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Not much tobacco settlement money goes to reducing smoking

ASK THIS | December 06, 2005

Anti-smoking activist Eric Lindblom says many states thwart intent of tobacco 'Master Settlement Agreement', using almost all the money for other purposes.

By Eric N. Lindblom


Phone: (202) 296-5469


Q. The tobacco Master Settlement Agreement gave massive funding to the states so they could derive public health, fiscal, and economic benefits from tobacco prevention programs. Why have so many states failed to allocate a reasonable portion of their massive tobacco settlement funds to prevent and reduce smoking and other tobacco use, especially among children?


Q. In those states that do allocate funds to curb tobacco use, why have so many failed to meet the minimum funding recommendations of the U.S. Centers for Disease Control and Prevention? Also in these states, how many of CDC’s nine recommended best practices for tobacco control has each state adopted?


Q. In addition to money for tobacco-prevention programs, some of the MSA funds were intended to cover the medical costs of current and former tobacco users. Have the states used any tobacco settlement money for this purpose? If not, who covers those costs?


Q. How are the states actually using their tobacco settlement funds? Are those uses consistent with the purpose of the MSA and the individual state tobacco settlements? Is tobacco money being used to prop up unrelated state programs or to mask financial shortfalls?


Q. Securitization is a process by which states sell all or part of their future tobacco settlement revenues in exchange for much smaller short-term, lump-sum payments. Is securitizing tobacco settlement payments consistent with the purpose of the tobacco settlements? Does securitizing make good fiscal sense? Are securitizing states outsmarting Wall Street – or is it the other way around?  Has securitizing hurt those states’ bond and credit ratings?


Q. Compared to state investments to prevent and reduce tobacco use, what state expenditures could produce more direct benefits in terms of reducing public and private costs and reducing suffering and saving lives ?


Q. What political forces, if any, are blocking or reducing state investments of a reasonable amount of their tobacco revenues to better treat smoking-caused illness and to prevent and reduce tobacco use and its harms and costs?


Through the Master Settlement Agreement (MSA), executed in November 1998, the major cigarette companies agreed to settle state lawsuits against them by making annual payments to 46 states, DC and the U.S. Territories that will total more than $200 billion in just the first 25 years. Prior to the MSA, the major cigarette companies entered into similar settlement agreements, with even larger per-capita payments, with the four other states (MS, FL, TX, MN). Through 2005, the cigarette companies have already made tobacco payments to the states of more than $55 billion, including $7.5 billion in 2005 alone. 


Although the MSA has clear language stating that a significant portion of the funds should be used to prevent and reduce tobacco use, especially among children, and to treat smoking-caused illness, the states are allocating only about $550 million per year (or significantly less than $1 out of every $10 tobacco settlement dollars they receive) on tobacco prevention efforts – and they spend little or none of their settlement funds specifically to treat smoking-caused illness. In sharp contrast, the U.S. Centers for Disease Control and Prevention recommends that the states spend, at a minimum, at least $1.6 billion per year on tobacco prevention alone.


This failure to use MSA funds for tobacco prevention efforts is especially odd given the solid evidence that state investments in tobacco prevention not only reduce adult and youth smoking rates but also reduce public, private sector, and household smoking-caused costs in the state. Nationwide, smoking-caused healthcare costs, by themselves, total more than $85 billion per year. Similarly, smoking and other forms of tobacco use reduce worker productivity by more than $88 billion per year – not even counting productivity losses from smoking-caused sick days and smoking breaks or from smokers being less healthy and effective when on the job. State investments in tobacco prevention can reduce these smoking-caused productivity losses, as well.


The Master Settlement Agreement does not have the force of legislative law. It is more like a contract, with the five tobacco companies on one hand and the 46 states on the other, as the parties. The states do receive their money; but because the MSA is not a law there does not appear to be any way for anyone besides the states and the cigarette companies to try to enforce its language about states using at least some of the settlement payments to prevent and reduce tobacco use, especially among children, and to treat those with tobacco-caused disease.


The states are not likely to sue themselves for not honoring the original purpose of the MSA – and it would directly contradict the cigarette companies’ profit making goals to try to force the states to make the tobacco prevention investments called for by the MSA. Therefore, neither side pushes to enforce the strong language in the MSA that advocates deterrence programs; and the MSA does not provide any third-party with any authority to try to enforce the MSA’s language or purpose.


In the long-term, it makes no sense for states to ignore these aspects of the settlement. Research has demonstrated that funding tobacco-control programs is one of the best ways for a state to improve the health of its citizens its health-care system, and its budget, as well as its economy as a whole. Yet in 2005 only four states heeded CDC’s minimum recommendations for state tobacco prevention funding. Most states spent less than half of CDC’s minimum recommendation, and six states, plus Washington, DC, spent exactly zero.


Securitization allows states to sell their rights to their future settlement payments to financial institutions to establish special tobacco settlement bonds backed by future payments that are subsequently marketed to investors. In effect, the state exchanges a long-term future revenue stream for a much smaller, one-time payment. The financial institutions not only get paid directly for managing these securitization deals but also end up paying the states only 40 cents or less per dollar for the future revenue stream.


The states like to think that they are outsmarting the financial institutions by trading a risky future revenue stream for a modest amount of hard cash now – but it is clear that the Wall Street firms and other financial institutions managing these deals have protected themselves by basing them on the most pessimistic and cautious assumptions about the future revenue streams they are buying from the states (which further shrinks what the states receive). Indeed, some states that have securitized to provide funds for current budget shortfalls have had their credit and bond ratings reduced because the securitization effort is seen as a bad financial deal for the state that puts them in a weaker financial position that they were in before they securitized.


