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Posts Tagged ‘economic stimulus bill’

Legislators in tough economic times are using tobacco settlement money to desperately plug budget holes. Massachusetts state lawmakers in at least the last two years have used the funds to help cover general fund expenses as the deficit widened into the billions of dollars. In November, a $100 million economic stimulus bill passed that relied on more than $33 million in tobacco money. Two local law firms that helped the state win its $8.3 billion tobacco settlement are suing the commonwealth for $1.2 billion they say they’re owed in legal fees.
But ostensibly, the money is supposed to be spent to help educate young people to stop smoking and for other health-related programs.
That happened the first year the money came in. In 2000, a $326 million tobacco payment came in and 70 percent was saved or invested. The rest went to the Tobacco Settlement Fund for education programs, all according to statute. In 2001, $242 million came in, again at the 70/30 percent ratio.
But in 2002, $305 million came in, and 50 percent went to the general fund. The rest went to the Health Care Security Trust. In 2003, $303 million came in and all of it went to cover general fund expenses, a trend expected again this fiscal year.
Massachusetts established the Health Care Security Trust in 2000 to administer and invest the money as it came in. It’s a one-man office, run by 49-year-old Paul Todisco, who was transferred from the state pension fund to manage the money as it came in. Todisco recently talked to Boston Business Journal reporter Mark Hollmer about the tobacco money, where it’s been spent so far and how much of it has actually been spent on health care.

Q Tell me about the Health Care Security Trust office.

A It was created through the Legislature … and basically, we’re charged with managing and investing all the money generated by claims or actions undertaken by the attorney general’s office over the tobacco settlement.

Q How did the funding formula initially work?

A Initially the Legislature set up the formula in the statute that said 30 percent of annual receipts in this settlement would be used … for tobacco cessation (antismoking initiatives) and 70 percent … would be saved or invested for some future use for health care purposes.

Q How much money has come in to Massachusetts to date?

A About $1.2 billion.

Q How much has been saved or invested to date?

A In our most recent quarter we had a net asset value of $494 million.

Q Why didn’t you get any new money to invest this year?

A The state is in a budget crisis … and like many states around the country, we’ve taken receipts from the tobacco settlement and used it for general purposes as opposed to targeting health care. This is not anything that’s basically earthshattering, given the fact that practically all 50 states have had fiscal bumps on the road, (but) it’s the state’s prerogative.

Q Has Massachusetts used the money as the Legislature intended?

A Massachusetts has really been a model for other states around the country, as far as health care and using this money for tobacco cessation programs. It will be a leader once again once the state gets back on its footing.

Q What has happened to the tobacco settlement fund?

A In this last budget, the tobacco settlement fund was eliminated and folded into the general fund of the commonwealth.

We are considered a reserve fund. It is in the commonwealth’s prerogative to use the assets as they see fit for whatever purposes they feel are necessary.

BULLET POINTS on Todisco * Is executive director and sole employee of the Health Care Security Trust that administers and invests the state’s tobacco settlement money

* Oversees assets that are expected to reach more than $8.3 billion over 25 years

* On who holds the tobacco settlement purse strings: “We’re just kind of the bank. The state is the entity who decides how it gets spent.”