Note: The following contentions are prominent among the arguments used by proponents of the proposal. They do not necessarily represent the views of the Mackinac Center for Public Policy.

Tobacco Lawsuit Damage Payments Are Being Misallocated

Michigan's Attorney General joined a lawsuit against the tobacco companies because taxpayers had incurred billions in health care expenses taking care of sick, low-income smokers misled about the true dangers of tobacco. When the suit was settled, taxpayers had good reason to believe that damages would and should be used to help pay for the medical care of present and future smokers, and for vigorous anti-smoking campaigns to reduce future health expenses.

That has not happened. Instead, the money has gone for a wide variety of programs having nothing to do with tobacco, including computer technology, road construction, prisons, and funding for a rare isotope accelerator. Legislators have used the damage payments as a “cookie jar” to pay for pet programs totally unrelated to the damaging effects of smoking.

Worse, although it receives some $300 million a year in damages from the tobacco companies, Michigan only spends $6.5 million a year on tobacco reduction efforts. Only ten states spend less, according to the Center for Disease Control (CDC).

Redirects Tobacco Damage Payments to Where They Belong

Currently, state Medicare payments to health providers do not fully cover the cost of caring for low income patients, including those suffering from tobacco related diseases. These providers, including Michigan’s non-profit hospitals, must make up the cost somewhere else. They do so by shifting it to health care paid for by private insurance plans purchased by individuals and job providers. This means that everyone else must pay more because the state is not spending tobacco lawsuit dollars where it should.

The initiative would guarantee that 90 percent of the tobacco settlement money goes to addressing current tobacco-related expenses, and programs to reduce future expenses. Most of the money would be used to ease the burden on taxpayers and health care providers stuck with the medical care costs of uninsured low income smokers. Part of this would go to nursing homes and hospices that provide long term care for victims of tobacco use, and those who are dying of the smoking related diseases. Millions more would be directed towards research to find new cures for tobacco related diseases, and for a prescription drug program for low income senior citizens. Finally, a substantial portion would go to tobacco prevention efforts that help young people resist this dangerous habit, and thereby reduce future health expenses.

The proposal still allows 10 percent of the money to be transferred to the state general fund to cover other state government expenditures. This strikes a reasonable balance between the purposes of the tobacco lawsuit and other state spending needs.

Accountability Would Be Ensured

The proposal requires each recipient of tobacco funds to submit an annual report to the state itemizing all expenditures. It requires the state Auditor General to conduct an annual Accountability Report showing where tobacco settlement money was expended. Currently there is less accountability, because the legislature can direct tobacco money anywhere it wants – including programs having nothing to do with anti-smoking efforts or health care costs.

For more information, see the website of Citizens for a Healthy Michigan (previously at http://www.healthymichigan.org), the umbrella group sponsoring the initiative.