According to The Campaign for Tobacco-Free Kids:
Total State Tobacco Revenues FY2000-2014 $390.8 billion
Total State Tobacco Prevention Spending FY2000-2014 $8.9 billion
Just a bit over 2% of the revenue spent on attempts to prevent people from acquiring the smoking habit.
Could it be that the states aren't really that interested in getting everyone to stop smoking?
That they want to have it both ways: tax the sin, but continue to milk the sinners, to fill in budget holes left by their failure to seriously address the needs of their constituents?
Remember that huge tobacco settlement? That huge pile of money that was going to enable states to fund anti smoking programs, and to help pay the health costs incurred by state's citizens?
But they are not required to spend their $7 billion in settlementSo, the money coming in today was spent years ago. We borrowed against our future. And, as happens so often when Wall Street gets involved, all the rewards flow to them, all the risk stays with the borrower.
money on tobacco cessation -- a sore spot among some of the attorneys
general who negotiated the deal. As a percentage of overall tobacco
revenue, states spent only about 2 percent of it fighting tobacco use.
The money instead went to a variety of other needs, from state literacy
programs in Colorado to a teacher retirement fund in West Virginia to
shoring up Medicaid in others.
In 14 states and the District of Columbia, at least a quarter of
tobacco settlement money is going to pay off debt on tobacco bonds that
gave those states money upfront in exchange for a portion of the annual
proceeds from the settlement, according to data compiled by ProPublica.
In eight of those states, 100 percent of annual proceeds are going to
debt service. Ohio is one of them.
Under former Gov. Ted Strickland, Ohio sold tobacco bonds in 2007 to
finance new schools and tax cuts. Shortly thereafter, as the recession
applied budgetary pressure, spending on tobacco prevention began to fall
steadily from a $60 million a year high in the early 2000s to almost
Wall Street came knocking with an offer many state and local
politicians found irresistible: Cash upfront for those governments
willing to trade investors the right to some or all of their tobacco
payments. State after state struck deals that critics derided as “payday
loans” but proponents deemed only prudent. As designed, private
investors — not the taxpayers — would take the hit if people smoked less
and the tobacco money fell short.
Things haven’t exactly worked out as planned.
ProPublica analysis of more than 100 tobacco deals since the settlement
found that they are creating new fiscal headaches for states, driving
some into bailouts or threatening to increase the cost of borrowing in
One source of the pain is a little-known feature found
in many of the deals: high-risk debt that squeezed out a few extra
dollars for the governments but promised massive balloon payments, some
in the billions, down the road.
These securities, called capital
appreciation bonds, or CABs, have since turned toxic. They amount to
only a $3 billion sliver of the approximately $36 billion in tobacco
bonds outstanding, according to a review of bond documents and Thomson
Reuters data. But the nine states, three territories, District of
Columbia and several counties that issued them have promised a whopping
$64 billion to pay them off.
And the rich [the investors] get richer
As of this year, at least one out of every three dollars coming in
under the settlement is pledged to investors, according to bond
disclosures and payment data from the National Association of Attorneys General, which tracks the flow of funds.
sure winners so far: Investment bankers from Citigroup, the now defunct
Bear Stearns and others who, along with consultants and lawyers, have
pocketed more than $500 million in fees for their financial engineering,
ProPublica estimates. They now stand to make more as the governments
look to rework old deals and try to get even more tobacco cash upfront.
And the impossible odds are stacked outrageously in favor of the investors and the firms that broker them:
Most of the deals involving CABs sold right before the 2008 financial
crisis, ProPublica found. As the horizon darkened, the market for them
began falling apart, with one lone buyer keeping Wall Street’s CAB
machine going. Pitch documents show that bankers pressed the states to
act fast before the window shut.
“We are confident that we can
stimulate demand,” Bear Stearns bankers told Ohio prior to a $5.5
billion tobacco bond package championed in 2007 by then state Treasurer
Richard Cordray, who these days heads the U.S. Consumer Financial
Ohio’s tobacco deal was the largest ever. It
included CABs that brought in $319 million in return for an eventual
$6.6 billion balloon payment — a nickel on the dollar. Bear Stearns,
Citigroup and other Wall Street firms made about $23 million in fees on
the transaction, according to the bond offering document.
Meanwhile, the e-cigarettes are flourishing. Un-taxed. Pretty much un-regulated. And who's behind the e-cigarette industry?
No surprise, it's our old friends, the tobacco companies.
The three biggest tobacco companies — Altria (Philip Morris), R.J.
Reynolds and Lorillard — are investing heavily in e-cigarettes, creating
their own product lines and buying up whole e-cigarette companies.
E-cigarettes: un-taxed, un-regulated, and advertised all over the place. And with names like Bubble Gum, Fruit Loop, etc: aimed directly at the minds and lungs of kids.