The following article appeared in the Oct 18, 2002, edition of the MIRS Newsletter.

H. Lynn Jondahl is the Director of the Michigan Prospect for Renewed Citizenship

PROPOSAL 02-4: Should Michigan voters amend the Constitution to reallocate tobacco lawsuit proceeds?

Proposal 4 on the Nov. 5 ballot will require Michigan voters to determine whether they will change the state constitution to turn over the money Michigan receives from the major tobacco companies to several non-public agencies and organizations.

An important debate should occur in Michigan. How should the state use more than $300 million it receives for the current fiscal year from the tobacco settlement. Unfortunately, that debate is not before us. In fact, Proposal 4 is so carefully crafted it makes that important debate virtually impossible. Neither a “Yes” vote nor a “No” vote will result in a wise decision about how these dollars should be spent. The Proposal turns out to simply – but importantly – be a vote on who will decide how those dollars should be spent. On that question the wise public policy vote is a “No” vote in order to assure that the important debate about how to spend the money will be made by accountable elected representatives of citizens, not by private interest groups.

A majority of “No” votes on Proposal 4 means that the decision about how funds from the tobacco settlement agreement ($330 million for the current fiscal year) are allocated will be made by the Legislature and governor in the same manner most other state budget decisions are made. Such decisions about state spending can be changed by the Legislature and governor in order to reflect changing needs of the state. This is especially critical in the context of the current budget deficit. A majority of “Yes” votes on Proposal 4 would mean that the decision about how 90 percent of the funds from the tobacco agreement are allocated will be made according to the language of the Proposal and can only be changed by another amendment to the constitution. Passage of Proposal 4 will constitutionally allocate the hundreds of millions of dollars annually to specific organizations and agencies with only one measure of accountability – a report. “All recipients of funds under this section shall annually file a report with the Auditor General itemizing their expenditures of funds received under this section.” The Auditor General will compile these reports and make them “available to the public by request.” There is no provision for auditing, evaluating or questioning – only reporting.

The Attorneys General of Michigan and 45 other states entered a law suit against major tobacco companies arguing that these companies are liable to reimburse the states for some of the health costs attributed to use of tobacco products. In 1999, after years of litigation, the attorneys general negotiated an agreement (“the tobacco settlement agreement”) with the states whereby the tobacco companies will pay to the states a total of over $200 billion through the year 2025. The estimates are that Michigan, now receiving something over $300 million per year will, between 2004 through 2025 receive about $270 million annually.

Although the litigation that led up to the agreement argued that the tobacco companies should be required to make payments to the states to compensate for health costs related to tobacco use, the tobacco settlement agreement did not determine how states would spend the monies from the payments. Some health advocates and anti-smoking advocates entered into a coalition to challenge what they believe is the misallocation of the settlement dollars in a manner that excludes programs to discourage smoking and treat smoking-related health problems.

Michigan stands out as one of only three states (Michigan, Missouri, Tennessee, and the District of Columbia) that has allocated no settlement dollars for tobacco prevention. The Center for Disease Control (CDC) recommends that Michigan should be spending between $54 million and $154 million annually for tobacco control programs. Various claims about total Michigan spending for tobacco prevention range from a bit over $6 million to nearly $28 million – all well short of the CDC recommendations. At least Michigan policymakers did not choose to use any of the tobacco settlement dollars for subsidizing tobacco production, as did at least one of the other states with whom Michigan is tied at zero expenditures for tobacco prevention. (“Show us the Money: A Mid-Year Update on the States' Allocation of the Tobacco Settlement Dollars,” Campaign for Tobacco-Free Kids, 7/22/2002)

Currently 75 percent of Michigan's annual benefit from the settlement agreement is allocated by statute to the Michigan Merit Award Trust Fund for “Merit Award Scholarships.” The remaining 25 percent of current income from the agreement is allocated to the Tobacco Settlement Trust Fund. “Among recipients of these funds in FY 2003 are: Merit Award Scholarship ($114.3 million); the Life Sciences Corridor ($45 million): the Elder Pharmaceutical Insurance Program ($30.0 Million); and the Council of Michigan Foundations ($4.0 million).” (Citizens Research Council of Michigan Memorandum 1066, September 2002. (www.crcmich.org/publicat/2000s/2002/props 1-4/memo 1066.html)

