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The BG News
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November 30, 2023

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States turning to tobacco money to balance budget

COLUMBUS – Faced with a ballooning budget deficit, Gov. Bob Taft has proposed borrowing $100 million of the state’s share of the national tobacco settlement.

His proposal has disappointed state anti-smoking advocates, who saw in Taft a strong voice for using the money on health-related programs.

Governors and lawmakers around the country have been turning to the tobacco money, part of a $206 billion national settlement in 1998, as the economy worsens and budget deficits grow.

At least four other states have used the money in the past year to balance their budgets, and more are considering such a move.

“The current budget crunch that a lot of states are facing threatens to undermine all of the progress that’s been made in funding effective programs to reduce tobacco use among children,” said Matthew Myers, president of the Washington, D.C.-based Campaign for Tobacco-Free Kids.

“In the long run, diverting tobacco prevention money from the critically important goal of reducing the number of kids who start will be bad public health policy and bad for the state’s treasury because of the cost of tobacco-related diseases,” he said.

Myers said his group recognizes the pressure states are under. He also praised Taft for resisting “the more draconian step” of just taking the tobacco money without promise of repayment. Within the past year:

Michigan used $65 million to meet a revenue shortfall in its budget year that ended last month. The state was planning to use tobacco money before the Sept. 11 terrorist attacks but the proposal wasn’t as large, said Kelly Chesney, a state budget office spokeswoman. Tennesee spent $560 million of the tobacco settlement money – four years’ worth – to balance the current budget. Wisconsin sold 25 years of payments from the state’s settlement with tobacco companies – expected to total $5.9 billion – for $1.3 billion, with $450 million intended to immediately help balance this year’s budget. Missouri’s Gov. Bob Holden tapped $25 million in tobacco settlement funds that had been intended for a new state health laboratory. Holden, a Democrat, didn’t want to use the tobacco money, but the tightest budget in a decade forced his hand, said spokesman Jerry Nachtigal.

“To offset the potential state employee layoffs, cuts in education and law enforcement and protecting the most vulnerable in our state, the decision was made we had to dip into that fund, and hopefully that won’t have to happen again,” he said.

Missouri also used $127 million to meet a revenue deficit the 2000 and 2001 budget years.

Also, in 2000, Montana allocated $20 million in tobacco funds to balance the budget.

In an upcoming special session, Florida lawmakers are considering taking $15 million out of $37 million anti-tobacco advertising program.

States are facing the unexpected downturn of the economy, made worse by the terrorist attacks, said Lee Dixon, a Washington analyst with the National Conference on State Legislatures.

“The tobacco dollars can be used in any way the states see fit,” he said. “The case can be made that the states are using the tobacco money to continue current services, and if they did not use tobacco money, they would have to eliminate some health programs.”

In Ohio, Taft’s proposal is part of a broader proposal that includes budget cuts, the elimination of some sales tax exemptions and tapping the rainy day fund to deal with a $1.5 billion deficit that is being blamed in part on the attacks.

Lawmakers are cool to Taft’s tax proposals and use of the rainy day fund, but they don’t mind soaking up tobacco dollars.

“I’d rather spend tobacco money than rainy day money,” said Senate President Richard Finan, a Cincinnati Republican.

“We’re disappointed,” said Chris Schulte, spokeswoman for Tobacco-Free Ohio. “Governor Taft was instrumental in getting $1.2 billion allocated for prevention, so we were surprised.”

The anti-smoking group expects to lobby against the proposal, she said.

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