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May 18, 2000     (512) 463-0300

Subcommittee on Tobacco Settlement Proceeds Takes a Look at What Other States are Doing

AUSTIN - The Senate Finance Interim Subcommittee on Tobacco Settlement Proceeds held a meeting today, Thursday, May 18th 2000, at the Texas State Capitol to review expenditures by agencies and institutions that received appropriations from tobacco settlement proceeds. The review is to ensure the efficient and effective use of those funds, and to determine the best way to spend future tobacco settlement proceeds.

Lee Dixon, from the National Conference of State Legislatures, provided today's invited testimony. He briefed the subcommittee with an analysis of other states' use of tobacco settlement proceeds and ideas for the future use of those proceeds.

In November 1998, tobacco companies signed an agreement with 46 states, which was the largest settlement of its kind -an estimated $206 billion over the next 25 years. This is called the Master Settlement Agreement. But four other states including Texas had reached previous separate settlements for a total of $40 billion. The states can spend the money any way they wish.

State Legislatures around the nation have been working to make sure their states receive their shares of the tobacco settlement, and to consider how they would spend the funds. Half of the states have not yet passed any legislation regarding the proceeds and those who have enacted laws have done so in very broad terms. Many states are establishing trust funds -- separate accounts in the state treasury -- or more permanent endowments to manage the funds. Another issue to be considered by states is whether to spend all the revenue or to save some or all for the future.

The states that have already allocated some of these funds have covered a variety of needs, like health care services (Medicaid and indigents' care among them), tobacco use prevention and cessation campaigns, long-term care, education, childhood development programs like Head Start and programs that encourage tobacco farmers to plant other crops. Other states have invested some of the allocations in budget reserves, general funds, industrial bonds, tax rebates, budget deficit reduction, water resources and flood control.

Tobacco settlement proceeds for Texas amount to $15.3 billion. In 1999, House Bill 1676 established $1.5 billion in endowments, to be spent on health and education programs. The Legislature will continue the discussion about how to invest and spend the tobacco proceeds in the next session, which convenes in January 2001.

Following Lee Dixon, the subcommittee heard public testimony from two representatives of veterans' organizations. They said veterans should receive some of the money. They asked for $150 million for better health care, veterans' homes, and cemeteries.

The subcommittee consists of five members appointed by Finance Chair Bill Ratliff of Mt. Pleasant. Senator Royce West of Dallas serves as chair. Other members of the subcommittee include Senators Robert L. Duncan of Lubbock, Troy Fraser of Horseshoe Bay, Mike Moncrief of Fort Worth, and Steve Ogden of Bryan.

The subcommittee recessed subject to call of the chair.

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