Jul 7, 2002 3 min read

MADISON, Wis. (AP) – Wisconsin lawmakers are considering using the state’s entire share of the national tobacco settlement – once estimated to be worth $5.9 billion – to help cover a one-time budget deficit. The settlement, signed in 1998 by tobacco companies involved in a class action lawsuit over health care costs, was set up to pay the states over a 25-year period. About a dozen states, including Wisconsin, chose instead to sell the future profits to investors, leaving them only a fraction of the promised money but making it available immediately.

Most of those states put the money into escrow accounts to earn interest.

Wisconsin is the only one considering using all the profits for a one-time budget Band-Aid, according to the National Conference of State Legislatures.

“It’s fiscally irresponsible, and it blows what we could be using in the future to fight death and disease in Wisconsin,” said Maureen Busalacchi, deputy director for SmokeFree Wisconsin.

The state sold its tobacco settlement payments in May for about $1.3 billion. In effect, it sold bonds to investors to borrow against its share of the settlement.

The state Senate last week passed a bill that would use the remaining $825 million of that amount – it had already approved using the other $450 million – to solve a $1.1 billion deficit. The Assembly is expected to consider the proposal Monday.

Before the state learned of its budget deficit, it had planned to put the money into a permanent endowment fund and use the interest to pay for anti-smoking efforts and other state programs.

The state’s tobacco control board, which has a $15 million budget for 2002-2003, had been slated to get $25 million a year.

Tim Roby, a spokesman for Gov. Scott McCallum, said Wisconsin was left with little choice once it became clear the Legislature was not going to adopt the governor’s plan to phase out the $1 billion in state aid to local governments to use for programs such as police and fire protection.

“If you don’t use the tobacco money, you are faced with extra serious decisions including, first and foremost, a huge tax increase. That was not going to happen,” Roby said.

“It is our rainy day fund, like it or not.”

The plan before the Legislature would still leave Wisconsin with a projected $2.8 billion deficit going into the two-year budget that begins July 1, 2003.

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On the Net:

Wisconsin Legislature: http://www.legis.state.wi.us

SmokeFree Wisconsin: http://www.smokefreewi.org/