Black Jet Theory – Volume 2020-13 – The Tobacco Settlement Endowment Trust and Why It’s Important
July 24, 2020 by Marshall Snipes
In 1996, 24.7% of Oklahomans smoked tobacco products. By 2001, the smoking rate increased to 28.7%.[1] The high rate of smoking in Oklahoma, in part, caused the state’s overall health ratings to be abysmal. At that time, the attorney generals of 46 states had filed various lawsuits against the tobacco companies. Those lawsuits were settled in 1998 through a Master Settlement Agreement requiring the tobacco companies to make an annual payment to the individual states, as long as cigarettes were sold in those states.
Through the efforts of then Attorney General Drew Edmondson, then Legislator Jari Haskins and others, the Oklahoma Legislature passed a joint resolution to allow the public to vote on a constitutional amendment establishing the Tobacco Settlement Endowment Trust (“TSET”) to hold those annual payments in part, in trust. The constitutional amendment was approved by the voters in 2000. The earnings from those annual payments were to be used for clinical and basic research, the prevention of cancer from smoking, cost-effective tobacco prevention and cessation programs, programs to improve the health of Oklahomans with an emphasis on children and seniors, and for authorized administrative expenses.[2] Attorney General Edmondson said “I can’t imagine an issue with more lasting impact than the issue of smoking, the litigation with the industry, and the creation of the Tobacco Settlement Endowment Trust. It’s going to have a profound impact on the State of Oklahoma far beyond my life.”[3]
Oklahoma is the only state in the United States that used their settlement money to establish a constitutional trust. Other states used the settlement money in different ways, but no state has any remaining portion of those annual payments. Oklahoma, as of June 30, 2019, has a trust valued at $1.3 billion and had contributed $47.7 million in the current fiscal year to its programs to stop smoking and improve the health of Oklahomans.[4] Those payments will continue in perpetuity as long as cigarettes are sold in Oklahoma.
TSET’s major programs are Tobacco Prevention, Obesity Prevention, and Research and Health Communications. The Tobacco Prevention efforts have resulted in establishing the Oklahoma Tobacco Helpline which has served over 400,000 Oklahomans, and the Helpline Referral Process including 65 hospitals and 235 clinics, and funding for the Physician Manpower Training Commission with 42 doctors participating and practicing medicine in rural and underserved areas.[5]
The Obesity Prevention efforts have resulted in providing grants and expertise to schools, city governments, community organizations and businesses at the local level to encourage and support the passage of health promoting policies. Once those policies are in place, the local community qualifies for incentive grants including programs to promote physical activity and proper nutrition.
Research efforts include cancer treatment and research at the Stephenson Cancer Center with more than 2,500 patients enrolled in clinical trials, establishment of the Oklahoma Tobacco Research Center which conducts behavioral research around addiction, cessation, and e-cigarette usage, and provides funding for the Oklahoma Center for Adult Stem Cell Research.[6]
Health Communications efforts have included the “Tobacco Stops with Me” program, which educates Oklahomans on the dangers of smoking, the “Shape Your Future” campaign which offers resources to promote healthy choices that prevent obesity and promoting the signature program, the Oklahoma Tobacco Helpline.
The results of these programs have been successful. According to Julie Bisbee, Executive Director of TSET, “independent research shows that TSET has seen smoking decline 10 times faster than other states with similar price and policy environment”.[7] As of 2019, the smoking rate dropped to 19.7%.[8] The 2019 national average rate is 16.1%.[9] TSET’s goal is to reduce the rate to less than 10% by 2024 achieving Oklahoma Governor Kevin Stitts’ goal of making Oklahoma a Top Ten state in lowering tobacco usage. Obesity continues to be a problem in Oklahoma. Oklahoma had a 34.8% obesity rate in 2019, down from 36.5% in 2018, while the national average is 30.9%.[10] In two of the last three years, the obesity rate has decreased.[11] While the Obesity Program at TSET is relatively new, its impact is beginning to take effect. Most of TSET’s programs have had varying degrees of success. Those that didn’t were discontinued.
By establishing TSET, future earnings on the principal available for its programs are guaranteed, unless the constitution is amended, even if the tobacco companies for some reason discontinued selling tobacco products. General Edmondson believed the establishment of the trust would protect the money to be used for its intended purpose. “This money would be protected from the legislature. This money would be spent for the purposes it was intended and would not be diverted.”[12] Governor Keating also endorsed the establishment of TSET with public input. “My first impression was that this was the way to go, to have the public involved in a constitutional amendment. It was wise public policy. The process was constructed to have a vigorous debate, find the best idea and move that idea forward. That was the reason, I think, we can look back with considerable pride as a state that we did it the right way.”[13]
The legislature bypassed the Governor in the 2020 legislative session and passed a joint resolution to change the constitutional formula regarding the division of tobacco settlement money between the legislature and TSET. Constitutional amendments require a vote of the people. Currently, TSET receives 75% of the annual settlement payment from the tobacco companies and the legislature receives 25%. State Question 814 on this November’s ballot amends the constitution to reverse the payment amounts with TSET receiving 25% and the legislature 75%. The additional portion of the annual payments directed to the legislature are restricted to use for Medicaid expansion as a result of the recently passed State Question 802. Medicaid expansion is now a constitutional provision that forces the state to expand the definition of eligible participants in Medicaid without any provision for paying for the additional cost of the expansion. Thus, there is pressure on the legislature to find additional funds to pay for expansion.
The amount of the annual payments paid by the tobacco companies is in decline. As smoking has declined the amount of money TSET receives correspondingly declines. As more money is spent by the public on e-cigarettes, less money will be spent on tobacco products covered under the Master Settlement Agreement further deteriorating TSET’s share of the tobacco company annual payments. Over the years since the formation of TSET, the legislature has attempted to gain control over the TSET funds. Those efforts to date have been unsuccessful.
By amending the constitution, the annual payment amounts diverted from TSET to the legislature will diminish the effectiveness of TSET in the long run and allow the legislature to apply different standards for the expenditure of those annual payments. Those standards are subject to change from year to year with the shifting political winds.
Common sense, the Black Jet Theory[14], dictates that “if it ain’t broke don’t fix it”.
Don’t take my word for it, think for yourself.
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[1] TSET website. www.tset.ok.gov
[2] Oklahoma Constitution Article 10 Section 40 – Tobacco Settlement Endowment Trust Fund. https://ballotpedia.org/Article_X,_Oklahoma_Constitution
[3] Statement by Attorney General Drew Edmondson. https://youtu.be/yw7fd3Tr6UQ
[4] Audited Financial Statements of the Tobacco Settlement Endowment Trust. https://tset.ok.gov/sites/g/files/gmc166/f/2019-FS-6-30 Tobacco Settlement Endowment Trust Fund-FINAL.pdf
[5] Interview with Julie Bisbee, Director of TSET.
[6] Ibid
[7] https://tset.ok.gov/content/oklahoma-smoking-rates-decline-faster-other-states-due-tset-effort
[8] https://www.americashealthrankings.org/explore/annual/measure/Obesity/state/OK
[9] Ibid
[10] Ibid
[11] Ibid.
[12] Statement by Attorney General Drew Edmondson. https://youtu.be/yw7fd3Tr6UQ
[13] Statement by Governor Frank Keating. https://youtu.be/yw7fd3Tr6UQ
[14] Snipes M. The Black Jet Theory is “the notion that most of what currently happens, when viewed through the filter of common sense and critical thinking, leads to a different conclusion, than the widespread view of current thinking by those who control the dissemination and content of information (academia, the media, politicians and other “experts”)”. Black Jet – Volume 2020-1, May 1, 2020.