On 10th Anniversary of 1998 Tobacco Settlement, Report Finds Most States Fail To Adequately Fund Tobacco Prevention Programs

States Have Spent Only 3 Percent of Tobacco Revenues to Fight Tobacco Use

Nov. 18 2008

Washington, DC — Ten years after reaching more than $246 billion in legal settlements against the tobacco industry, the states have failed to keep their promise to spend a significant portion of the money on programs to protect kids from tobacco and help smokers quit, according to a report released today by a coalition of public health organizations.

Key findings of the report include:

  • Over the past 10 years, the states have received $203.5 billion in tobacco-generated revenue — $79.2 billion from the tobacco settlement and $124.3 billion from tobacco taxes. But they have spent only 3.2 percent of their tobacco money — $6.5 billion — on tobacco prevention and cessation programs.
  • This year, no state is funding tobacco prevention programs at the levels recommended by the U.S. Centers for Disease Control and Prevention. Only nine states are funding tobacco prevention at even half the CDC-recommended amount, and 27 states are providing less than a quarter of the recommended funding. (Beginning in fiscal 2010, North Dakota will fund its prevention program at the CDC-recommended level as a result of a state ballot initiative approved on November 4.)
  • The limited restrictions on tobacco marketing imposed by the tobacco settlement have failed to curtail the tobacco industry’s ability to aggressively market its products. Annual tobacco marketing expenditures have increased by 94 percent, from $6.9 billion in 1998 to $13.4 billion in 2005, the most recent year for which the Federal Trade Commission has reported such data. The tobacco companies spend nearly $19 to market tobacco products for every $1 the states spend to prevent kids from smoking and help smokers quit.

The report, titled "A Decade of Broken Promises: The 1998 State Tobacco Settlement Ten Years Later," was released by the Campaign for Tobacco-Free Kids, American Heart Association, American Cancer Society Cancer Action Network, American Lung Association and Robert Wood Johnson Foundation.

The 10th anniversary of the settlement comes as recent surveys have shown that the nation has made significant progress in reducing smoking in the past decade, but smoking declines have slowed in recent years. From 1997 to 2007, smoking rates declined by 45 percent among high school students and by 20 percent among adults. But 20 percent of high school students and 19.8 percent of adults still smoke, and tobacco use remains the nation’s leading cause of preventable death, killing more than 400,000 people and costing nearly $100 billion in health care expenditures each year.

"Ten years after the state tobacco settlement, we are at a crossroads in the fight against tobacco use and its devastating consequences," said Matthew L. Myers, President of the Campaign for Tobacco-Free Kids. "If Congress and the states show the political will to implement proven solutions, we will win one of the most significant public health victories in our nation’s history. If they fail to do so, it will be a tragic missed opportunity for the nation’s health."

To accelerate declines in tobacco use — and eventually eliminate the death and disease it causes — the report calls on Congress and the states to follow the recommendations of recent landmark reports by the Institute of Medicine and the President’s Cancer Panel:

  • Congress should enact legislation granting the U.S. Food and Drug Administration authority to regulate the manufacturing, marketing and sale of tobacco products. The U.S. House of Representatives on July 30 voted 326 to 102 to approve this legislation, and it has 60 sponsors in the Senate, including President-elect Barack Obama and Senate Majority Leader Harry Reid.
  • Congress should also significantly increase the federal tobacco tax and utilize some of the revenue to fund a national public education and smoking cessation campaign.
  • The states should fund tobacco prevention programs at CDC-recommended levels, further increase tobacco taxes and enact comprehensive smoke-free workplace laws (24 states and the District of Columbia have enacted such laws to date). The CDC has estimated that if each state sustained the recommended level of funding for tobacco prevention and cessation programs for five years, five million fewer people would smoke in the U.S., and hundreds of thousands of premature deaths would be prevented.

"The nation’s challenge today is to resist complacency and stay focused on reducing tobacco use. The good news is that we have the evidence and we know what to do," said Risa Lavizzo-Mourey, M.D., M.B.A., President and CEO of the Robert Wood Johnson Foundation. " Making all workplaces smoke-free, increasing taxes on tobacco products, funding prevention programs at recommended levels and helping smokers quit will help get us to the goal that the Institute of Medicine has set for us — to eliminate tobacco use as one of the most pressing public health problems in the United States."

"When states properly fund tobacco prevention programs, the return on investment is undeniable," said John R. Seffrin, PhD, national chief executive officer of the American Cancer Society Cancer Action Network. "This is a golden opportunity to stop addiction before it starts for generations to come. State governors and legislators need to make every effort to seize this resource and apply it to programs that not only prevent disease and death, but also save money by lowering tobacco-related health care costs."

"This report underscores the need for state officials to take a hard look at the devastating impact of tobacco use in their own communities," said M. Cass Wheeler, CEO of the American Heart Association. "They must reassess their priorities and use the money for what it was originally intended — to fund prevention and cessation programs and break the cycle of addiction."

"In these economically challenged times, states cannot afford to misuse tobacco settlement funds," said Bernadette Toomey, President and CEO of the American Lung Association. "The crushing financial burden each state must carry to address the very real costs associated with tobacco-related death and disease will only diminish when smoking rates begin to decline. Yet, the bitter reality is that states are not using the money for what it was intended."

On Nov. 23, 1998, 46 states settled their lawsuits against the major tobacco companies to recover tobacco-related health care costs, joining four states (Mississippi, Texas, Florida and Minnesota) that had reached earlier, individual settlements. The settlements require the tobacco companies to make annual payments to the states in perpetuity, with total payments estimated at $246 billion over the first 25 years.

The states also collect billions of dollars each year in tobacco taxes. Since the tobacco settlement, 44 states and the District of Columbia have raised cigarette tax rates 90 times, increasing the average state cigarette tax from 39 cents to $1.19 per pack today. Raising cigarette prices is one of the most effective ways to prevent kids from smoking and encourage smokers to quit.

This year alone, the states will collect $24.6 billion in revenue from the tobacco settlement and tobacco taxes, but will spend less than three percent of it on tobacco prevention programs. It would take just 15 percent of this tobacco revenue to fund tobacco prevention programs in every state at CDC-recommended levels.

(NOTE: The CDC recently updated its recommended funding for state tobacco prevention programs, taking into account new science, population increases, inflation and other cost factors. In most cases, the new recommendations are higher than previous ones. This report is the first to assess the states based on these new recommendations.)