Two States Blow Smoke Over How to Spend Tobacco Booty
New fire trucks or schools? Wrangling erupts in Florida, Mississippi over spending huge windfall from industry.
The ideas are coming in almost as fast as the dollars.
As tobacco companies send in multimillion-dollar settlement checks to Florida and Mississippi - the first two states to settle big lawsuits with the cigarette firms - people there are suggesting many ways it could be spent, on everything from new school buildings to a bonus tax refund for citizens.
Meanwhile, 38 other states are watching closely, considering whether they too should settle their suits to reap a windfall. Texas must decide before its Sept. 29 trial date, and Minnesota must do so before January. A key factor in whether to settle is the difficulty of spending such sums. Political wrangling over spending plans can leave the cash sitting in limbo for years.
Mississippi, the first to settle, will get $3.6 billion over 25 years. Its first installment - $175 million - is gathering $25,000 a day in interest, while the Legislature and courts cobble together a spending plan.
"There is already a proposal to buy fire trucks for communities to put out fires caused by cigarette smoking," says Marshall Bennett, the state treasurer. "That's a stretch."
Indeed, the two states are a test case for whether it's possible to stick to the original idea behind fighting the tobacco industry - to have the firms reimburse state expenses to treat ailing smokers and to help people stay away from cigarettes.
For Florida lawmakers, who will have $11.3 billion to spend over the next 25 years, "the temptation will be to listen overwhelmingly to their constituents," says Bob Bradley, budget director for Gov. Lawton Chiles, a Democrat.
"When state legislatures see a lot of money, they have their own idea of how it should be spent," adds Richard Daynard, who runs the Tobacco Control Center at Northeastern University in Boston. "It could be anything. It could be potholes."
In Florida, $200 million of the first installment is earmarked for a two-year campaign against underage smoking, a fact that antitobacco forces count as a victory.
But how the remaining $550 million will be spent is less clear. One proposal is to spend it on solving the state's perennial crisis - school overcrowding. Later this fall, legislators will discuss how to pay for a backlog of classrooms that could cost $2 billion to $3 billion over five years.
It's a crisis that Florida Education Commissioner Frank Brogan, along with the antitax, GOP-led legislature, say should be eased with some of the tobacco cash.
As the tobacco money starts filling state coffers, Mr. Brogan says, the legislature can take state money already dedicated to children's programs and spend it on school construction. But child advocates say it's hypocritical for a legislature that voted down tax increases for new schools to now look at the tobacco windfall as an easy solution. It would be unfair, they say, if lawmakers spent the booty on school construction rather than preventive health care and anti-tobacco programs for kids.
"To swoop down on the tobacco deal [to pay for new schools] is a shell game," says kids' advocate Jack Levine, director of the Florida Center for Children and Families.
In Mississippi, state judge William Myers, who has jurisdiction over the settlement, hasn't yet issued guidelines on where the money should go. But he has said he wants the deal, which he approved, to pay for antitobacco and health-related programs. But many legislators feel it should be up to them to decide. "We sued to collect the money that taxpayers had paid on Medicaid. If you follow that train of thought, you ought to give it back to the taxpayers," says state Sen. Dick Hall, the GOP chair of the senate appropriations committee. He wants to set up a trust fund, let the money generate interest, and use the interest later.
"If and when we get the money, we have a lot of ideas on what we should do about it," Mr. Hall says. Health care and education, he says, top the list. "You could educate a lot of kids in Mississippi with $175 million a year."
Florida's and Mississippi's tobacco money is likely to remain sitting in a bank, quietly generating interest, for some time. One uncertainty is how the $368 billion national tobacco settlement, if approved by Congress, would ultimately affect state deals. It would supercede state settlements, but those states that have already settled could opt out of the national deal if their own settlement is better.
"There's a lot of ambiguity surrounding the money," says Bradley, Gov. Chiles's budget director.
But Mr. Daynard hopes "political decency" will prevail. "As a matter of political ethical judgment, this is money obtained on the basis of tobacco-caused health damage. The money ought to rectify that."