Tobacco Settlement: States' Allocations of Fiscal Year 2004 and Expected Fiscal Year 2005 Payments

In the 1990s, states sued major tobacco companies to obtain reimbursement for health impairments caused by the public's use of tobacco. In 1998, 46 states and four of the nation's largest tobacco companies signed a Master Settlement Agreement (MSA) that requires the tobacco companies to make annual payments to the states in perpetuity as reimbursement for past tobacco-related health care costs. The MSA commits the tobacco companies to pay the states approximately $206 billion over the first 25 years. Some of the states have arranged to receive upfront proceeds based on the amounts that tobacco companies owe by issuing bonds backed by future payments. The Farm Security and Rural Investment Act of 2002 requires GAO to report annually on the amount of MSA payments that states receive through fiscal year 2006. This fourth report provides information on (1) the payments the 46 states received in fiscal year 2004 and expect to receive in fiscal year 2005 and (2) states' allocations of these funds to various program categories and changes from prior years. To conduct this study, GAO surveyed the 46 states.