The idea was to sock away the state’s multimillion-dollar annual payments from a tobacco lawsuit. The trust fund balance would grow, the money would be invested and the state would spend only the earnings to cover health care expenses.
Things didn’t work out as planned.
The Great Recession happened. Budget problems happened. The body of the trust fund was whittled away year by year. And now, the health care trust fund has been drained dry.
The budget summary from the 2016 legislative session shows the fund will have a zero balance on July 1 (http://1.usa.gov/1XZftk9 ).
The state will receive about $116 million for its annual settlement payment in the next few months, but that money won’t be invested for the future. Instead, it will prop up the tight state budget for the coming year.
In 1994, Mississippi became the first of many states to sue tobacco companies to recover public costs of treating sick smokers. Democratic Attorney General Mike Moore used private attorneys to represent the state, and Republican Gov. Kirk Fordice said the lawsuit was a money grab by trial lawyers who were some of Moore’s most generous campaign donors.
In 1997, Mississippi settled its lawsuit with a promise of perpetual annual payments from tobacco companies to the state, and a generous payday to the private attorneys.
Although the payments to the state are supposed to continue as long as the tobacco defendants are in business, the winnings were often expressed in easy-to-digest terms: Mississippi would receive about $4 billion over the first 25 years.
In 1999, legislators created the trust fund with a long-term vision of having an ever-growing pot of money to pay for health care.
Draining the trust fund has been a bipartisan effort. It started when Democrats controlled the House and Senate and has continued under Republican control the past several years.
Just a year after the fund’s creation, it was helping pay for children’s health insurance, nursing homes, trauma care and mental health services. State tax collections were running $28 million short of expectations in January 2000, and education cuts were looming. After a briefing that month on the half-billion dollar balance in the health care trust fund, the House Appropriations Committee chairman, Democratic Rep. Charlie Capps of Cleveland, joked: “I get a little greedy when I see all of that.”
House Public Health Committee Chairman Bobby Moody, D-Louisville, replied that he would oppose any change to the trust fund. Once legislators started dipping into it, Moody predicted it would be “spent on every program that somebody comes along with.”
During his final year as attorney general in 2003, Moore warned against frittering away the fund.
“If they keep spending the money, it’ll be gone,” he said. “It’s not a slush fund; it’s a trust fund.”
For the past several years, legislators have put annual tobacco settlement payments directly into the state budget rather into the body of the trust fund, where it could earn more money. The tobacco settlement has been spent on health care. For example, Medicaid has received nearly $63 million from the trust fund this budget year and will receive more than $87 million from it next year.
But tax dollars that might have gone to health care have been spent instead on a wide variety of other state programs. There’s also a good argument that the money has helped mitigate budget cuts during tough times.
The health care trust fund is an all-purpose budget booster, but one that falls substantially short of its original purpose.
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