Tobacco money well used, not abused: states have spent billions of dollars on health-related services. Even so, they are being criticized for using some of the tobacco money to fill budget gaps.

• Author: Gordon, Dianna

States have come under scrutiny--and some criticism--for using tobacco settlement money to prop up general funds in these hard economic times.

U.S. Senator John McCain of Arizona, head of the Senate Finance Committee, conducted hearings Nov. 12 in Washington, D.C., on use of the settlement money. Committee members agreed to push states into spending more of that money on anti-smoking programs, but acknowledged long odds against trying to accomplish it through federal legislation.

McCain said he would "publicly shame" the states into spending more money on tobacco prevention even though they have spent $1.8 billion so far--four times more than the federal government--on smoking prevention and a total of $17.3 billion on health-related services and biomedical research. McCain and Mississippi Senator Trent Lott said they might push legislation to require states to spend a set amount on smoking cessation.

The settlement money--$243 billion--came after states successfully sued the major tobacco companies for health-related damages. The 1998 agreement provides for payouts over 25 years.

Although states publicly declared they would earmark tobacco money for smoking cessation or public health programs, they never were legally required to do so.

Out of necessity, the states have been using tobacco funds to bridge budget gaps during the national recession. Forty-one states and the District of Columbia faced budget shortfalls in FY 2004.

The states spent more than $2 billion or 28 percent of the total settlement for 2003 on health services. Long-term care received 5 percent ($363 million); tobacco prevention, 3 percent ($266 million); research, 3 percent ($226 million); education, 5 percent ($379 million); children and youth, 3 percent ($231 million); tobacco grower and community reimbursements, 4 percent ($295 million); and endowments and budget reserves, 2 percent ($195 million), according to a recent National Conference of State Legislatures study.

The tobacco money, however, has also proved vital when state revenues plunged $50 billion for fiscal year 2003, according to the Center on Budget and Policy Priorities. About 47 percent of the total tobacco settlement payments of $7.9 billion in FY 2003 was funneled into general fund budgets, an increase from 29 percent last year and 16 percent in each of the three previous years.

"Without the tobacco settlement, many states would have been forced to cut health services for the poor, elderly, disabled...