THE way states handled their national tobacco settlement windfall may forecast how national mortgage settlement funds are managed — and critics say that's not good.
The multistate tobacco lawsuit settlement in 1998 was expected to provide participating states, including Oklahoma, a combined $246 billion over the first 25 years. Health care advocates hoped the money would be used to address health needs, particularly smoking reduction, but a 2011 report by the Campaign for Tobacco Free Kids found that largely hasn't been the case.
The report showed that in fiscal year 2012, the states collected $25.6 billion from the tobacco settlement and from tobacco taxes, a near record. Yet funding for tobacco prevention and cessation programs was slashed by 12 percent — and by 36 percent over four years.
Nationally, in fiscal 2012 just 1.8 percent of tobacco revenue was used to prevent kids from smoking and help adult smokers quit; the total spent in all states on tobacco prevention programs and the percentage of tobacco revenue dedicated to those programs was the lowest since 1999.
Critics suggest the same thing may already be happening to billions reaped this year by a multistate settlement with the country's five largest mortgage services companies for alleged consumer abuses. Under that settlement, the banks will pay more than $25 billion, with $2.5 billion of that going directly to states for housing counseling and foreclosure prevention programs. But in many cases, states have chosen to use the money for other needs.
A report by Enterprise Community Partners found that just $1 billion of the $2.5 billion total was dedicated to helping distressed homeowners. Much of the remainder was directed to other uses, including propping up state spending in unrelated areas.
Fortunately, Oklahoma has been a more responsible steward of tobacco and mortgage settlement funds. According to the Campaign for Tobacco Free Kids, Oklahoma ranks seventh in the nation in the amount of state spending directed to tobacco prevention (measured as a percentage of the U.S. Centers for Disease Control and Prevention recommended funding levels).
Oklahoma's tobacco settlement funds are governed by a constitutionally created Tobacco Settlement Endowment Trust; only interest earnings from settlement funds may be spent on health, education and tobacco prevention programs. The trust determines how 75 percent of funds are spent, with the Legislature controlling the remainder.
Attorney General Scott Pruitt negotiated a separate, single-state agreement with mortgage lenders. Oklahoma got $18.6 million and is in the process of providing payments to families legitimately harmed by lending abuses. Those families are expected to receive between $5,000 and $20,000 apiece, which is up to 10 times more than the direct payments made under the national settlement.
Pruitt's office also is partnering with Legal Aid Services of Oklahoma, the Oklahoma Bar Association and Oklahoma Lawyers for America's Heroes Program to help families successfully navigate mortgage issues.
Even with Oklahoma's better management, the evidence from other states suggests these national lawsuits, touted as a way to right consumer wrongs, were falsely justified. As time goes by, the lawsuits' benefit has accrued less and less to allegedly victimized citizens and more and more to enriched bureaucrats and lawyers.