Why children’s advocates worry about future tobacco settlement payments
Topeka ? For the past week or so, visitors coming into the Kansas Statehouse through the public entrance are greeted with a poster display stretched out along the main corridor, touting the benefits of a program called the Children’s Initiative Fund.
But those posters were not put there by any state agency connected to the fund. Instead, they are the work of Kansas Action for Children, a group that lobbies for early childhood education and children’s health and welfare programs.
What many visitors may not know, and might even find ironic, is that the fund in question is actually money the state receives from tobacco companies. And the reason why the posters are there is to drum up opposition to Gov. Sam Brownback’s proposal to sell off the state’s interest in future tobacco payments in exchange for a lump sum that can be used to plug holes in the state budget for the next two years.
“It is disappointing that Governor Brownback is doubling down on his efforts to dismantle the Children’s Initiatives Fund, yet he’s still completely unwilling to consider fixing the cause of our fiscal problems….which is failed tax policy,” KAC said in a statement in response to the Brownback administration’s budget proposal. “Kansas kids didn’t create this budget crisis, and they shouldn’t be forced to pay for it.”
In point of fact, though, using tobacco payments as a dedicated source of funding for children’s programs was a controversial move when lawmakers decided to do it in 1999. But because that program has been in place so long, today there are few lawmakers still around who remember why it was done.
In the 1990s, Kansas and most other states joined in a lawsuit against the tobacco industry, claiming that the marketing of tobacco products, and cigarettes in particular, had cost them billions of dollars in health care costs over the years, mainly in the form of Medicaid costs for low-income people with smoking-related illnesses.
The lawsuit dragged on for a number of years and was finally settled in 1998 with the signing of what was called the Master Settlement Agreement.
In that agreement, the major tobacco companies agreed to change their marketing practices by, among other things, halting the use of cartoon characters like “Joe Camel” that targeted children, and to stop advertising on outdoor billboards and signs on buses and subway cars.
But the key to the settlement was an agreement to pay the states roughly $10 billion a year for an indefinite length of time to compensate states for their tobacco-related health care costs.
The money is distributed among the states based on a formula using several factors such as population and smoking rates.
As of June 2016, according to Attorney General Derek Schmidt’s office, Kansas had collected just over $1 billion in settlement payments. In recent years, they have averaged around $60 million a year.
But despite the fact that the legal reason for the payments was to compensate states for smoking-related health care costs, few states have used the settlement money for that purpose, and Kansas was no exception.
In 1999, Kansas lawmakers decided to earmark the vast majority of the money for children’s programs.
“Bill Graves (a Republican) was governor at the time, and I think there was just a general consensus that we needed to do better in terms of early childhood education,” said Senate Democratic Leader Anthony Hensley of Topeka, one of the few remaining lawmakers who was in office at that time.
“I know at that time the House Minority Leader was Jim Garner (D-Coffeyville) and he was a real champion of that cause, and that’s what we did. That’s the decision we made,” Hensley said.
Public health and anti-smoking groups, however, were harshly critical of the decision in Kansas and elsewhere to steer the tobacco money away from health programs and anti-tobacco campaigns.
According to the national Campaign for Tobacco-Free Kids, states are expected to receive $26.6 billion in tobacco payments this year, but only 1.8 percent of that — less than half a billion dollars — will be used for smoking cessation and prevention programs. That’s a small fraction of the $9.1 billion that tobacco companies spend each year marketing their products, the organization said.
In Kansas, the group said, smoking prevention and cessation programs get less than $1 million in funding, which ranks the state 41st in the nation in that category. That compares to the $77.7 million that tobacco companies spend on marketing in Kansas.
“It’s about 2 percent of what the (Centers for Disease Control and Prevention) recommends for effective tobacco prevention and control,” said Hilary Gee, who lobbies in Kansas for the American Cancer Society’s Cancer Action Network.
Brownback budget plan
In his budget plan, Gov. Brownback is proposing to sell off the state’s future payments for a lump sum, estimated at about $530 million. Half of that would go into the budget for the fiscal year that begins July 1; the other half would be used the year after that.
To accomplish that, Budget Director Shawn Sullivan told lawmakers, the state would issue 30-year bonds that would be backed by its future tobacco payments. He estimated the cost of repaying those bonds at about $45 million a year.
That would effectively put an end to the Children’s Initiatives Fund, but the administration says programs currently funded through the CIF would instead be funded through the state general fund.
That idea has many advocates worried because it would mean children’s programs now receiving dedicated CIF money would suddenly have to compete for funding with all the other programs funded with general tax dollars, including K-12 and higher education, public safety, and other social service programs, including Medicaid.
Officials at Kansas Action for Children did not respond to requests for additional comment beyond their press statement Wednesday.
Gee said the American Cancer Society opposes selling off the tobacco payments, despite the fact that very little of it is used for smoking cessation and prevention.
But her group does support one of Brownback’s other proposals, raising cigarette taxes.
“A much smarter solution to part of the state’s budget situation would be a significant increase in the tax on cigarettes and other tobacco products,” she said. “Not only does it bring in revenue, but it also has substantial health benefits.”
Brownback has proposed raising cigarette taxes by $1 per pack. The American Cancer Society, Gee said, would like to go even further, to $1.50 per-pack in additional cigarette taxes.