State Tobacco Settlement Funds Not Being Spent on Vigorous Tobacco Control Efforts

February 1, 2002

Each year, tobacco use kills nearly 500,000 Americans (430,000 smokers and 53,000 from secondhand smoke)[1]-more than the combined annual number of national deaths from the acquired immunodeficiency syndrome, alcohol, automobile accidents, murders, suicides, and fires. The annual cost of treating tobacco-related diseases is about $89 billion.[2]

Each year, tobacco use kills nearly 500,000 Americans(430,000 smokers and 53,000 from secondhand smoke)[1]—more than the combinedannual number of national deaths from the acquired immunodeficiency syndrome,alcohol, automobile accidents, murders, suicides, and fires. The annual cost oftreating tobacco-related diseases is about $89 billion.[2]

Recent reports by the Institute of Medicine and the Centers for DiseaseControl and Prevention (CDC) concluded that the best available evidence fromstates such as California, Massachusetts, and Florida indicate that large-scaleaggressive state tobacco control programs can rapidly reduce cigaretteconsumption.[3,4] In California, the reduction in smoking was accompanied bysubstantial reductions in lung cancer rates and deaths from heart disease.[5,6]

If states made a significant and comprehensive effort to fund aggressiveanti-tobacco media campaigns, community programs to encourage nonsmoking, qualitycessation programs, and school programs (as the CDC recently recommendedregarding best practices for state tobacco control),[7] tobacco use could bereduced by nearly 50% in 1 decade.[2]

By 1998, all states had enough funds (billions of dollars) from legalsettlements with the tobacco industry to conduct such a national effort.Nevertheless, the states have spent very little on tobacco control programs.This failure to establish such programs is consistent with the tobacco industry’slong-standing strategy of seeing that the money that might be used for tobaccocontrol is used for anything else. Thus, reductions in preventabletobacco-related illnesses and deaths have been minimal.

With vigorous political organizing efforts in all states, progress can bemade in reversing the dismal current record on tobacco control funding. Thebasis for this reversal lies in understanding the historical, legal, andpolitical framework of how the tobacco settlements occurred, how the settlementfunds have been allocated, and what might be done to organize in response tothese political and legal realities.

State Tobacco Lawsuits and Settlements

In 1994, Mississippi, Florida, Texas, and Minnesota were the first states tofile lawsuits to recover Medicaid costs expended in treating sick and dyingsmokers on behalf of the taxpayers (who had traditionally borne these costs).These lawsuits were filed under new legal theories (and sometimes specificenabling legislation) that focused on class action suits on behalf of largenumbers of smokers and statistical evidence rather than on the traditionalapproach of individual wrongful death cases.

This change meant that potential monetary awards for damages could be muchlarger in light of the higher number of plaintiffs involved in each lawsuit. Thenew legal theory also allowed states to file suits using statistics showing thattobacco use was linked to illness and death. This contrasted with the older andmuch more burdensome legal theory requiring direct proof of causality linked totobacco use and disease in specific individuals who became ill, usually manyyears after they first started using tobacco.[8]

Over the next few years, the remaining states and the District of Columbiafollowed the lead of the first four states. By 1998, Mississippi, Florida,Texas, and Minnesota had settled individually with the tobacco industry, onprogressively stronger terms. The terms of these settlements includedreimbursing the states for the estimated costs of smoking in perpetuity(estimated to be $40 billion to be paid to the four states over the first 25years), restrictions or bans on outdoor tobacco advertising includingadvertising aimed at children, bans on tobacco advertising on publicconveyances, payment for counter-tobacco-marketing campaigns and educationprograms, and the release of millions of pages of previously secret tobaccoindustry documents.

In November 1998, the 46 other states and the District of Columbia jointlysettled their lawsuits under a proposal known as the Master SettlementAgreement. This agreement called for the tobacco industry to reimburse thestates for the costs of smoking borne by the states in perpetuity (about$206 billion in monetary damages over the first 25 years) and to pay anadditional $5 billion to 14 states to compensate for harm to tobacco farmers asa result of reduced tobacco consumption and production. Moreover, the agreementalso contained certain provisions that purported to tighten control of tobaccoadvertising and promotions that might be attractive to minors at a variety ofoutdoor public events such as fairs, rodeos, and autoracing. These restrictions,however, do not seem to have had much practical effect on tobacco marketing.

