Tobacco money becomes state's slush fund

Missouri's legislators have debated for two years how to best spend the state's tobacco settlement, currently estimated at $4.5 billion over 25 years. Thanks to expected partisanship and unexpected mushiness from all sides over how the money could do the most good, the legislators haven't been able to come up with a plan.

Never mind. Gov. Bob Holden has decided to spend a big chunk of the money to prop up state spending.

And, if the governor has his way, he will get the authority to encumber even bigger chunks if the state's finances are devastated by a disaster.

So far, the state has received $389 million of its first-year installment of the tobacco settlement. Another $110 million is expected in April. And the governor has committed $298 million of the first year's take to cover the checks being written for the state's over-spending.

Let's briefly review the tobacco settlement and see if the money coming to the state is being spent wisely or as it was intended.

All the states that sued Big Tobacco claimed they were entitled to compensation for medical expenses the states had incurred related to health problems caused by smoking citizens. Rather than pay for years of expensive litigation -- Missouri's lawyers are getting more than $100 million for a few months of work -- Big Tobacco agreed to make huge payments for 25 years. Presumably, the state would use the money to cover the expense of future tobacco-related medical expenses and, perhaps, use some of the money to prevent smoking or get smokers to quit.

Two big fallacies here are easy to spot.

The first is the incorrect claim that the state's money was used for all those medical expenses when, in fact, the state has no money. It was taxpayers' money that was used. Rightfully, every dime of the tobacco settlement should be used to reduce taxes as a way of repaying taxpayers.

The second is best put this way: Because there is no plan in place for spending the tobacco money, the governor feels free to spend it however he chooses. And when there is a major budget crunch, no one will argue with him. So far, none of the money has been spent on tobacco-related expenses.

Now the governor wants the authority to issue bonds that would be repaid by funds from the tobacco settlement. With the bonds, huge sums of money could be mustered to pay for "disasters." Perhaps the governor's next step will be to declare the state's highways a "disaster."

Keep in mind that using bonds would also incur enormous interest expenses, which means only part of the tobacco money could be put to any use. The rest would go to bondholders.

The legislature has yet to speak on this issue. It has the power to determine the future of the governor's proposals. One thing's for sure: The money will be spent. The question is: For what?