Oregon's Missed Opportunity for Tobacco Prevention; Master Settlement Agreement Monies Spent Elsewhere

Brett Hamilton, executive director of the Tobacco Free Coalition of Oregon, hopes the Legislature will redeem itself in 2013

May 15, 2012 -- Tobacco costs Oregonians at least $2.4 billion a year in direct and indirect costs related to smoking and tobacco use. That’s over $13 per pack of cigarettes sold, nearly three times what the smoker pays. A recent report by the American Lung Association and Penn State University estimates that tobacco costs Oregon even more at $3.3 billion a year or $18.83 per pack.

Despite these staggering estimates, only 3 cents of the $1.18 tax per pack of cigarettes in Oregon goes toward tobacco reduction efforts. In other words, only 3.2 percent of the estimated $260 million in tobacco-generated revenue the state collects every year from tobacco taxes is spent on tobacco reduction efforts.

And what about the $181 million Oregon receives per biennium from the
Tobacco Master Settlement Agreement? None of that money is allocated toward tobacco prevention, something the Public Health Advisory Board, which serves as an advisory body to the Oregon Health Authority, would like to see changed.

In 1998, Oregon, along with 45 other states, signed the Tobacco Master Settlement Agreement with the tobacco industry to settle lawsuits against the tobacco industry for recovery of the states’ tobacco-related, healthcare costs. To date, Oregon has received $1 billion from the Master Settlement Agreement, none of which has been directed
toward tobacco reduction and control. Instead, most of these funds have been used to pay back general appropriation bonds purchased by the state in 2003 and to pay for the Tobacco Enforcement Fund, which was established to fund the Oregon Department of Justice’s enforcement of the Master Settlement Agreement.

In 2001, the Oregon Legislature approved the Oregon Opportunity Act, which authorized the state to provide $200 million to Oregon Health & Science University through the sale of bonds. The Master Tobacco Settlement is also being used to pay back those OHSU bonds.

For the 2011-2013 biennium, Oregon allocated $144.7 million to the Oregon Appropriation Bond Fund and $31.6 million to the OHSU Bond Fund. After the debt service transfers have been satisfied for the 2011-13 budget, the Department of

Administrative Services will transfer funds to the Oregon Department of Justice (approximately $1.2 million) for tobacco enforcement and to the Oregon Health Authority ($30 million) for the Oregon Health Plan.

While there is no legal requirement that any Master Settlement Agreement money be allocated to the Tobacco Use Reduction Account, that money may be used to reimburse smoking cessation program providers (ORS 431.831). At its March meeting, the Public Health Advisory Board passed a recommendation that the state finally turn
that may into a must.

“The board has a responsibility to put it (the new recommendation) forward as a Public Health Advisory Board concept priority, knowing the reality of how hard it may be to move it,” Alejandro Queral, a member of that Board, explained. “This concept is different than past Master Settlement Agreement concepts in that it looks at a more
permanent solution to the problem, rather than looking short term at the current biennium.”

More specifically, the Public Health Advisory Board’s recommendation says that the director of the Oregon Health Authority submit a legislative proposal that 40 percent of the annual monies the state receives from the Master Tobacco Settlement be put in the Tobacco Use Reduction Account, the account that funds tobacco prevention programs. Why 40 percent?

The Centers for Disease Control (CDC) has recommended that Oregon spend $43 million a year to have an effective, comprehensive tobacco prevention program. The program currently receives approximately $8 million a year, including both state and federal funds. Forty percent of the $181 million Oregon receives from the Master Settlement agreement is $72.4 million or $36 million a year, which matched with the $8
million already spent on tobacco prevention, is $44 million, enough to meet the CDC’s recommendation.

“That amount (40 percent) would help plug the gap that currently exists
between what the CDC recommends that Oregon spend and what Oregon has actually been spending,” noted Queral, program officer with Northwest Health Foundation. “If this was done (the 40 percent recommendation), the Oregon Tobacco Prevention and
Education Program could prevent more children from becoming addicted to tobacco and help more people quit smoking.”

In fact, during the 2012 legislative session the Legislature diverted $1.5 million (9 percent) in Tobacco Prevention and Education Program funding from the Tobacco Use Reduction Account for other general fund uses.

Other anti-tobacco advocates like Brett Hamilton, executive director of the Tobacco Free Coalition of Oregon, hopes that the legislature will redeem itself in 2013 by directing a percentage of the Tobacco Master Settlement proceeds into tobacco prevention.

"There is less money available now for Oregon’s tobacco control program, at a time when the declines in the state’s adult smoking rate have stalled, and our kids have the highest rate of accessing tobacco from retailers in the nation,” Hamilton said. “This is coupled with the fact that tobacco use disproportionally harms populations that are
suffering health inequities. Oregon's needs to revitalize its efforts in tobacco control to save lives and reduce health care costs. Investing funding into the state tobacco prevention and education program has proven to be effective."

The Lund Report was not able to obtain a statement from the Oregon Health Authority about the Public Health Advisory Board’s recommendation by press time.

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