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How the Big Tobacco Deal Went Bad
By Jim Estes, Oct. 6, 2014, Nytimes.com
SAN BERNARDINO, Calif. — WHEN was the last time you saw an anti-smoking ad?
In November 1998, the tobacco industry and 46 states reached what is known as the Tobacco Master Settlement Agreement (four states reached separate settlements). This group deal exempted the industry from legal liability for the harm caused by tobacco use. In return, the tobacco companies agreed to make annual payments, in perpetuity, to the states to fund anti-smoking campaigns and public health programs. The industry guaranteed a minimum of $206 billion over the first 25 years.
While a requirement that the states use these funds as intended was not written into the agreement, it was anticipated that they would do so.
They haven’t.
Only a small fraction of the money has gone to tobacco prevention. Instead, the states have used the windfall for various and unrelated expenditures. In Alaska, $3.5 million in settlement money was spent on shipping docks. In Niagara County, N.Y., $700,000 went for a public golf course’s sprinkler system, and $24 million for a county jail and an office building. And in North Carolina, in the ultimate irony, $42 million of the settlement funds actually went to tobacco farmers for modernization and marketing.
But that’s not all: Nine states — Alaska, California, Iowa, Michigan, New Jersey, New York, Ohio, Rhode Island and West Virginia — and Washington, D.C., Puerto Rico and Guam decided to get as much of those annual payments as fast as they could by mortgaging any future payments as collateral and issuing bonds. They traded their future lifetime income for cash today — at only pennies on the dollar.
SAN BERNARDINO, Calif. — WHEN was the last time you saw an anti-smoking ad?
In November 1998, the tobacco industry and 46 states reached what is known as the Tobacco Master Settlement Agreement (four states reached separate settlements). This group deal exempted the industry from legal liability for the harm caused by tobacco use. In return, the tobacco companies agreed to make annual payments, in perpetuity, to the states to fund anti-smoking campaigns and public health programs. The industry guaranteed a minimum of $206 billion over the first 25 years.
While a requirement that the states use these funds as intended was not written into the agreement, it was anticipated that they would do so.
They haven’t.
Only a small fraction of the money has gone to tobacco prevention. Instead, the states have used the windfall for various and unrelated expenditures. In Alaska, $3.5 million in settlement money was spent on shipping docks. In Niagara County, N.Y., $700,000 went for a public golf course’s sprinkler system, and $24 million for a county jail and an office building. And in North Carolina, in the ultimate irony, $42 million of the settlement funds actually went to tobacco farmers for modernization and marketing.
But that’s not all: Nine states — Alaska, California, Iowa, Michigan, New Jersey, New York, Ohio, Rhode Island and West Virginia — and Washington, D.C., Puerto Rico and Guam decided to get as much of those annual payments as fast as they could by mortgaging any future payments as collateral and issuing bonds. They traded their future lifetime income for cash today — at only pennies on the dollar.
Read the full story: www.nytimes.com
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