It is important to argue that tobacco agreement money should go to health programs, not scholarships. Proposal 4, however, is not the way to do it. The proper way to do it is to mount a public campaign to challenge the Legislature's decision to allocate the money for scholarships. If this doesn't work and you want a vote of the people on the issue, don't amend the constitution. It would make more sense to gather signatures of voters to put an initiated act on the ballot for voters to determine a better way to spend the tobacco settlement dollars. This way your alternative proposal, if passed into law, could be changed, if circumstances merit it, by a three-quarters vote of the Legislature. It would not require another constitutional amendment and the procedure would be subject to all of the accountability provisions of law.

Proposal 4, if enacted, would appropriate over $92 million to nonprofit hospitals and nearly $43 million to nursing homes, along with several other private recipients. Bizzarely, three individuals, opposed to the Proposal, have organized themselves as the “Healthy Michigan Foundation” just to show that the Proposal is so poorly developed as to permit them to become the constitutionally mandated recipients of over $3 million a year for every year between now and 2025. And all they would have to do is report their receipt of this windfall of public dollars to the Auditor General. This alone is reason enough to vote “No” on Proposal 4.

Whether Proposal A would end the Merit Award Scholarship program depends on whether the legislature would find some other source of funding for the program. Given the current budget deficit that would not be easy to do. Whether Proposal A passes or fails, the continuation of the Merit Award Scholarship should be reconsidered. We should have that debate.

The use of tobacco settlement funds for scholarships for those high school students who score well on the Michigan Educational Assessment Program (MEAP) tests is a questionable policy for a number of reasons – not alone because none of it is going to tobacco prevention programs or other health programs. The “Merit Award” scholarship program uses one criterion to determine who is eligible to receive a $2,500 scholarship to attend a Michigan college or university or a $1,000 scholarship to attend a school outside the state. The one criterion is the student's score on the MEAP tests.

The American Civil Liberties Union (ACLU), the Mexican American Legal Defense and Education Fund (MALDEF) and the Michigan Conference of the National Association for the Advancement of Colored People (NAACP), have challenged that policy decision in court. They see the “Michigan Merit Award” as a discriminatory program that relies too narrowly on a single criterion, one designed to test schools, not students. They are raising the right policy questions.

Kary MOSS, Executive Director of the ACLU of Michigan, summarized the basis of the suit as follows: “By relying on the MEAP test to award scholarships, the State of Michigan is misusing the test. All students should be judged fairly, by looking at the range of their accomplishments as individuals in the same way that colleges and universities evaluate applicants. The State of Michigan has a chance here to fix or compensate for some of the problems in our educational system; instead, it is making it worse by using a selection criteria that everyone knows will help least those we need it the most.”

The MEAP tests were created to evaluate how well schools are performing in their responsibility to teach basic information. Critics point out that students in poor schools rarely receive the education necessary to pass the test while students from wealthier districts with more comprehensive programs, including “Advanced Placement” course, for example, receive more adequate preparation for the tests. Moss says, “the state is essentially punishing students for the schools they attend.” We can see the pattern of who is punished. In 1999, 34 percent of eligible white students qualified for scholarships (1 in 3 white test takers), only seven percent of African American students qualified (1 in 14 test takers), 20 percent of Hispanic and 19 percent of Native American students qualified (1 in 5 test takers).

These figures come from the research of Donald Heller, assistant professor of education at the University of Michigan. He contends that, “The evidence is clear that the Michigan Merit Award Scholarship program will do little to further the legislation's stated goal of increasing access to higher education in Michigan. A great number of these awards, based on what we know from existing research, are likely to go to students who will attend college anyway. Many of these students come from relatively wealthy school districts that already send a large percentage of their high school graduates on to college.”

For the sake of improving public policy, voters should reject Proposal 4 and then return to the Legislature with two challenges. One is to develop and fund a rational and accountable smoking prevention program. The second is to address how best to improve Michigan's public education system. All within the constraints of the difficult budget crisis. Unfortunately, Proposal A doesn't advance either of these critical agendas. It's passage would only make matters worse while mocking the constitution.