Q: What happened to the hundreds of millions of dollars the cigarette manufacturers paid to state governments to offset medical costs for illnesses related to smoking?
—Michael Cosgrove, Mableton
A: Much of the money from tobacco companies, which now totals about $100 billion, goes to investors "who bought bonds used to 'securitize' the money coming in," ProPublica wrote last September.
Investors receive about 44 percent of the money that the companies pay the states and other governments under terms of the landmark 1998 financial settlement.
ProPublica is an “independent, non-profit newsroom that produces investigative journalism in the public interest,” according to its website, propublica.org.
The money was supposed to go to programs to help people stop smoking and assist with the costs of health care, but several states, the District of Columbia and many counties struck deals for “upfront” cash for the “right to some or all of their tobacco payments” with steep repayment conditions. Some governments also sold “about $3 billion” in capital appreciation bonds – which have “steeper repayment terms” – and now must repay $64 billion.
Some states used the money from those bonds for budget shortfalls and funding other programs. NPR reported that Colorado has invested millions in a literacy program and Kentucky invested in agricultural programs.
“There are some fairly notorious cases of money being used for fixing potholes, for tax relief (and) for financial assistance for tobacco farmers,” Myron Levin, a journalist who covered the tobacco industry and who founded FairWarning.org, told NPR in 2013.
Other governments are using the funds for what they were designed to do, NPR reported.
Andy Johnston wrote this column. Do you have a question about the news? We’ll try to get the answer. Call 404-222-2002 or email q&a@ajc.com (include name, phone and city).
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