney General Thomas Reilly
says a check for $98 million -- the first installment of Massachusetts' $8.3 billion
tobacco settlement windfall -- could arrive in state coffers as early as next month.
"We're cautiously optimistic that the monies will be distributed
sometime in November," Reilly told the News Service yesterday. "It's not final,
but we're making progress."
The disbursement date has been a moving target for the last year.
Previously, Reilly has warned lawmakers to plan conservatively and not bank on receiving
the money until June 30, 2000, th latest possible date stipulated under the
multi-state master settlement with the tobacco industry.
Forty-six states last year reached a $246 billion, 25-year settlement
with the five leading tobacco manufacturers, after the states sued to recover the costs of
treating smoking-related illnesses. Former Attorney General Scott Harshbarger brought suit
on Massachusetts' behalf.
Last week, in announcing a fiscal 2000 budget agreement, House
Speaker Thomas Finneran (D-Mattapan) and Senate President Thomas Birmingham (D-Chelsea)
indicated they expected the tobacco money as early as January. They also announced plans
for spending and investing it.
Now, Reilly says, the final piece that's been holding up the money
appears poised to fall into place sooner than expected. Under the settlement agreement, 80
percent of the 46 states had to reach "finality" before money could be released.
That required disposing of any legal challenges to individual states' participation in the
settlement agreement. ...
This state's first settlement installment is by far the smallest in
the 25-year payment schedule, which will amount to a total of $7.6 billion. Massachusetts
was awarded extra money for its leadership role in the lawsuit, bringing the state's total
up to $8.3 billion.
The second installment, due to arrive in 2000, will be $259 million,
said Reilly spokesman Brian Heffron. By comparison, new education dollars this year - by
far the biggest categorical increase in state spending - total $245 million.
In 2001, the amount goes up to $280 million, then to $336 million in
2002. The biggest single payment comes in 2003, with $339 million. From 2004 to 2007, the
state will receive $283 million per year. From 2008 to 2017, the annual amount is $289
million. The yearly check goes back up to $323 million from 2018 to 2024, and beyond.
Those figures don't include interest.
Anti-tobacco activists are thrilled that the money appears to be on
its way sooner than expected. "I'm pretty excited about getting this money six months
early," said Massachusetts Coalition for a Healthy Future Director Lori Fresina.
"There are a lot of needs out there related to tobacco."
Fresina, who is also the legislative agent for the American Cancer
Society, said she would have been nervous about the potential early arrival, if not for
the accord announced last week by Finneran and Birmingham on how to spend the tobacco
funds. Activists were concerned the money would be spent on things unrelated to tobacco
control, as in many other states.
The Finneran-Birmingham agreement would place 70 percent of the
annual funds into a trust fund. The other 30 percent will be spent each year on tobacco
control and health programs.
Activists had requested that 25 percent of the overall settlement be
dedicated to fighting smoking. Legislative leaders agreed to dedicate 25 percent of the
settlement funds to be spent each year, which activists said was a good start. That will
mean an additional $22.5 million for tobacco control in the first year, nearly doubling
the existing budget of $31.6 million.
"Had we not had a Legislature that supported further and
substantial investment in tobacco control, I would be pretty concerned," Fresina
said. "Until you get that agreement that they've bought in and they're supporting the
same values, you have to keep up the fight."
Most states that are slated to receive tobacco money, including
Massachusetts, are spending the bulk of it on non-tobacco control items. As of early
September, 23 states had passed enabling legislation or appropriation acts concerning the
disposition of the tobacco money, according to the National Conference of State
But states appear to be limiting outright spending of the tobacco
money. Within the 23 states that have set their plans into statute, only 12 percent of the
money they expect to receive in the first year was allocated for specific programs or
activities, NCSL data shows. That amounts to $1.1 billion of the $8.8 billion the tobacco
companies will pay out to states by June 30, 2000.
Most of the tobacco money is being placed into interest-generating
trust funds and endowments. As of last month, 19 states had passed laws creating trusts.
Those states plan to live off the interest, but the principal could be accessed if a
Legislature wanted to. Four states have passed laws creating endowments, which will only
allow interest earnings to be spent.
Of the money states plan to spend right away, the bulk -- 51 percent
-- is going toward health care services. Under Finneran and Birmingham's agreement, which
has not yet been signed into law, most of the spending money will be applied to health
programs, including catastrophic drug coverage for senior citizens.
NCSL breaks down the other half of the planned immediate spending
like this -- 14 percent for education and scholarships; 11 percent for children's
services, 7 percent for tobacco control and smoking cessation; and 7 percent for long-term
care and drug coverage for the elderly. The rest has been earmarked for emergency
priorities such as job creation projects in Alabama and flood prevention in North Dakota.