State allots tobacco case settlement
Four years after the $246 billion national tobacco settlement, Oklahoma is moving slowly toward spending it on tobacco prevention and cessation programs.
In January, a national report ranked Oklahoma 41st in the nation in tobacco settlement money used for tobacco prevention programs. The ranking was based on recommendations by the U.S. Centers for Disease Control and Prevention that states spend 20 percent of tobacco settlement funds each year on such programs.
The report, "Show Us The Money: An Update on the States' Allocation of the Tobacco Settlement Dollars," was sponsored by the Campaign for Tobacco-Free Kids, the American Heart Association, the American Cancer Society and the American Lung Association.
Dr. Robert McCaffree, chairman of the board of directors for the Oklahoma Tobacco Settlement Endowment Trust, said it will likely be 10 years before the state reaches the CDC recommendations.
"Over the past year, we've taken a very serious look at programs that have proven to work," he said. "And when we're ready to move forward we'll look for programs that are leveraged in some way with other resources. That way, the programs have a higher impact."
Fund hires director The trust fund was created by a constitutional amendment approved by voters in 2000. A seven-member board appointed by seven political leaders -- the governor, the Senate president pro tempore, the speaker of the House of Representatives, the attorney general, the state treasurer, the state auditor and inspector and the state superintendent of schools -- manages the day-to-day activities of the fund.
Earnings from the fund can be spent for research of cancer and other tobacco-related diseases, tobacco prevention and cessation programs and health care programs with an emphasis on children.
McCaffree said the past year has been spent in putting together the organizational and vision plans for the trust.
The group hired its first employee, Tracey Strader, as executive director in early August.
Strader was the head of the Tobacco Use and Prevention Service within the Oklahoma Health Department for three years.
"I've spent the past year attending meetings of the board, submitting presentations and listening to them," Strader said. "I'm impressed with the efforts they have put into ensuring that the foundation of the trust fund is solid and that we don't waste money."
Support staff for the office will be hired later, McCaffree said.
Oklahoma will receive an estimated more than $2 billion from the national settlement over the next 25 years. The trust fund received 50 percent of the state's allocation of money from the settlement in 2001.
The fund's share increases each year by 5 percent until 2007, when it will cap out at 75 percent of Oklahoma's share of the settlement money. Only interest from the fund can be spent.
Tim Allen, spokesman for the state treasurer's office, said the fund earned $1.4 million in fiscal 2002.
Since its creation, the trust fund has received about $88 million of the total $227 million in tobacco funds the state has received.
McCaffree estimated the trust fund would have only $700,000 to spend on programs because of administrative costs.
"In a few months, we'll be asking groups for presentations on programs, and then we'll decide where to spend the money," he said.
Strader and McCaffree said comprehensive programs that focus both on smoking cessation, prevention and education are more successful.
With so much left to do yet, it will likely be the end of the year before Oklahomans see the benefits of the trust fund program.
Where has all the money gone? Although 50 percent of the tobacco settlement money goes to the Endowment Trust Fund, the state still has a sizable amount added to its coffers. A Tobacco Settlement Revolving Fund was also created in 2000. The money has been appropriated to the Health Care Authority, the state Health Department, the Department of Mental Health and the Department of Human Services. In fiscal 2001, the Health Care Authority received $27.8 million and in fiscal 2002 it received $23.4 million.
DHS also received a share with $14.3 million in fiscal 2001 and $10.1 million in fiscal 2002. Both the Health Department and the Department of Mental Health received less than $2 million for each fiscal year.
Before the creation of the special funds, state law mandated that money from the tobacco settlement go directly into the state's general revenue fund. The general revenue fund received $23.1 million in December 1999 and $20.8 million in January 2000.
The attorney general's office has received more than $7.5 million for fees related to its work in the tobacco litigation.
Charlie Price, spokesman for Attorney General Drew Edmondson, said the fee will continue to decrease each year.
"If you look at how the money has been allocated, it's easy to see that Oklahoma has spent it as it was meant," Price said.
Four Oklahoma law firms also shared in the $300 million contingency award for their work in the tobacco litigation.
"It's important that people understand that this didn't decrease Oklahoma's share and did not come out of any money the state has received," Price said. "The attorneys reached an arbitration agreement with the tobacco companies separate from the national settlement."
What have other states done? McCaffree said the trust fund will begin to have more money to spend as the principal increases. But State Question 701 on the November ballot may increase the amount sooner. If approved, the question would limit annual expenditures from the state's Tobacco Settlement Fund to not exceed 5.5 percent of the 12-month average in earnings. This would operate similar to school endowments, with only a certain percentage of money available for use.
"We take our fiduciary duties very seriously, so I still don't anticipate spending more than the interest," he said.
The fund is limited to $500,000 annually for operating expenses. Strader will earn $75,000 as executive director. Office space has been donated by the Oklahoma Health Center Foundation.
Other states are not so thrifty with their share of the settlement. Budget shortfalls across the nation have prompted some states such as Wisconsin and Missouri to borrow against future tobacco settlement funds. Others have used the money to fund highways or education.