SID SALTER: Tobacco fund heads to total depletion

When Gov. Haley Barbour took office there was about $630 million in the state’s supposedly “inviolate” Health Care Trust Fund – the repository of the state’s tobacco settlement.
If Barbour’s Fiscal Year 2012 budget recommendation is adopted by the Legislature, the fund will contain about $50 million when Barbour vacates the Governor’s Mansion. Joint Legislative Budget Committee numbers show a current unobligated balance in the fund of $102.5 million.

Writing on the wall
Lawmakers are planning to spend $56.2 million from the fund in the FY2012 budget. Barbour’s budget also relies on a chunk of the tobacco fund.
Barbour publicly signaled lawmakers in this year’s “State of the State” address in January that he knew the tobacco fund was headed to fiscal extinction.
“Since I’ve been governor, it has become clear to me that (the Health Care Trust Fund) is not and never will be held in trust in the true sense of the word,” Barbour said. “It will never build up since the interest or earnings are not large enough to be material in future budgets. So, while I didn’t propose it, if it is the will of the Legislature, I will agree to spending down the balance of the existing fund, as long as it is done on a schedule of equal payments over a period of at least four years.”
Four years? Good luck with that. After FY2012, the state will likely be spending the annual tobacco payment hand-to-mouth with no trust fund whatsoever.
In 1999, the year after former Attorney General Mike Moore brought the state’s first $174 million settlement payment into the state treasury, the Legislature made a gaudy public commitment to saving the principal of the tobacco settlement to create a permanent revenue source for health care.
They said the trust fund would be “inviolate” – then proceeded to violate the living daylights out of it year after year. Left alone, the fund would today contain more than $2 billion in principal earning millions in annual interest payments to spend on public health care in the state in perpetuity.

Plan ignored
Along with the Health Care Trust Fund, the Legislature also established in 1999 the Health Care Expendable Fund, which provided a schedule of transfer payments from the Trust Fund to the Expendable Fund to be spent exclusively for health care:
In FY 2000, $50 million; FY 2001, $55 million; FY 2002, $60 million; FY 2003, $65 million; and in FY 2004 and “each subsequent fiscal year, a sum equal to the average annual income of the investment” of the trust fund since July 1, 1999.”
But faced with growing state budget deficits – many caused by Medicaid spending – the Legislature began first to “borrow” from the Health Care Trust Fund with the promise to repay the funds.
Then, lawmakers began to “intercept” the annual payment from the tobacco companies before it was deposited into the trust fund.
History should record this as a huge wasted opportunity.

Contact Clarion-Ledger Perspective Editor Sid Salter at (601) 961-7084 or e-mail ssalter@clarionledger.com.

SID SALTER