Washington, DC – The American Lung Association reports today that a growing number of states are selling their rights to future tobacco settlement payments in the hope of finding a fast fix for current budget woes. As a result, fewer dollars will be ava

“States are breaking promises they made to the public to reduce youth smoking and promote health when they signed a 1998 agreement with the tobacco industry,” said John L. Kirkwood, President and CEO of the American Lung Association. In a process known as securitization, many states are opting to sell the rights to future annual tobacco settlement payments in the form of bonds, in exchange for an upfront lump sum payment. “Securitization of tobacco settlement dollars is bad health policy because it limits future funding for tobacco control programs. It is bad fiscal policy because states get only 30 to 40 cents on the dollar,” said Kirkwood. “The fiscally responsible approach is to invest settlement dollars in proven tobacco use prevention programs. This investment will save lives and pay ongoing dividends to taxpayers in the form of reduced health care costs in the future,” said Kirkwood. “Selling off decades of future revenue meant to promote public health in order to plug a one-year budget gap is short-sited and violates the trust voters place in their representatives. Taxpayers should be concerned,” he said. The Lung Association report notes that the trend toward securitization is doubly troubling because many states are already devoting only a tiny fraction of their tobacco settlement money to tobacco use prevention programs. “More than 40 states are now facing budget shortfalls, so the pressure to securitize is going to grow. Securitization is attractive to cash-strapped politicians. They can show they’ve balanced the budget or cut spending, hoping no one will ask what will happen next year when there is no settlement coffer to raid,” said Kirkwood.

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