Up in Smoke
The state splurges with the tobacco settlement
Tobacco companies have paid Illinois more than $930 million so far to settle a lawsuit the state brought to recoup expenses it incurred to treat smoking-related illnesses. But instead of using that money to fund health care or to help citizens to stop smoking, Illinois has filtered the money into a multitude of unrelated projects. Now it wants to borrow against future payments to plug a $1.5 billion budget hole.
In 1998, more than 40 states ganged up on the tobacco companies, alleging the firms manipulated nicotine levels to keep smokers addicted, withheld information about the adverse health effects of cigarettes, and colluded to prevent consumers from getting less hazardous products. States demanded reform in the tobacco industry and got a financial recovery that would be the largest in the nation's history.
The tobacco companies agreed to pay $1.5 billion over the next five years to educate the public about the destructive effects of smoking and another $250 million for a foundation to concentrate on discouraging teenage smokers. They would also dole out $9 billion to the states annually beginning in the year 2008. Total payments through the year 2025 would be $206 billion.
To date, only 6.6 percent of Illinois' settlement money has gone to prevent smokers from lighting up. We aren't alone in our spending spree. Michigan has used its tobacco settlement for college scholarships, Ohio has built new schools, North Dakota has used it for flood-control projects, and we used some of it for last year's tax rebate.
The General Assembly has already approved House Bill 2828, which authorizes the sale of $750 million in general obligation bonds secured by future payments from tobacco companies. The funds generated from the bonds can be used for anything from meeting payroll to buying office supplies.
Illinois comptroller Daniel Hynes is against the use of bonds to fund the daily operations of government. He says it "sends a bad signal to our creditors and bond rating agencies."
Though the legislation has already passed, no bond proceeds have been used to meet operating expenses--yet.
"It is definitely our hope that they won't," says Hynes spokesperson Karen Craven. "It's something you are going to have to pay in the long term [to fix] a short-term problem."
Craven says it has always been Hynes's stance that the tobacco settlement should be used for health-related issues. But here's a sampling of projects that will be financed by tobacco funds in 2003:$1,027,900 for the tuck pointing of facilities operated by the Illinois Center for Rehabilitation and Education; $344,000 for the upgrading of "chemistry/ seed lab systems" at the Illinois State Fairgrounds; $2,000,000 to support veterinary medicine at the University of Illinois; $1,023,543 for the rehabilitation or replacement of playground equipment; $296,720 for maintaining lodge and concession facilities at state parks; $678,941 to renovate buildings and $180,158 to improve boat-access safety at the Kaskaskia River & Fish Wildlife Area; $173,522 to renovate the art gallery at the James R. Thompson Center in Chicago; $2,363,823 to demolish buildings, $1,136,700 for the resurfacing of roads and parking lots, $471,300 for dehumidifiers, and $106,639 to enlarge doorways and bathrooms at the Manteno Veterans Home; $380,695 to renovate the Dickson Mounds Museum; $100,687 for a back-up generator at the Old State Capitol.
The majority of the funds so far have paid for a senior citizen prescription drug assistance program (30.2 percent). Tax rebates and "budget stabilization" have consumed 34.6 percent of the settlement.
"Tuck pointing and parking lots," Craven says with disgust. "This is not where the money should go. It's bad fiscal policy."
Maybe legislators figure there's more where that came from, but it's not a bottomless barrel: Illinois' share of the settlement will come to about $8.2 billion over the next 23 years.