States Devoting Tobacco Money To Education

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As states wrap up plans to spend their shares of the giant multistate settlement with the nation's top tobacco companies, schools and students are coming out winners.

Not surprisingly, states are devoting the bulk of the $206 billion settlementwhich was designed to help them recoup the medical costs associated with treating tobacco-related diseasesto various health programs. But many lawmakers are also taking advantage of the fact that the 46-state settlement comes without strings attached, and are sharing the windfall with schools.

At least 18 states have already enacted legislation ensuring that some money from the 1998 legal settlement will be spent on education, and legislatures in another five states are considering similar measures.

"The master-settlement agreement did not put any limits on how these dollars could be used," noted Lee Dixon, the director of the health-policy tracking service for the Denver-based National Conference of State Legislatures. "The case could be made that states would have liked to have put more money into education during the '90s, but weren't able to do it because of the demands on them to fund health programs related to tobacco diseases. So, now this is an opportunity to correct that imbalance."

Although many states put in place general guidelines last spring for how the money from the settlement of the tobacco litigation would be used, most nailed down the specific allocations only during their recent budget proceedings.

All but three states received their first payments from the tobacco companies in December under the 25-year agreement. Payment has been delayed in Arkansas, Missouri, and Tennessee because of court challenges to the settlement decrees in those states.

Source of Scholarships

One place where students will benefit notably from the settlement is Michigan. Some 37,000 high school seniors there were notified last month that their fall tuition bills for college would be significantly reduced because of a state scholarship program that rewards students who perform well on state tests taken in 11th or 12th grade.

The legislature agreed last spring to spend 30 percent of Michigan's share of the tobacco settlement on the scholarship program in 2000-01, 50 percent the following year, and 75 percent every year thereafter. Although the state's total share of the settlement proceeds was estimated to be roughly $8.5 billion in 1999, the figure is expected to change over the years based on inflation rates, as well as rates of cigarette production for domestic consumption.

The Michigan program gives one-time, $2,500 awards to qualified seniors who will attend in-state postsecondary institutions, and $1,000 awards to students attending college out of state. In addition to making highereducation more affordable, the scholarship program gives students an incentive to do well on state tests, thereby increasing the possibility that state education officials will get a more accurate picture of how schools and districts are performing, said Susan Shafer, a spokeswoman for Gov. John Engler, a Republican.

But some legislators and others criticized the state for putting no new money into anti-smoking education programs. In a state where teenage smoking is on the rise, and spending on anti-tobacco programs ranks 44th out of 50 states, it is irresponsible for lawmakers not to devote any of the settlement money to the problem, said Rep. Mark Schauer.

"We're missing an opportunity to save millions of dollars in the future by not investing in prevention programs," argued Mr. Schauer, a Democrat. "And there are other educational programs we could invest in that would have a better payoff than $2,500 scholarships that are going to wind up helping affluent students most."

Nevada legislators also opted to spend 40 percent of their state's $1.2 billion settlement proceeds on scholarships to in-state schools, with 10 percent going to early-childhood-development programs, 10 percent to programs aimed at preventing tobacco use, and the remainder to health-care programs. In Louisiana, some of the interest from a trust fund the state set up with the tobacco money will also be applied to tuition support.

Buildings To Benefit

Ohio, too, is allocating a significant portion of its $9.9 billion settlement to schools. Lawmakers there agreed to devote an estimated $2.42 billion to building and repairing school facilities over the next 12 years, and another $2 billion for fiscal 2012 through fiscal 2025. The money is one part of a broader $10.2 billion, 12-year plan for school repair and construction outlined by Gov. Bob Taft last fall.

In a decision last month, Ohio's supreme court praised the governor for his proposal to put new money into school construction and repairs, but nonetheless ruled that the state still had not met a 1997 court mandate to provide a "thorough and efficient" system for schools that did not rely so heavily on property taxes.

Mr. Taft unveiled his proposal in December, at a time when the state justices were still considering the case. Some observers said the plaudits from the court—made possible in part by the availability of the settlement money—softened the overall impact of a ruling that otherwise represented a rebuke to state policymakers' efforts to comply with the court.

