State and Local Issues

Tobacco Settlement Bonus Payments

A Second Chance to Fund Tobacco Prevention

The 1998 state tobacco settlement — and the billions of dollars in revenue it provides each year — presented the states with an unprecedented opportunity to attack the enormous public health problem posed by tobacco use in the United States. Unfortunately, too many states have squandered this opportunity and failed to use their settlement funds — and additional billions of dollars they collect annually in tobacco taxes – to fund tobacco prevention and cessation programs at even the minimum levels recommended by the U.S. Centers for Disease Control and Prevention (CDC).

Now states officials have a second chance to keep the promise of the tobacco settlement and adequately fund programs to prevent kids from starting to smoke and help smokers quit.

Beginning in 2008, the 46 states, the District of Columbia and the U.S. territories that are party to the 1998 tobacco settlement (the Master Settlement Agreement) will receive "bonus settlement payments" totalling almost a billion dollars per year. The bonus payments are mandated by the terms of the settlement and will continue for at least 10 years.

States have no excuse for failing to utilize their growing tobacco-generated revenue to fund tobacco prevention and cessation programs:

  • Tobacco use remains the nation's leading preventable cause of death, killing 480,000 Americans each year and costing at least $289 billion annually in health care bills and other economic losses.

  • Every state has plenty of tobacco-generated revenue to fund tobacco prevention and cessation programs at CDC-recommended levels.

  • The states have more evidence than ever before that tobacco prevention and cessation programs work to reduce smoking, save lives and save money by reducing tobacco-caused health care costs.

The tobacco settlement bonus payments present the states with a second chance to make the 1998 state tobacco settlement a historic turning point in the battle to reduce tobacco's terrible toll.

Updated Feb. 27, 2014