The current situation of the states enjoying (or securitizing) enormous tobacco revenues while spending trivial amounts to prevent and reduce tobacco use is a horrible violation of the letter and spirit of the tobacco settlement agreements. When the MSA was signed in 1998, hopes ran high that some of the new state revenues it created would be used to sharply reduce the enormous costs and harms caused by tobacco-related diseases and illnesses in each of the states. Instead, the promise of the MSA has been broken has been repeatedly broken. 




The Centers for Disease Control has outlined nine aspects of tobacco-control programs, with the caveat that the best results have been obtained only when all nine components are present. They say that states cannot fund these measures by half.

The Tobacco Control Archives at the University of California, San Francisco, contains information about the health and economic effects of tobacco as well as information about the tobacco industry.

A list of tobacco-related public health officials and officers from all 50 states is located here.

A Factsheet detailing how the MSA calls for states to use the funds to prevent, reduce, and treat smoking-caused harms.


A new Campaign for Tobacco-Free Kids report on state tobacco revenues versus tobacco control expenditures.


Click here for material on the securitization of state tobacco settlement revenues.


A pull-down menu for getting basic tobacco's toll data for each state.


Additional information on the state tobacco settlements and related payments to the states. Also, here. 


Click here for information on the effectiveness of state investments to prevent and reduce tobacco use.



Good news!
Posted by Bill Hannegan - founder of KEEP ST. LOUIS!, an anti-smoking ban group
01/23/2006, 01:00 AM

Good news! A just released study shows smoking bans much less necessary than previously thought to protect public health!

Press Release

For Immediate Release: December 5 , 2005

Do Smoking Bans cause a 27 to 40% drop in admissions for myocardial infarction in hospitals?
December 5, 2005

Antismokers claim that studies have shown that bans bring about an immediate and drastic decrease in heart attacks among nonsmokers exposed to smoke at work.

This claim was never true to begin with - the cited studies never separated and analyzed nonsmokers as a separate group - and it has now been pointed out in the pages of the BMJ that even the claim of saving lives among the combined population of smokers and nonsmokers might be worthless.

While many making that claim may have believed their information to be accurate, it is now obvious that its basis has been thrown strongly into question. As Jacob Sullum noted in a December 1st reaction to the announcement, "An effect this dramatic (i.e. an immediate and pronounced drop of hospital admissions for heart attacks) should have been noticed all over the country..."

Just a week before the Chicago Aldermen were due to vote on a citywide smoking ban, two independent researchers working together, David W. Kuneman and Michael J. McFadden, unveiled a new study covering a population base roughly 1,000 times as large as the previous town-based studies. The new study indicates strongly that rather than a 30% decrease in heart attacks, statewide smoking bans seem to have literally NO EFFECT AT ALL on heart attack rates. Incredibly the data even indicates that California's statewide heart attack rate went UP by 6% in the first full year of their total smoking ban!

The data for the study and the basis of its design have been backed up and expanded by well-known antismoking researcher Michael Siegel who has come out in support of the researchers' approach as providing "compelling evidence that brings into question the conclusion that smoking bans have an immediate and drastic effect on heart attack incidence." His observation is echoed by researcher Kuneman who asks, "Ever wonder why you didn't hear about post ban heart attack declines in New York City? Or in Minneapolis or Los Angeles? Now you know!"

On December 4th the British Medical Journal entered the fray with the online publication of a Rapid Response by Mr. McFadden outlining the new research and posing sharp criticisms of the earlier studies and of the refusal of the authors of those studies to respond to previous criticisms and questions. McFadden points out that the data in the Kuneman/McFadden study are fully open for public examination and far less selective than the data in the earlier studies and notes with pride that he and his co-researcher have been quick to respond to all queries posted about their methodology on Dr. Siegel's web blog.

He also poses the wider ranging question of whether studies commissioned by the "Antismoking Industry" should begin to receive the same cautious reception accorded those commissioned by "Big Tobacco." The current study, as well as an earlier one by the duo, were unfunded and neither researcher receives grants for their work from either interest group. Kuneman sharply asks the question, "Why the difference between the studies? For one thing we weren't dependent on antismoking-targeted grants!"

At this point there appears to be very little, if any, real scientific support for the claim that protecting nonsmokers from normal levels of exposure to secondary smoke prevents any heart attacks. And it is this claim that has always provided the impressive numbers upon which ban advocates have pressed legislators to pass smoking bans.

Without those numbers proponents of extreme bans are left with little other than the widely discredited EPA figures relating ETS to lung cancer and a few isolated instances of hospitality workers who have come to believe that their own cancers were caused by working in smoking establishments. Samantha Phillipe, editor of the longstanding smokersclubinc.com newsletter, notes that while it's always a cause for sadness when someone becomes ill that it's even more sad when they are misguidedly advised to blame family and friends for their illness.

Without a compelling body of scientific evidence backing them up, smoking bans are an unnecessary and overbearing intrusion of government into the spheres of free choice, private property and free enterprise. And the Kuneman/McFadden study points up just how uncompelling even some of the strongest and most publicised evidence actually is.


1) Article: A Preliminary Study

2) Mike Siegel's blog analysis and follow up comments:

3) BMJ Response: Helena 1000 Days

4) Jacob Sullum's REASON column: Hit and Run

Michael J. McFadden
Author of "Dissecting Antismokers' Brains"
Mid-Atlantic Regional Director of SmokersClubInc.com
web page: http://pasan.thetruthisalie.com/ ...
Email: Cantiloper@aol.com

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