Where Has the MSA Money Gone?
from R.J. Reynolds Tobacco Company

State and federal governments have an unprecedented amount of money available to them to reduce youth smoking, through payments from the Master Settlement Agreement (MSA) and other similar settlements. These settlements give states up to $246 billion from tobacco companies over a 25-year period that can be used to support anti-smoking efforts. Future annual payments, based upon inflation and cigarette sales, will continue into perpetuity.

Although the MSA repeatedly mentions "implementation of tobacco-related public health measures," each state decides how its MSA funds are spent. Tobacco companies do not have any input into how the states spend their settlement funds. R.J. Reynolds Tobacco Company believes that states should take advantage of having unprecedented funds available to combat youth smoking, and that a significant portion of the states' payments should be spent on preventing tobacco use among minors.

Now that four years have passed since the MSA was signed, where has the money gone so far? When the MSA was signed, the states held press conferences proclaiming that they would spend the money on smoking education, cessation and research. They talked about protecting youth and improving public health. However, it seems to have become a classic "bait and switch" operation. The states have squandered billions of dollars on pet projects such as golf courses and horse-breeding farms, pork-barrel projects such as roads and bridges and state-budget deficit reductions - items completely unrelated to the stated purpose of the settlement funds.

When the MSA was signed, the Attorneys General and plaintiffs lawyers held press conferences and talked about using the money for public health and protecting kids. Washington Attorney General Christine Gregoire said, "Washington state's proceeds from the tobacco industry settlement should be spent on public health issues or the integrity of the historic agreement will be violated."

"This agreement provides significant benefits to Montana and to Montanans. It will settle the state's damage claims against big tobacco. It will provide useful tools to educate the public - particularly young people - about the dangers of tobacco use, and to meet other health-related needs," said Montana Attorney General Joe Mazurek.

In fact, states have spent a large portion of MSA funds on projects totally unrelated to youth smoking prevention and tobacco control. Among the projects for which MSA funds have already been spent:

• Dump trucks, golf carts, a golf course irrigation system and a new county jail in New York
• Broadband cable networks in Virginia
• Psychiatric care for prisoners in New Jersey
• Boot camps for juvenile delinquents, alternative schools, and metal detectors and surveillance cameras for schools in Alabama
• Upgrading public television stations with DVD technology in Nevada
• Harbor renovation and museum expansion in Alaska
• Water and sewer improvements in South Carolina
• Pasture and weather monitoring for a thoroughbred association in Kentucky
• College scholarships in Michigan
• New schools in Ohio
• City parks and the purchase of undeveloped land in California
• A senior citizen prescription drug program and property tax rebates in Illinois
• Medicaid dental services in Maine
• Water Resources Trust Fund and flood-control projects in North Dakota
• Operating expenses for the Carolina Horse Park, truck-driver training, pine-straw farming research and equipment upgrades at a knitting plant in North Carolina
• A People's Trust Fund in South Dakota will generate interest income that can be spent on whatever the legislature wishes
• Four years of MSA money was used to help balance the budget in Tennessee
• Rural economic development in Georgia
• Tax rebates in several states
• Municipal bonds, backed by future MSA payments, were sold in Wisconsin and half of the money was spent to offset a revenue shortfall

The National Conference of State Legislatures (NCSL) analyzed state plans for spending MSA funds during fiscal years 2000 through 2003. Of the total $33.1 billion in MSA funds that states will receive during this period, more than half of the money was earmarked for projects totally unrelated to smoking.

The U.S. Centers for Disease Control and Prevention (CDC) recommended that approximately 20 to 25 percent of the MSA payments go toward smoking prevention programs. By the end of 2001, states had received more than $13.4 billion in MSA payments. However, only seven states (Arizona, Indiana, Maine, Massachusetts, Mississippi, Ohio and Vermont) had met or exceeded the CDC's minimum funding recommendations for tobacco control programs.

In its analysis of MSA payment expenditures evaluated since the MSA was signed through July 2002, the Campaign for Tobacco-Free Kids (CTFK) found:

• Only five states funded tobacco prevention programs at levels that meet the CDC's minimum recommendation.
• Nineteen states (including the five above) have committed even 50 percent of the minimum funding level recommended by CDC.
• Sixteen states committed modest amounts (between 35 and 50 percent) of MSA funds to tobacco prevention programs.
• Twelve states committed minimal amounts (less than 25 percent) of MSA funds to tobacco prevention programs.
• Three states and the District of Columbia committed no MSA funds to tobacco prevention programs.

According to their analysis, the CTFK says, "We have found that most states have not kept their promises - only a handful of states have funded tobacco prevention programs at the minimum level recommended by the U.S. Centers for Disease Control and Prevention, and the majority of states have failed to fund prevention at even half the CDC minimum."

A June 2001 General Accounting Office (GAO) report found that states allocated about seven percent of the nearly $13.5 billion in MSA payments made from December 1999 through April 2001 for new or expanded tobacco control programs. The GAO also found that 36 states spent zero or less than 10 percent of MSA monies on tobacco control.

What can you do?

The states' greed penalizes adults who choose to smoke. It's not tobacco companies that are paying the freight for government tobacco profits; the settlement payments and cigarette taxes come out of the price that smokers pay for a pack of cigarettes. And the government makes more money off cigarettes per minute than the average family makes in a year.

Tobacco settlement payments have resulted in unprecedented increases in the price of a pack of cigarettes. In 2001, government collections of settlement payments and tax revenues accounted for nearly half of the price of a pack of cigarettes. From 1999-2001, the government collected over $88 billion in settlement payments and cigarette taxes; yet many states have enacted or are proposing even higher cigarette excise taxes. They expect the 23 percent of the U.S. adult population that smokes to pay even more for cigarettes to cover state budget deficits, too. Click here to view more information about tobacco taxes and revenues.

State officials should take the opinions of adult smokers into account when reviewing funding and budget issues or voting on proposed legislation. Sometimes it's hard to believe that one voice can make a difference, but it can. And when many smokers speak out, the message is even stronger.

Find out what is being done with MSA funds in your state. Contact the Attorney General's office in your state and your state's elected officials to find out where the money is going.
Several states have made progress toward assuring that MSA dollars are spent as intended. For example, Oklahoma voters voted to amend their state constitution to require that their state's MSA monies be placed into a trust fund where only the interest on the money can be spent, and then only on health care. Ask elected officials in your state to do the same.

Write letters to the editor of your local newspaper and ask elected officials to spend MSA funds on youth-smoking prevention.