Budget & Tax

Two reforms for TSET

January 30, 2018

Trent England

This article was published in OCPA's Perspective magazine View Issue

He approaches you on the sidewalk and asks for money. He does look a little disheveled, maybe down on his luck, but something catches your eye. In the cart behind him is a cashbox with its lid partly open. In fact, the lid can’t close because it’s packed to overflowing with twenty-dollar bills.

“What’s the deal?” you demand. “You’re begging for money when you’ve got a whole bunch right there!”
He's offended. “That’s my savings,” he retorts, “I can’t spend that.”

And so some Oklahoma officials decry tight budgets and demand tax increases, all while the state has one account holding more than a billion dollars. The account is held by the agency called TSET—Oklahoma’s Tobacco Settlement Endowment Trust—and is a model of how not to build a bureaucracy.

TSET was set up to hold money the state receives from its participation in the tobacco lawsuit in the 1990s. It is subject to no political control or accountability and has a mission so broad it can use funds on anything related to health, education, or whatever else might benefit Oklahomans. What it does, predictably, is spend some money on high priorities like cancer research, but also spend money on absurd projects like hassling people not to drink soda while paying for advertising for bars and sleazy nightclubs that happen to ban smoking.

And this is just what TSET does with the earnings from its growing savings account. The bulk of the money is—for now—locked away. That might have seemed like a good idea when people thought it would only amount to a few million, or even tens of millions, of dollars. But today TSET sits on a pile of more than $1.1 billion.

The time has come to reform TSET in two ways. First, new tobacco settlement dollars should be redirected to high-priority health care needs (rural hospitals, care for veterans, etc.).

Second, TSET’s endowment should be reduced, capped, and limited to helping people quit smoking and to health care needs related to smoking (what most people thought TSET was about in the first place). Excess TSET funds should be appropriated by the legislature, which might use these temporary revenues to cover transitional costs related to criminal justice reforms or tax reforms (or both).