In 1997 and 1998, four states—Florida, Minnesota,  Mississippi, and Texas—settled their lawsuits by negotiating independent  agreements with the tobacco industry. States Have Received Billions to Date From the Master Settlement Agreement

As of April 2001, 45 of the 46 states that signed the Master Settlement  Agreement had received nearly $13.5 billion in payments from the tobacco  companies. Types of MSA-Related Payments

Currently, states receive two types of payments as a result of the MSA— annual payments and initial payments. (See appendix IV for estimated payment  amounts for the first 25 years of the MSA.) As part of the decision- making process, some states established planning commissions and  working groups to develop recommendations that resulted in a strategic  plan for the state’s use of the funds. Forty-two of the 46 states have made  decisions about the allocation of MSA payments, and in 30 of these states  the legislature enacted laws to ensure that these payments are restricted or  used for specific purposes. Wyoming has dedicated its settlement payments to an  endowment fund and all of the interest in fiscal years 2000 and 2001 was  allocated to tobacco control. The  agreement includes the 13 tobacco states that are a party to the MSA and  the state of Florida, which reached an earlier, independent settlement with  the tobacco industry. 2. “Disbursements from the fund to programs funded by the state or with federal funds administered by the state  shall be used solely to supplement, and not to supplant, funds otherwise available for the programs under federal or  state law as provided in this section.”
Massachusetts Established the Tobacco Settlement Fund to receive 30% of tobacco settlement payments received by the state and  30% of the earnings on the Health Care Security Trust as well as other sources of funding.
Why GAO Did This Study

The attorneys general of 46 states signed a settlement agreement in 1998 with the nation's largest tobacco companies. The agreement requires the tobacco companies to make annual payments to the states in perpetuity as reimbursement for past tobacco-related costs. Florida, Minnesota, Mississippi, and Texas reached earlier individual settlements with the tobacco companies. States are free to use the money for any purpose. This report examines (1) the amount of payments received by the states and the states' decision-making processes on the allocation of payments in fiscal years 2000 and 2001 and (2) the types of programs that states funded with their payments in those two fiscal years.

What GAO Found

As of April 2001, GAO found that 45 of the 46 states received nearly $13.5 billion of the $206 billion estimated to be paid by the tobacco companies during the first 25 years of the agreement. Many states established dedicated funds to receive at least part of the payments. Other states passed legislation to ensure that payments are used to supplement existing state funds, enacted laws governing the future use of the payments, established voter approved initiatives to decide how to allocate the payments, and created special commissions to develop recommendations and long-term plans for the payments. The types of programs that states tended to fund were tobacco control and health care.