Government smokes: The tobacco settlement.

• Author: Freund, Charles Paul
• Position: Citings - Some states invest tobacco settlement funds in tobacco companies - Brief Article

HOW ARE STATES using their tobacco settlement windfall? The Investor Responsibility Research Center (IRRC) recently surveyed state treasurers to find out. It found that seven states--Texas, Connecticut, New Mexico, North Carolina, North Dakota, Utah, and West Virginia--had taken millions of dollars intended to reimburse them for tobacco-related health expenditures and invested the funds in tobacco companies.

The IRRC findings were reported by the Cybercast News Service (CNS) in a series of stories in March. Doug Cogan, director of IRRC's Tobacco Information Service, told CNS that even beyond the investments--Texas alone put $10 million into tobacco stocks--very few tobacco-settlement dollars were being spent on preventing tobacco use. Cogan puts the figure at as little as 5 percent. (The General Accounting Office estimated last year that 7 percent of the settlement was being used for prevention programs.)

According to the terms of the settlement, 46 states will receive $206 billion from tobacco companies over the next 25 years, with no stipulation as to how the funds will be spent. Because some 95 percent of this money is being poured into general revenues, the states have actually become invested in the financial well-being of the companies.

Bob Levy, a...