Tobacco Tax Revenues: Oregon’s New Addiction
The State of Oregon sued tobacco companies this week to recover more money under the 1998 Master Settlement Agreement (MSA). That agreement, signed by Oregon and 45 other states, requires the four largest tobacco companies to pay specified amounts each year to the settling states, ostensibly as reimbursement for the costs of treating smoking-related illnesses.
However, each state is free to spend the money any way it wants, and many legislators are treating the fund as a cash cow. For example, on April 17 tobacco makers turned over $66.3 million to Oregon. More than 88 percent of that money will be spent for debt service on bonds that have nothing to do with public health, while less than 12 percent will go to the Oregon Health Plan. None of the funds will be spent on tobacco cessation programs, even though cigarette smokers are the ones paying for the settlement.
In the recently-filed lawsuit, the Oregon attorney general claims that we need more money from the industry to pay for the Oregon Health Plan, but if that were a priority, elected officials would not have already committed most of the money to pay off long-term debt.
Some states have shown greater fiscal discipline. For example, Pennsylvania expects to receive $366 million this year in tobacco settlement funds, and all of it will be spent on health research, uncompensated care, medical assistance for workers with disabilities, and tobacco control programs.
The MSA was negotiated with the tobacco industry by Oregon officials who claimed to be on the moral high ground. Eight years later, it looks like they’ve wound up in the moral swamp.
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