O’Bannon Administration Lets Down Indiana’s Kids and Taxpayers by Cutting Funding for State’s Tobacco Prevention Program

Washington, D.C. — Just months after Indiana was recognized as a new national leader in protecting kids from tobacco, the O'Bannon Administration has delivered a one-two punch that threatens the future of the state's tobacco prevention program just as it is getting to full speed. The Administration has cut $20.6 million from the $25 million the Legislature appropriated for the program in Fiscal Year 2003, leaving just $4.4 million. It has also proposed trading nearly half of the state's future tobacco settlement payments for a much smaller lump sum payment up front, which will reduce the amount of settlement dollars available for tobacco prevention and other vital health programs in the future. These are penny-wise, pound-foolish proposals that let down Indiana's kids and taxpayers and will cost the state far more in the long run. If these cuts are not reversed, more Indiana kids will become addicted to tobacco, more Indiana residents will die of tobacco-caused disease, and Indiana's taxpayers will pay more to treat tobacco-caused disease.

Until now, Governor Frank O'Bannon has been a champion in protecting Indiana's kids from tobacco. A national report released in July by the American Cancer Society, American Heart Association, American Lung Association and Campaign for Tobacco-Free Kids ranked Indiana sixth in the nation in its funding of tobacco prevention. The report found that Indiana is one of only a few states that have kept their promise to use tobacco settlement money to fund a comprehensive tobacco prevention program based on the recommendations of the U.S. Centers for Disease Control and Prevention (CDC). The Administration's latest plans break this promise. We urge Governor O'Bannon to maintain his commitment to Indiana's kids and restore full funding for tobacco prevention. We look forward to working with him to do so, and we are also prepared to work to aggressively fight these cuts with others in Indiana who are committed to the health of Hoosier children.

The Administration's proposal would bring Indiana's innovative tobacco prevention program to a screeching halt just as it is delivering services and benefits throughout Indiana. The program is helping to prevent kids from starting to smoke and helping adults to quit through media messages and community and school programs in almost every Indiana county. If Indiana stays the course, the experience of other states with comprehensive tobacco prevention programs tell us it will dramatically reduce smoking among both kids and adults, save lives and save money for taxpayers. Studies have shown that states can save as much as $3 in smoking-caused health costs for every dollar spent on tobacco prevention.

We are also concerned about the Administration's proposal to securitize, or sell to investors, 40 percent of the state's future tobacco settlement proceeds for a much smaller lump sum payment up front. This one-time budget gimmick will leave the state with far less tobacco settlement money for tobacco prevention and other purposes in the future, would cash in the settlement for pennies on the dollar, and could cost Indiana taxpayers even more by harming the state's credit rating. According to a story in the November 29, 2002, issue of The New York Times, five states that have securitized their tobacco settlement proceeds have had their credit ratings lowered by the three main credit agencies or have been placed on alert about the possibility. A lower credit rating would cost Indiana taxpayers millions whenever the state borrows money. Selling off future tobacco settlement payments is a raw deal for Indiana's taxpayers.

Tobacco's toll is devastating in Indiana – 31.6 percent of high school students currently smoke, and 20,500 more kids become regular, daily smokers every year, one-third of whom will die prematurely. Smoking-caused health care costs Indiana and its taxpayers $1.6 billion a year. Indiana receives $441 million a year in revenue generated by tobacco, including $145 million in tobacco settlement money and $296 million in tobacco taxes. Just 7.4 percent of this tobacco money is needed to fund a comprehensive tobacco prevention program at levels recommended by the CDC. Surely Indiana can maintain this commitment to protecting its kids from tobacco addiction and the death and disease that often follow.