Ohio can grab tobacco funds

The Ohio Supreme Court ruled this week that the State Legislature does have the power to raid $250 million of the state’s tobacco funds. This is money from the 1998 $280 billion Tobacco Settlement Agreement between the states and Big Tobacco.

Several states have used these monies simply to balance their budgets. The states won the settlement initially because of the costs of smoking on state’s Medicaid programs. But, instead of using that money for anti-smoking education or health care, most states have simply thrown the money into their general fund pots so they can avoid raising property taxes. There’s nothing in the agreement that prevents states from doing this. And no one expected it or saw it coming. It was one of the most heartbreaking aspects of the 1998 settlement. So much more could have been accomplished with that money, but politicians wanted to be able to spend more money without raising taxes and it turned into an easy little windfall for a number of states.

So, Ohio actually set up a quasi-nonprofit quasi-public agency to run its anti-tobacco program. A couple of years ago, Gov Ted Strickland decided to raid the agency’s funds, and the agency fought back. The American Legacy Fund (a national anti-smoking organization) sued, saying the $10 billion Ohio received from the 1998 settlement was a trust that the state couldn’t simply raid.

After two years of the case winding through the courts (At one point a court ruled in favour of the anti-tobacco plaintiffs and against the state), the state Supreme Court ruled that what Strickland did was legal.

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