The state trust fund established with the tobacco settlement money is drying up at the same time the state faces declining sales tax revenues — raising questions about the wisdom of the fund. Lawmakers voted in 2000 to sell 78% of the $246-Billion settlement in order to get a lump sum of cash for the fund.
Former Republican state senator Jeff Lamberti of Ankeny help put together the deal for the trust fund. Lamberti says there was talk of the tobacco companies going into bankruptcy to avoid paying some of the settlement, so the lump sum deal made sense.
"The model was good other states were doing it. I think in hindsight the thing we’ve learned is if government has an unrestricted pot of money to spend they will spend it and that’s unfortunate because I think the model was the right model for us to do," Lamberti says.
Lamberti says the idea was to maintain a sufficient minimum balance in the fund to earn enough interest to make the fund self-sustaining. The goal was to use the money solely for healthcare. But lawmakers almost from the start began spending more money than the fund could sustain.
Senator Jack Hatch, a Democrat from Dens Moines, chairs the budge subcommittee that oversees funding for health and human services. Hatch says part of the problem is that the cost of healthcare is escalating faster than revenue growth, it’s rising faster than inflation so they’re are dealing with a population and cost of treatment that is escalating faster than the money coming in.
"So this is going to happen, it’s not that were spending the money wrong we just don’t have enough of it to spend," Hatch says. Anti-smoking activists though question the legislature’s decision to sell off part of the settlement to create the trust fund.
American Cancer Society representative, Cathy Calloway, says that money is now nearly gone. "The tobacco control community was never in support of the securitization. The idea that tobacco companies were going to go bankrupt or out of business was preposterous. Once it happened here in Iowa, we weren’t surprised how the money has been spent," Calloway says.
Calloway says she now worries about finding funding for tobacco prevention and programs to help people stop smoking. Calloway says the "hard hitting" counter marketing campaign put together by the JEL (Just Eliminate Lies) program influenced young people to quit smoking and she says the smokers quitline and its wide promotion helped people to stop smoking.
A spokesman for the Iowa Department of Public Health says they derive about 12% of the department’s total budget from the healthy Iowans tobacco trust fund. He says they’re concerned about that funding running out, as a number of programs currently rely on that money.
Majority Democrats defend spending down the trust fund, saying the money had to be used to fund rapidly increasing healthcare costs, and say Republicans made the same decisions when they were in control.