The initiative would amend the Constitution to change the way money from the national tobacco lawsuit settlement is spent in Michigan. Currently, statute requires 75 percent of the annual proceeds to be deposited into a Michigan Merit Award Trust Fund, and 25 percent into a Tobacco Settlement Trust Fund. The law gives the legislature discretion on where to spend money from the funds. According to a Dec. 3, 2001 Senate Fiscal Agency report, for Fiscal Year 2001-2002 $426.7 million was appropriated from the two funds for the following:

  • $103 million to provide scholarships to high school and junior high students who do well on the state MEAP test

  • $27.2 to other education related programs

  • $45 million to the EPIC prescription drug program for low income seniors

  • $48.5 million for other health programs including Medicaid

  • $45 million to subsidize private and university health research

  • $4 million to the Council of Michigan Foundations for anti-smoking programs

  • $159.7 million revert to the state general fund to sustain other state spending, given lower-than-expected tax revenues

In the summer of 2002, a coalition led by the Michigan Hospital Association gathered sufficient signatures on a petition to amend the Constitution so as to mandate that annual tobacco lawsuit settlement proceeds be appropriated for a variety of specific uses. With the exception of 10 percent that would go to the state general fund, this would remove all legislative discretion; any alteration to the mandated appropriations would have to be approved by voters in a new Constitutional amendment. The initiative would require the money to be spent as follows:

  • 28 percent to nonprofit hospitals

  • 15 percent to a “Tobacco-Free Futures Fund,” a non-profit organization the details of which have not been established, consisting of the American Cancer Society, American Heart Association, American Lung Association and Tobacco-Free Michigan Action Coalition. This would develop and implement anti-smoking campaigns.

  • 13 percent to the EPIC prescription drug program for low income seniors

  • 13 percent to licensed nursing homes

  • 13 percent to subsidize private and university health research, 15 percent of which must be tobacco related

  • 2 percent to licensed hospices

  • 2 percent to the Council of Michigan Foundations

  • 1 percent to a “Healthy Michigan Foundation,” a non-profit organization the details of which are surrounded by some controversy

  • 1 percent to nurse practitioners who deal mainly with Medicaid cases

  • 1 percent to school health clinics

  • 1 percent to a nurse's scholarship program

  • 10 percent to the state general fund

These amounts would be addition to any existing funding for the various programs. The initiative is drafted in such a way as to prohibit using the mandated appropriations as a substitute for any existing spending.

The Senate Fiscal Agency memo estimates tobacco lawsuit settlement proceeds for the next three years as follows:
FY 2002-2003 $317.2 million
FY 2003-2004 $273.9 million
FY 2004-2005 $272.2 million

The annual payments will increase by enough to keep up with inflation, and decrease to keep up with expected declines in tobacco use.