Here’s some more evidence of the great money grab of 1998.
agreement with the major tobacco companies to settle numerous lawsuits brought on to make the industry pay for money lost through tobacco-related illnesses. We were told at the time that state treasuries were being drained due to rising health care costs associated with treating residents for lung cancer, emphysema and other illnesses associated with heavy smoking.
The agreement allowed each of the states to collect a sum close to $4 billion, to be paid in yearly installments. The idea was for the states to use the money on health care and anti-smoking programs. In return the tobacco industry would be free from the harassment of aggressive states attorney generals.
We lived in a different era in 1998. State budgets were sound and many even included surpluses. Virginia even experienced years of double-digit economic growth and budget surpluses. With surpluses came aggressive spending.
When the economy leveled off, the states ran out of extra money needed to keep pace with all the extra spending that went on during those good days.
Critics of the tobacco settlement called the case a massive money grab by the states trying to extort cash from a legal industry. Yes, cigarettes are addictive and continued smoking does kill people. Instead of banning it, however, the states went after the huge amounts of money made each year by the likes of Philip Morris and R.J. Reynolds.
With the states experiencing tough economic times, we are beginning to see the results of the great money grab. The tobacco industry shells out around $8 billion to the states each year as part of the settlement.
Is this money being spent on health care initiatives aimed at smoking victims or at trying to get people to quit smoking? Can addicted smokers purchase “the patch” at a state-subsidized discount? Is a majority of the money being spent on aggressive programs designed to keep cigarettes out of the hands of teens?
Of course not.
A recent study by the National Conference of State Legislators showed that many states are relying on this annual tobacco payment to fill holes in the budget. The report found that 47 percent of this year’s payments to the states will be funneled into states’ general funds, the Associated Press reported. That’s up from 29 percent last year.
The study found that states are battling budget shortfalls and instead of placing the cash into endowments, where it will grow, it’s being used to pay for existing state programs. A decreasing amount is being spent on health services or anti-smoking initiatives.
Using this money for general purposes is dangerous because the tobacco money will dry up sooner or later. Perhaps by then, the states will have successfully sued the fast food industry.