Tobacco Settlements:

States' Use of Settlement Proceeds

HEHS-98-147R: Published: Apr 22, 1998. Publicly Released: May 27, 1998.

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Pursuant to a congressional request, GAO provided information on how three states are using the proceeds of tobacco settlement agreements, focusing on: (1) whether any of the settlements specify how the proceeds are to be spent, including expenditures for health-related activities such as tobacco prevention or control efforts; (2) whether funds need to be spent within certain timeframes; (3) who is involved in deciding how the funds should be spent; (4) what programs and activities that states plan to spend the proceeds on; and (5) what tobacco prevention or control efforts are under way or planned in selected states.

GAO noted that: (1) in Florida and Texas, the settlement agreements specify which health-related and tobacco prevention or control activities are to receive funding; (2) the Florida agreement does not specify how much will be spent on each of the health-related activities identified, but it earmarks $200 million for a pilot program targeted at reducing the use of tobacco products by minors; (3) the Texas agreement specifically earmarks about $1.3 billion for health-related activities at several educational institutions; (4) the Texas agreement also specifies $200 million for a tobacco prevention and control pilot program; (5) the Mississippi agreement does not specify which programs or activities are to receive funding; (6) however, using the more favorable terms of the Florida settlement agreement, the Mississippi Attorney General negotiated a separate agreement with the tobacco companies to fund its pilot program with about $62 million; (7) the three settlement agreements do not specify that the funds be spent within certain timeframes, except for the tobacco pilot programs described in the Florida and Texas agreements; (8) Florida's agreement stipulates that the $200 million for the tobacco pilot program be spent over 2 years at the rate of $100 million each year; (9) the Texas agreement stipulates that the pilot program is to last for not less than 2 years; (10) decisions about how funds should be spent ultimately rest with the three state legislatures, based on recommendations from the governors, attorneys general, the departments of health, and other public health related organizations; (11) the three states are in different stages of planning how they will spend the funds; (12) as of March 31, 1998, each state had certain amounts of the settlement proceeds in escrow accounts; (13) in Mississippi, officials have focused on developing plans for the tobacco pilot program called the Partnership for a Healthy Mississippi; (14) in Florida, the state legislature is considering an appropriation of about $100 million of its settlement proceeds to fund the federally supported Children's Health Insurance Program, related Medicaid expansions, and other health-related services; (15) in Texas, the Department of Health has convened an interagency work control pilot program; and (16) officials in Florida stated that they used tobacco prevention and control efforts in California and Massachusetts as models for their own efforts, and Texas may also adopt the models of these states, according to state officials.

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