Not included in the Master Settlement Agreement were requirements on how thestates were to spend the award money. At the time the agreement was signed, manypublic officials applauded it as a significant step toward reducing andpreventing present and future tobacco use.

State Spending of Tobacco Settlement Funds

This promise has, for the most part, not been realized. Instead, since theMaster Settlement Agreement was enacted, only 5% of all tobacco settlement fundshave been spent on state tobacco control programs (Table1), according to recentstudies by the National Conference on State Legislatures and the Campaign forTobacco Free Kids, American Heart Association, American Lung Association, andAmerican Cancer Society.[2,9] Non-tobacco control-related health-care programsaccounted for 36% of total spending, with the remainder being allocated to awide variety of other programs. This has included such efforts as fundingcollege scholarships in Michigan, upgrading public TV stations in Nevada, andimproving public education in New Hampshire.

When this funding trend is broken down by state and compared to minimumCDC-recommended spending on state tobacco control programs, the commitment toeffective tobacco control efforts appears weak (Table2).[2] By January 2001,just six states had spent funds on comprehensive tobacco control effortsequivalent to the minimum best-practice amounts recommended by the CDC.

These budgetary trends indicate that when a wide variety of states receivelarge sums of money with no restrictions, the parochial interests and petpolitical projects of state politicians will take precedence over the originalpurpose of the national tobacco settlements, which was to significantly curbtobacco use.

An Example: California Tobacco Settlement Funding

In California, for instance, many health advocates were initially optimisticthat newly elected (in 1998) Democratic Gov. Gray Davis would reverse theefforts of Republican Gov. Pete Wilson to undermine California’sProposition 99—the first large-scale tobacco education andcountermarketing program, which was passed by voters in 1988—by increasingspending for tobacco control to the CDC’s minimum recommended levels.[10,11]Gov. Davis, however, resisted increasing funding for the program and even vetoedlegislation that would have allocated money from the Master Settlement Agreementto tobacco control and health care.[11]

After 2 years of behind-the-scenes lobbying, several organized health groups,led by the American Heart Association and Americans for Nonsmokers’ Rights,started to apply public pressure on Gov. Davis to reinvigorate the tobaccocontrol program. Gov. Davis did finally reverse the (Wilson era) ban on mediaattacks on the tobacco industry, but he was also slow to change the cumbersomeapproval process (first established by Gov. Wilson) for new antitobaccoadvertisements and continued to oppose increases in funding for the overalleffort.

The Effects of Political Pressure

In the second year of the Davis Administration, the organized health groupsran a newspaper advertising campaign beginning in April 2000, castigating Gov.Davis for not spending any of the Master Settlement Agreement money on tobaccocontrol efforts. The ads also urged the Davis Administration to allocate thosefunds at the CDC’s minimum recommended best-practice levels. In May 2000, inresponse to political pressure, Gov. Davis announced that he was releasing $27.6million of Proposition 99 money, which had been restricted by the WilsonAdministration, for increased funding on countermarketing antitobacco efforts inCalifornia.

In January 2001, also due to political pressure, the Davis Administrationannounced that it would begin spending Master Settlement Agreement money ontobacco control. Gov. Davis proposed allocating a modest $20 million for ayouth antismoking campaign. This amount was well below the $118 million (20% ofthe tobacco settlement money) minimum best-practice recommendation by the CDCand the California Tobacco Education and Research Oversight Committee (TEROC), agroup created by the legislature to monitor the program and make budgetaryrecommendations for the state’s tobacco control program (Table3).

Success of the Original Tobacco Control Program

In the early 1990s, California’s tobacco control program was large andaggressive, and smoking rates fell faster than in the rest of the United States.This effort may have prevented 59,000 deaths from heart disease between 1989 to1997.[5,12] However, during the late 1990s, after the program was modified byboth the Wilson and Davis Administrations, the difference in smoking ratesbetween California and the United States narrowed. In essence, this caused15,000 more deaths from heart disease than would have occurred had the program’seffectiveness simply been maintained.[5,12]

Without the political pressure applied by the health groups in California,Master Settlement Agreement funding levels would probably have been even loweror nonexistent. The events in California clearly demonstrate that healthadvocates must play hardball politics at the state level to ensure that minimalMaster Settlement Agreement funding is allocated for tobacco control programsaimed at reducing tobacco-related illnesses and deaths.

