Friday, September 28, 2012

Potential Elimination of Early Childhood Programs in Kansas Demonstrates Folly of Tying Program Funding to Cigarette Revenues

Rather than spend the money on tobacco-related programs, as it was originally intended, most states have been diverting money from the Master Settlement Agreement to fund other essential government programs, plugging budget shortfalls and avoiding having to find other sources of revenue. As a result, I have been arguing that the Master Settlement Agreement was a public health disaster because it tied state fiscal solvency to continued high levels of cigarette consumption. If cigarette consumption falls substantially, then funding for essential government programs evaporates.

Yesterday, the Kansas City Star reported that the bulk of funding for early childhood programs in Kansas may go up in smoke because of an expected decrease in cigarette company revenues from the Master Settlement Agreement.

According to the article: "The Kansas Children's Cabinet and Trust Fund, which promotes early-childhood programs in the state, has been warned that it could lose up to 75 percent of its budget next year because of a drop in money from a national lawsuit against tobacco companies. Amanda Adkins, chairwoman of the cabinet, told the board Wednesday to prepare two recommendations — one that would assume the group would continue to receive $56 million in tobacco funds, with a second assuming it would receive only $12 million, The Topeka Capital-Journal reported. "That is just the hard reality in which we find ourselves," Adkins said. Kansas and 30 other states are currently in arbitration over provisions in the tobacco case settlement, leading to speculation that funding for the trust will be cut." ...

"The cabinet receives its funding from a 1998 settlement with major tobacco companies. One of the provisions of that settlement required states to force smaller cigarette manufacturers to pay a $6 per carton fee to keep them from undercutting the bigger companies. The major manufacturers contend the states haven't enforced that agreement."

The Rest of the Story

This story illustrates the brilliance of the Master Settlement Agreement (from the perspective of the cigarette companies). The states are now fiscally dependent on a steady stream of cigarette revenues. Any substantial drop in cigarette smoking threatens the state's fiscal situation. Thus, there is no incentive to take any action that will substantially reduce cigarette sales. Perhaps this is why we haven't seen many major anti-tobacco initiatives at the state level since the Master Settlement Agreement was signed. We've seen mostly minor initiatives that dilly dally around the margins, but very few which actually aim to put a major dent in cigarette sales.

Big Tobacco could not have scripted a happier (more favorable) ending to the Master Settlement Agreement saga. If they had sat down and tried to figure out a way to institutionalize tobacco consumption and to find a way to make the states become dependent upon tobacco sales for their economic survival, they could not have come up with a better scheme than this.

Out of their greed for political and economic gain, the Attorneys General have done a tremendous service for the tobacco companies. They have created a financial partnership between their states and Big Tobacco, by which the fiscal solvency of the states depends on continued high levels of cigarette consumption. They have destroyed the incentive for states to take any action that might substantially reduce cigarette use.

This explains why so few states are running effective tobacco control programs, why so few states are allocating their MSA money to anti-tobacco programs, and why Congress (aiming to protect the states they represent) crafted tobacco legislation that does very little to actually make a dent in cigarette consumption

In direct contrast to what the Attorneys General predicted, the Marlboro Man isn't riding into the sunset on Joe Camel. Instead, they're both having a beer and a good laugh together as they enjoy their trip to the bank.

No comments: