A Broken Trust
It was a huge windfall for Ohio, $10 billion to settle claims against tobacco companies. A decade later, almost all the money is gone.
Charlie Doan, active in many tobacco-free causes, remembers the hope in 1998 when the tobacco industry settled its huge lawsuit with the states. It would make up for their smoking-related medical costs by splitting among them a huge pot of money, $200 billion in all. Ohio’s share came to $10.1 billion.
“The whole idea was to make the tobacco industry pay for the damage its done,” said Doan.
How to spend that huge chunk? Then-Attorney General Betty Montgomery held up a blueprint that called for endowing a new public/private foundation called the “Tobacco Use Prevention and Cessation Trust Fund”. As money arrived annually from the tobacco companies, the interest on the endowment would be more than enough to fund anti-smoking programs year after year.
Doan says, “A lot of us were thinking, great! The money’s now going to start to flow, and isn’t it appropriate that it would come from the tobacco industry.”
Governor Bob Taft signed the deal in March of 2000.
The raiding of the fund would begin in 2001.
Doan says, “Let’s face it. Governments see money on the table and they can’t resist trying to use it for whatever their immediate need is.”
That need turned out to be the general revenue fund. Legislature after legislature since 2001 has diverted tobacco company payments supposed to go to the Trust Fund, for our general budget.
Governor Ted Strickland defends the diversions, which began under his predecessor. “The legislative and governmental leaders have a right to determine how those resources were to be used,” he said.
Strickland was a health care professional before he was a politician. “I think using those resources to provide health care for needy children is certainly a justified use. I don’t think you’ve got to say those resources can only be used for a very specified focused attempt at tobacco cessation or tobacco use prevention.”
But anti-smoking advocates like Doan say after this money is gone, there won’t be anything to fund kids’ programs or the billions Ohio spends for illnesses associated with smoking. “It’s disappeared for its intended purpose which was critical for public health and to save money in the long run. Ohio’s budget is going to find itself even more strained as Medicaid and Medicare costs for tobacco-inflicted diseases continue to ravage the population.”
A study funded by a consortium of groups including the American Heart Association, American Lung Association, Robert Wood Johnson Foundation and Campaign for Tobacco-Free Kids shows Ohio ranks 45th, nearly at the bottom of state spending on tobacco prevention programs compared to what the Centers for Disease Control says would be effective. Ohio spends 5 percent of what the CDC says it should.
In 2008, after Governor Strickland announced he would divert what was left in the tobacco endowment for an economic stimulus package, the trust transferred $190 million to the American Legacy Foundation in Washington D.C. The Legacy Foundation formed after the original national suit settlement to coordinate anti-smoking programs nationally. It committed to spending Ohio’s money in Ohio. But the move infuriated the governor.
“I want to tell you, I was offended,” the Governor told the I-Team when questioned at a press conference. “The attempt to transfer these funds to that foundation was a blatant attempt to frustrate and to circumvent the will of the representatives of the state of Ohio, and I think that’s shameful.”
“No, not at all,” answered Doan. “I think their intentions are very honorable. They’re trying to protect funds that will protect public health.”
But the governor wouldn’t have it. He abolished the trust the previous administration had set up just 10 years earlier. The trust then sued the state to keep the money for its intended purpose. It won in the Franklin County Court of Common Pleas, but the Tenth District Court of Appeals overturned the decision, ruling lawmakers can divert the trust fund’s money. Today, the case sits before Ohio’s top court.
Doan says diverting the money is a huge mistake. “I’m hoping the Supreme Court will take a good hard look at it and trace it all the way back through the history back over a decade and see where this money was intended to go, where it came from, where it was intended to go… For us it would have done wonders over a period of years. For them, it’s a finger in the dike. Very short-sighted, very penny-wise and pound-foolish.”
Governor Strickland disagrees and makes no apologies for the diversion of money. “Given the economic circumstances facing our state… There are different ways you can use those resources that are hugely justified.”