Political Organizing Needed to Maintain Effective Funding

Because their resources are limited and they do not make campaigncontributions, health advocates will never be able to wage the aggressiveinsider lobbying campaigns that the tobacco industry uses.[13] Rather, thepublic health groups need to use their primary strength—public support andcredibility—to apply political pressure on policymakers to create and defendtobacco control programs. While these groups must maintain a lobbying presencein state capitols, this lobbying presence needs to be managed in concert withhigh-profile public campaigns designed to hold politicians accountable for theiractions. These strategies include:

  • Full-page newspaper advertisements

  • Community forums with legislators

  • Face-to-face sessions with legislators

  • Contacting local opinion leaders

  • Rallies

  • Public demonstrations

  • Free media interviews

  • Opposing pro-tobacco and supporting pro-tobacco control politiciansat polls

  • Initiative, referendum, and recall

Public Credibility

Another important factor that health groups can use is their high publiccredibility (vs the tobacco industry’s low credibility) to make their casethat tobacco settlement money should be spent at the minimum best-practicelevels recommended by the CDC. In advancing their public arguments and supportfor higher tobacco settlement funding, they can use such themes as the tobaccoindustry’s manipulation of smokers, dangers of death from secondhand smoke,and the death and illness toll associated with tobacco use.

Because the Master Settlement Agreement and other tobacco settlements do notspecify spending guidelines for tobacco control efforts and the promotion ofbetter public health, recent state spending trends indicate that healthadvocates must become involved in the political process. By linking astutepolitical organizing with the establishment of new tobacco control programs andthe enhancement of existing tobacco control programs, public health can begreatly improved. Failing to become involved and letting states spend money onother projects or on less aggressive tobacco control programs will increase thenumber of deaths and illnesses from tobacco use, as the California experiencedemonstrated in the late 1990s.

University of California San Francisco,
Institute for Health Policy Studies,
Cardiovascular Research Institute,
Department of Medicine,
San Francisco,California


1. Glantz S, Parmley W: Passive smoking and heart disease: Epidemiology,physiology, and biochemistry. Circulation 83:1-12, 1991.

2. Campaign for Tobacco Free Kids, American Cancer Society, American HeartAssociation, American Lung Association: Show Us the Money: An Update on theStates’ Allocation of the Tobacco Settlement Dollars. Washington, DC, 2000.

3. National Cancer Policy Board: State Programs Can Reduce Tobacco Use.Washington, DC, Institute of Medicine, National Research Council, 2000.

4. US Department of Health and Human Services: Reducing Tobacco Use: A Reportof the Surgeon General. Atlanta, Centers for Disease Control and Prevention,National Center for Chronic Disease Prevention and Health Promotion, Office ofSmoking and Health, 2000.

5. Fichtenberg CM, Glantz SA: Association of the California Tobacco ControlProgram with declines in cigarette consumption and mortality from heart disease.N Engl J Med 343(24):1772-1777, 2000.

6. Cowling D, Kwong S, Schlag R, et al: Declines in lung cancer rates—California,1988-1997. Morb Mortal Wkly Rep 49(47):1066-1069, 2000.

7. Centers for Disease Control and Prevention: Best Practices forComprehensive Tobacco Control Programs—August 1999. Atlanta, US Department ofHealth and Human Services, August 1999.

8. Givel M, Glantz S: The Public Health Undermined: The Tobacco Industry’sLegacy in Missouri in the 1990s. San Francisco, Institute for Health PolicyStudies, University of California, San Francisco, November 2000.

9. National Conference of State Legislatures: Health Programs Benefit FromTobacco Settlement—1999 to 2001. Washington, DC, 2001.

10. Glantz S, Balbach E: Tobacco War: Inside the California Battles.Berkeley, University of California Press, 2000.

11. Givel M, Glantz S: Tobacco Policy Making in California 1999-2001: Stalledand Adrift. San Francisco, Institute for Health Policy Studies, University ofCalifornia, San Francisco, July 2001.

12. Fichtenberg CM, Glantz SA: Controlling tobacco use. N Engl J Med344:1