States mortgage tobacco money to balance budgets

Less than four years ago, Attorney General Christine Gregoire helped win billions in restitution from tobacco companies for 46 states, money she saw as a bonanza for smoking prevention and public-health programs.

Now she's watching in dismay as states around the country — including Washington — borrow heavily against their shares of the settlement to fill short-term budget holes.

"This was the single biggest opportunity in the history of public health to address the most preventable cause of death in America," Gregoire said.

Since the settlement dollars started flowing in, anti-tobacco forces have battled — and mostly lost — with lawmakers about how the money should be spent.

Only five states meet the Centers for Disease Control and Prevention's (CDC) recommendation that 20 to 25 percent of the settlement be spent to fight tobacco use, according to the Campaign for Tobacco-Free Kids.

Even in Washington state, where Gregoire's influence had helped keep the money earmarked for tobacco and public-health programs until now, anti-smoking spending didn't meet the CDC benchmark.

Elsewhere, moral claims on the settlement ran up against the cold statehouse fact that money is just money when it's time to balance the budget.

Now states aren't just spending the yearly checks on something else, they're spending decades of settlement payments all at once.

Washington will sell off the rights to about 20 percent of its settlement payments for the next 20 years to offset $450 million of its $1.6 billion budget hole.

In California, Gov. Gray Davis has proposed selling off 40 percent of his state's settlement to raise $2.4 billion to feed a hungry $12.4 billion budget hole. Similar proposals are in play in other states, including New Jersey and Rhode Island.

In Wisconsin, Gov. Scott McCallum and lawmakers are set to go whole hog: The entire settlement for the next two decades soon will be sold for about $1.3 billion, compared with $5.9 billion the state figured to rake in from settlement payments over 25 years.

Wisconsin's bond sale has been in the works since last year, but the state had planned to spend only $450 million in the current budget.

Critics — most vocally Gregoire and other anti-tobacco forces — liken the practice to taking out a second mortgage to buy groceries. Interest and fees paid to bond brokers will erode the settlement's spending power, they argue, and debt payments will long outlive the balanced budgets they pay for.

But budget writers say they have few choices. In Washington, Senate Ways and Means Chairwoman Lisa Brown, D-Spokane, turned to tobacco as the least offensive of three unpleasant options.

"You have to compare it to the alternatives," Brown said. "In this case, the alternative is $500 million in additional cuts or in general tax increases."

Anti-tobacco forces worry lawmakers will go back to the same well next year when similar budget problems loom.

"It makes future budget holes deeper and harder to climb out of," said Astrid Berg, executive director of the American Lung Association of Washington.

Compared with the political liability of raising taxes or cutting spending, selling off the settlement — known by the ungainly moniker of "tobacco securitization" — is easy money. Because the bonds aren't backed by states' taxpayers, they're exempt from strict restrictions on debt in many states.

At least 17 states or counties, including Alaska, Alabama, South Carolina, and counties in New York and California, already have sold off parts of their settlements.

At first, the bonds were mostly sold for capital construction — buildings that would outlast the bond payments — a widely accepted use of such borrowing.

Alaska was among the first, selling off part of its settlement money in 2000 to replace and repair crumbling schools. Anti-tobacco elements howled, but lawmakers were happy for a way to sell bonds without submitting them to a statewide vote, as the constitution requires for general obligation bonds.

I've said it before, I wonder if the anti-tobacco folks who are decrying the pillaging of the settelment funds have realized that they were just useful idiots in the States' grab for new revenue streams.

a bonanza for smoking prevention and public-health programs.

One of the biggest private industry extortions in American history.

I feel so sorry for the generation of kids, for whom these funds were going to help. They will be deprived of their anti-tobacco propaganda.

Hurry, lets start the fat foods tax to help our kids some more. (/sarcasm)

Once again this tobacco shakedown was nothing more than extortion of the private industry to generate money for liberal politicians to fund their programs.

Interest and fees paid to bond brokers . . .

This is all that needs to be said. If you look at any state that insists on floating bonds to pay for even the most idiotic government expenses, you are sure to find that the brokerage industry is among the strongest lobbying groups in the government.

"This was the single biggest opportunity in the history of public health to address the most preventable cause of death in America," Gregoire said."

They were going to ban automobiles?

Gregoire is an idiot.

Holocaust reparations are a close second. Next in line: slavery reparations for slave descendants and after that, reparations for Jim Crow laws against state & municipal governments.

I think the threshold has been crossed. The United States is in the process of devouring itself.

Oh well. We've had a nice run.

"This was the single biggest opportunity in the history of public health to address the most preventable cause of death in America," Gregoire said.

I sure wish they would get off that soap box that if we didn't smoke, we wouldn't die. This is rediculous!

I think if I was the head of one of the major tobacco companies that settled and started seeing this, I would petition the courts to nullify the settlement agreement. Those funds were extorted under extreme pressure from the media and public health officials demanding that tobacco companies pay for the costs of tobacco-related health costs and future anti-smoking programs.

If that's not what the funds are being used for, the states are acting in bad faith. They have perpetrated a flagrant fraud against the tobacco companies and the settlement should be nullified.

This news should be on every network and on the front page of every newspaper. The thieves that stole this money (politicians and lawyers) need to be prevented from extorting one more dime from an American industry ever again. (Look out McDonalds & Wendy's, the "fat police" and the crooked judges and pols are coming to get your hard earned dollars). I doubt that the American people are going to like the 2 faced RATS that started this hustle, and their arrogant attitude regarding the spending of the extorted spoils of the tobacco industry.

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