Monday, February 20, 2012

Settlements: states win big: residents, not so much

Think Progress has an article on the mortgage settlement money.
Scott Walker started the looting of funds: he's using much of it to balance the state's budget.
Of a $31.6 million payment coming directly to the state government, most of that money – $25.6 million – will go to help close a budget shortfall revealed in newly released state projections. [Wisconsin Attorney General J.B. Van Hollen], whose office said he has the legal authority over the money, made the decision in consultation with Walker.
And his example is
now being followed by at least one other state. Missouri Gov. Jay Nixon (D) and Attorney General Chris Koster (D) have pledged to put $40 million of the state’s $196 million share of the settlement into the state’s general fund to boost its higher education budget, Stateline reports:Koster, a Democrat, told reporters on Thursday that he agrees with the governor’s call for more higher education funding and will transfer the $40 million Nixon has requested into the general fund, citing the “severe budget shortages” the state faces.

Who can argue with education? Except of course, for the homeowners who might have thought that this settlement would help them. Silly people. Don't they remember what happened to all that lovely tobacco settlement money? Money that was supposed to help states
When the MSA [1998 Master Settlement Agreement between 46 state attorneys general and the four major tobacco companies] was signed, the attorneys general and plaintiffs lawyers held news conferences touting how the money would be used for public health and protecting kids. Washington Attorney General Christine Gregoire said, "Washington state's proceeds from the tobacco industry settlement should be spent on public health issues or the integrity of the historic agreement will be violated."
According to this article in Reuters, not much of that money went where it was supposed to.
In the 10 years since the landmark deal, the states have received $79.2 billion of the settlement and another $124.3 billion from tobacco taxes, but have spent only about 3 percent of it -- $6.5 billion -- on tobacco prevention and cessation programs, the groups said in a report.The deal, which restricted cigarette advertising practices, requires tobacco companies to make annual payments to the states in perpetuity, with total payments estimated at $246 billion over the first 25 years.
Short story:
From fiscal year 2000 through 2005, the 46 states party to the Master Settlement Agreement received $52.6 billion in tobacco settlement payments. Of the $52.6 billion total, about $36.5 billion were payments from the tobacco companies and about $16 billion were advance payments which several states had arranged to receive by issuing bonds backed by their future payments from the tobacco companies. The Master Settlement Agreement imposed no restrictions on how states could spend their payments, and as such, the states have chosen to allocate them to a wide variety of activities. Some states told us that they viewed the settlement payments as an opportunity to fund needs that they were not able to fund previously due to the high costs of health care. States allocated the largest portion of their payments to health care--$16.8 billion or 30 percent--which includes Medicaid, health insurance, hospitals, medical technology, and research. States allocated the second largest portion to cover budget shortfalls--about $12.8 billion or about 22.9 percent. This category includes allocations to balance state budgets or reduce deficits that resulted from lower than anticipated revenues, increased mandatory spending, or essential expenditures. Included among the next largest categories are allocations for infrastructure projects, education, debt service on securitized proceeds, and tobacco control.
 More links:

The moral of this story? Unless the people watch and question and pay attention, their elected officials will quite often take the easy road. It's so much easier to play games with settlement funds than to tell the public the hard truths. Lies get politicians elected. 

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