States Quietly Defunding Anti-Smoking Programs For Kids

Only 2 cents of each tobacco settlement dollar goes to smoking prevention plans.

If there’s one thing we know about smoking, it’s that for every smoker who quits, we gain a net financial benefit. These health cost savings can be huge for states, which is why all of them have put in place smoking cessation plans and programs for their citizens. And they are able to run this programs because of the monies that come to them under the 1998 master tobacco settlement.

Perhaps it doesn’t come as a huge surprise, but it’s depressing, all the same: The Campaign for Tobacco-Free Kids estimates that states will spend less than 2 per cent of these court-mandated funds on actual programs to prevent kids from smoking. The report accuses the states of failing to reverse budget cuts to “programs that have set back the nation’s efforts to reduce tobacco use.”

The report was undertaken to access whether states have been using the estimated $246 billion over 25 years—plus cigarette taxes—to reduce tobacco use. What they found was that “states have failed to reverse deep budget cuts that reduced funding for tobacco prevention by 36 percent” from 2008 to 2012. Only North Dakota and Alaska are currently funding smoking cessation programs at the level recommended by the Centers for Disease Control and Prevention (CDC). Four states—New Hampshire, New Jersey, North Carolina, and Ohio—have allocated ZERO funds for tobacco prevention programs in FY 2013.

“Given such a strong return on investment,” the report concludes, “states are truly penny-wise and pound-foolish in shortchanging tobacco prevention and cessation programs.” The report declined to speculate on where the money actually goes, but noted that this was the “second lowest amount states have spent on tobacco prevention programs since 1999, when they first received tobacco settlement funds.”

The cries of outrage came thick and fast:

“The states have an obligation to use more of their billions in tobacco revenues to fight the tobacco problem. Their failure to do so makes no sense given the evidence that tobacco prevention programs save lives and save money by helping reduce health care costs."—Matthew L. Myers, President of the Campaign for Tobacco-Free Kids

"States with comprehensive tobacco control programs experience faster declines in cigarette sales, smoking prevalence and lung cancer incidence and mortality than states that do not invest in these programs."—John R. Seffrin, CEO of the American Cancer Society Cancer Action Network

"The paltry amount of money that states spend on tobacco prevention and cessation programs is extremely disappointing…. These programs work and it’s time for states to put more skin in the game."—Nancy Brown, CEO of the American Heart Association

"Too many states are failing their citizens by abandoning their responsibility to invest in proven programs that prevent people from smoking and help smokers quit…. Supporting these programs at recommended levels is not only the right thing to do, it's the smart thing to do — quitting smoking or never starting saves lives and saves money."—Paul G. Billings, senior vice president of Advocacy & Education at the American Lung Association

In 2007, the CDC concluded: “We know how to end the epidemic. Evidence-based, statewide tobacco control programs that are comprehensive, sustained, and accountable have been shown to reduce smoking rates, tobacco-related deaths, and diseases caused by smoking.”

Two cents on every dollar. About 20 percent of Americans smoke. “Tobacco companies spend more than $18 to market tobacco products for every one dollar the states spend to reduce tobacco use.” What’s wrong with this picture?

Photo Credit: http://www.tobaccofreekids.org

Tobacco Industry Loses Crucial Court Case

Jury awards $8 million to widow of addicted smoker.

In a court decision that attorneys for Philip Morris called “profoundly flawed,” a Florida jury last week awarded $8 million to the widow of a man who died of lung cancer, ruling that nicotine addiction was the cause of his death.

Attorneys for Altria, the parent company of Philip Morris, argued in Hess v. Philip Morris USA that the deceased man had been fully aware of the dangers of smoking, and had been fully capable of quitting, had he chosen to do so.

Philip Morris will most certainly lodge an appeal, given that the closely-watched “Hess case” is the first of an estimated 8,000 similar cases filed in Florida in the wake of a class-action suit against cigarette makers in 1994. In 2006, the class-action suit was overturned by the Florida Supreme Court, which ruled that smokers had to prove in individual court cases that cigarettes were the immediate cause of their health problems.

Attorneys for the widow, Elaine Hess, argued that Philip Morris sold cigarettes that were “defective and unreasonably dangerous,” according to a Miami Herald report by Patrick Danner. Phillip Morris attorneys argued that smoking had simply been a “lifestyle choice” for Stuart Hess. Hess, the tobacco lawyers asserted, voluntarily chose not to follow the advice of family members and doctors, who told him to quit smoking.

According to the Miami Herald report, Hess “tried various means to quit smoking, including hypnosis, Nicorette gum and even going cold turkey. But all of his attempts failed.”

While technically the Hess case has no bearing on the individual court cases to come, attorneys said it was expected to serve “as a template for the other cases,” Danner wrote in the Herald article. Murray Garnick, a senior vice president and associate general counsel for parent company Atria, said in a press release that the verdict was the result of “an unconstitutional and profoundly flawed trial procedure. Fundamental fairness requires the plaintiff to establish basic liability before a jury can award damages.”

Photo Credit: http://snus-news.blogspot.com/2008_01_06_archive.html

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Tobacco Settlement Turned Upside Down

“Tobacco bonds” link state budgets to cigarette sales.

Bob Sullivan of MSNBC reports that ten years after a group of states wrestled Big Tobacco to its knees in a $200 billion settlement, the creation of “tobacco bonds” by Wall Street has allowed investors and state governments to borrow against their future tobacco settlement payments. The result? Money that was to be paid out over the next thirty years for smoking cessation programs is being redirected into infrastructure projects and shoring up municipal credit.

“A review of 660 leading bond funds covered by the investment research firm Morningstar Inc., conducted at msnbc.com’s request, showed that more than 260 are invested in tobacco bonds,” Sullivan writes on his blog, The Red Tape Chronicles.

What, you may well ask, are tobacco bonds, and where did they come from? “Perhaps from you,” Sullivan writes. “When Wall Street talked 25 states into borrowing against future tobacco payments—a process known as ‘securitization’—it sold bonds to individual investors and mutual funds that buy municipal bonds.”

The irony of that approach, says Sullivan, is that “because these states have essentially borrowed against future payments from the tobacco industry, they are now dependent on the continued vitality of cigarette sales. If Big Tobacco stumbles, states will be on the hook for these massive, billion-dollar loans.” As a lawyer involved in litigation over the tobacco settlement put it to Sullivan: “Now [the states] have an incentive not to put tobacco out of business.” More than that, any significant failure by the tobacco industry to make its payments would be “catastrophic both to state budgets and individual investors.”

It wasn’t supposed to be this way. But the settlement from the lawsuit designed to blow up Big Tobacco was just too attractive to investment bankers. Sullivan notes that Oppenheimer’s Rochester family of bond funds includes funds with up to 20 per cent of assets held in tobacco bonds. The lure to the states was that, rather than waiting for the money, they could opt for an attractive lump sum payment up front. And many states did just that.

The problem, according to a tobacco policy researcher quoted on Sullivan’s blog, is that “the states have this horribly naive view that they will outsmart Wall Street. Wall Street always gets the better deal.” Many states have settled for a payout of 50 cents on the dollar, plus additional insurance fees against the risk of tobacco companies going out of business.

Eric Lindblom, a director of the Campaign for Tobacco-Free Kids, told Sullivan: “There is a horrible failure of the states to invest even a minuscule amount of the funds for tobacco control. It’s a real tragedy for our country.”

Roughly 3 per cent of tobacco settlement money has been paid out for smoking cessation efforts over the decade since the settlement, Sullivan writes.

Photo Credit: www.treasury.state.la.us

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