Student Well-Being

States Covet Tobacco Bounty for Education

By Jessica L. Sandham — February 24, 1999 5 min read

Schools and students in a handful of states may receive an unexpected boon from the $206 billion settlement that 46 states secured last November with the nation’s five largest tobacco companies.

Though states won’t be able to tap their shares of the bounty until June of next year, some lawmakers are considering passing legislation this spring that would earmark the money for specific purposes. So far, most proposals would use it to initiate or beef up smoking- and health-related programs. But legislators in some states say part of the money would be better spent on education.

In Colorado, for example, Gov. Bill Owens has proposed routing 40 percent of the state’s estimated $2 billion payoff, or about $760 million over the settlement’s 25-year repayment period, to no-interest loans for school construction and repairs in needy districts and to new reading programs for elementary students.

“This is an historic opportunity to take care of some of our more glaring education problems,” said Dick Wadhams, the Republican governor’s spokesman. “We think it’s a sound plan.”

Maryland, Michigan, and Oklahoma are a few of the other states considering plans to put the tobacco money toward school programs. Despite their proponents’ good intentions, though, the proposals are raising concerns in some states about the wisdom of shifting settlement funding from health-related projects.

When Gov. Owens outlined his settlement-spending plan this month, the first-term chief executive veered from a campaign pledge he signed last October promising to direct any money the state received from the settlement to public-health programs.

At the time he made the pledge, Mr. Owens thought states were required to spend the settlement on such programs, Mr. Wadhams said. Ultimately, however, the new Colorado governor decided it would be “redundant” to spend the money on anti-smoking efforts he believed would be taken up by the federal government.

Under Mr. Owens’ package, in addition to the 40 percent for school construction and reading, 20 percent of the settlement would be used to provide health insurance for low-income children, and 30 percent would be invested in a trust fund to pay for the education and insurance programs even after the tobacco funds dry up. Ten percent would be left for unspecified programs.

Colorado’s health advocates say that while they like certain aspects of the plan, they’re disappointed that the proposal would allocate nothing to smoking-prevention efforts. Because the state lawsuits that resulted in the huge settlement were geared toward recouping some of the past and future expenses of caring for those with smoking-related illnesses, they contend that lawmakers ought to devote at least part of the payoff to preventing others from picking up the habit.

“This is our opportunity to do things for tobacco and health care,” said Michael Huttner, the director of government affairs for the American Heart Association of Colorado, the group that sponsored the pledge Mr. Owens signed last fall.

Mr. Huttner added that he would support a proposal that would pair health and education interests by designating money for anti-tobacco and other health programs in schools. “Instead of having us pitted against each other, that would be a great way to work together,” he said.

Michigan Scholarships

Health groups in Michigan have similar complaints. There, Republican Gov. John Engler has proposed using a substantial portion of the state’s estimated $8 billion share of the settlement to endow a trust fund that would offer up to $3,000 in college-scholarship money to each student scoring at top levels on the state assessments in reading, writing, mathematics, and science. Students could use the scholarships to attend any college in Michigan.

John Truscott, the governor’s spokesman, said the state already spends 6 percent of its tobacco tax, or roughly $35 million a year, on the types of anti-smoking and health-related programs that other states are hoping to start with the settlement money.

“We’re farther ahead than most states” in providing smoking-cessation programs, Mr. Truscott argued. “And education is our top priority, so that’s how we ended up with the proposal.”

But Jim Moore, the director of programs for the state branch of the American Lung Association, countered that Michigan ought to invest at least $75 million in trying to stop a problem that he said costs it far more every year.

“Our concern is that the merit-scholarship program not take all of the [settlement] money,” Mr. Moore said. If smoking-prevention efforts fail to receive adequate funding, “in 25 years, we’ll end up in the same place,” he added.

Settlement Uncertain

Even as state lawmakers, health advocates, and education proponents dicker over how best to cut up the tobacco pie, they all agree on who does not deserve a slice: the federal government.

President Clinton signaled in his State of the Union Address that he intends to pursue tobacco-industry payments for the federal government as well. Because smoking-related expenses run up Medicaid bills and the federal government pays for at least half the Medicaid expenses in every state, Mr. Clinton contends that the government is also entitled to reimbursement. Exactly how the administration intends to pursue such funding is unclear.

But Sen. Kay Bailey Hutchison, R-Texas, introduced legislation in Congress this month that would block the federal government from taking any portion of the money states obtain through the tobacco settlement.

In Oklahoma, several legislators, along with Gov. Frank Keating, have proposed using a large chunk of their estimated $2 billion share of the settlement to rescue the state’s underfunded teacher-retirement fund. Even so, “it’s hard to plan for something we don’t have yet,” said Rick Buchanan, a spokesman for the Republican governor.

Likewise, Democratic Gov. Parris N. Glendening has dubbed his proposal for Maryland’s estimated $4.4 billion share of the settlement a “wish list” that would include money for class-size reduction, the Head Start program, children’s health initiatives, and smoking-cessation programs.

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A version of this article appeared in the February 24, 1999 edition of Education Week as States Covet Tobacco Bounty for Education


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