Tobacco settlement money going to fix Rhode Island's budget

John O'Brien Jun. 27, 2007, 11:47am


PROVIDENCE, R.I. - When the Tobacco Master Settlement Agreement was signed in 1998, the attorneys general who signed it intended to use the money it provided to fund health initiatives related to tobacco use.

Tuesday, Rhode Island Attorney General Patrick Lynch decided the money should go to fixing the state's budget.

The amount -- $195 million -- was sold as a bond after Lynch issued his opinion.

"Although some may view tobacco money as a spigot whose jet of water never ends or slows, I have a very specific function to fill as the Attorney General to ensure that the rights of Rhode Islanders are protected, both now and in the future," Lynch said. "In short, it is incumbent upon me to determine if the sale of these bonds is legal. Every bond sale by the state requires a legal review by my office."

Rhode Island's fiscal year ends Saturday, and about $64 million of tobacco money will be used to cover losses from the past year.

The MSA allows approximately 40 tobacco companies to sell cigarettes in 46 states and six U.S. territories. It was negotiated largely by trial lawyers hired by the states.

The Competitive Enterprise Institute says trial lawyers were paid an estimated $13 billion for their work, which, in some occasions, amounted to tens of thousands of dollars per an hour of work. The settlement was worth $246 billion. The states alleged that tobacco products caused the state's harm by raising medical costs.

"I had and still have concerns about how both the Legislature and the Governor intended to spend the MSA money and how the final budget prioritizes the way it will actually be spent," Lynch said. "But I am not the gatekeeper of this money. Again, my role is to make sure that the wording of the bond document properly memorializes our state's obligations and efforts under the MSA."

Rhode Island has received $371 million in tobacco payments since the MSA was implemented. This year, the state took in $44 million.

According to a report in the Providence Journal, the bonds are expected to be paid off more than 40 years from now. Also, the report says $20 million of the sale must be used to cover overspending from the past fiscal year.

Lynch feels that because of the amount of money the MSA involves, the issues regarding a sale are complex.

"It's my job to slash through the technicalities and, ultimately, make the promise that the State of Rhode Island is continuing to comply with the terms of the MSA because, absent such compliance, the spigot could be turned off," Lynch said. "And if we think we have budget problems now, we should try to imagine how magnified they would be without this funding."

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