"The money came together at a time that we really needed it," said Scott Millburn, a spokesman for the Republican governor.

William L. Phillis, the executive director for Ohio Coalition of Equity and Adequacy in School Funding, the group representing the plaintiffs in the long-running court case, said that the tobacco money may have been a "godsend" for lawmakers trying to avoid a tax increase, but that it will not by itself cover the state's school facilities needs.

"It's a good use of the money, but it obviously does not solve the facilities problem," Mr. Phillis said.

Lawmakers in some states, including Kansas, Maryland, and Maine, decided to divvy up the settlement money among a wide variety of health and education programs.

Trust Funds Popular

The Kansas legislature decided last year to put nearly all of the state's $3.5 billion in payments into a trust fund that could be used only for programs that benefit the health and well-being of children. For the coming fiscal year, the legislature spent $10.9 million from the trust fund on various education initiatives, including school-violence-prevention grants for designated districts, a program encouraging more parental involvement in schools, and an early-childhood- education program for disadvantaged 4-year-olds.

The education spending was intentionally allocated to new programs that address needs outside of those currently handled through the public schools, said Duane A. Goossen, the state budget director.

"There's a variety of opinion in the legislature about whether programs administered directly through the department of education really fit the spirit of children's programming," Mr. Goossen said. "So there's no new general money for public education. Even though our law technically allowed it, we tried to stay away from it because there would be strong objections to it."

Maine lawmakers also created a trust fund with their state's $1.5 billion share of the settlement. And while most of the money is allocated for health-care-related programs, the legislature did opt to earmark $9.5 million in fiscal 2001 for preschool, childhood-development, and Head Start programs.

Kentucky legislators also decided to devote 25 percent of their $3.5 billion in proceeds to early-childhood education. Likewise, in Maryland, state leaders earmarked $7 million in settlement funds for early- childhood education for fiscal 2001, while $35 million was set aside to raise teachers' salaries. Maryland is also devoting $9.3 million of the funds to a teacher-mentoring program, $6 million for aid to nonpublic schools, and almost $4 million to upgrade technology in schools.

Resources Go to Reading

In Colorado, meanwhile, lawmakers approved Gov. Bill Owens' plan to devote 20 percent of the state's $2.7 billion in tobacco money, or up to $20 million a year, to grants for before-school, after-school, and summer programs for 2nd, 3rd, and 4th graders who read below grade level. The Read to Achieve program is designed to make a dent in figures showing that fully one-third of the state's 3rd graders are not reading at grade level, as measured by state assessments, said Terri Rayburn, the governor's senior education analyst.

"The governor was so committed to it that people knew that any bill dealing with the tobacco settlement had to have Read to Achieve in it or he wouldn't sign it," Ms. Rayburn said.

Among the other states that have approved or are considering using some tobacco-settlement proceeds for education programs:

  • Alabama is devoting at least $60 million annually— from a $3.17 billion total settlement—to programs that serve at-risk children and juvenile offenders.
  • Connecticut lawmakers last year committed $58.7 million in tobacco money over two years to pay for a tuition freeze at the state university.
  • New Hampshire legislators last year appropriated $40 million from their total $1.2 billion settlement to a trust fund for education.
  • New Jersey Gov. Christine Todd Whitman, a Republican, has proposed devoting $100 million from the tobacco settlement to school repairs and construction in fiscal 2001. The state's total settlement is approximately $7.6 billion. Lawmakers have not yet acted on the governor's proposal.
  • New York City, which will receive almost 27 percent of the state's total $25 billion share of the tobacco money, plans to issue $2.5 billion worth of bonds backed by settlement funds over the next four years to raise money to build and repair schools. The city issued its first such bonds, worth approximately $709 million, in November.
  • North Dakota's legislature established a trust fund last year for that state's $718 million in payments and committed 45 percent of the funds to schools.
  • Oklahoma will devote one-third of its $2 billion total settlement to shoring up the state's teacher- retirement fund.

Vol. 19, Issue 41, Pages 22, 28

Published in Print: June 21, 2000, as States Devoting Tobacco Money To Education
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