Budget & Tax

Review shows little benefit from TSET spending

June 21, 2021

Ray Carter

In 2000, Oklahomans approved a constitutional amendment directing that the state’s annual payments from tobacco companies, reached as part of a 1998 Master Settlement Agreement, be deposited into a trust from which investment earnings would be spent on smoking cessation and other health-related measures.

The plan was hailed as a triumph of long-range thinking over short-term political desire. But a new independent review shows Oklahoma has reaped relatively little benefit from the trust’s spending and smoking prevalence is higher in Oklahoma than in a state that dedicated no settlement money to smoking cessation.

In its latest report presented to lawmakers, the Legislative Office of Fiscal Transparency (LOFT) evaluated the outcomes generated by the Tobacco Settlement Endowment Trust (TSET) spending over the past two decades.

The conclusions were blunt.

“Oklahoma’s ranking for tobacco use remains one of the worst despite high levels of spending and continued protection of the settlement fund,” said Shannon Rios, senior program manager of process improvement at LOFT.

The state’s tobacco settlement fund today holds $1.7 billion, which generates between $50 million and $60 million per year in annual earnings, and TSET’s most recent budget was $54.95 million.

But Rios told lawmakers serving on the Oversight Committee for the Legislative Office of Fiscal Transparency that LOFT’s review of TSET found “a lack of evidence demonstrating correlation between state spending on tobacco cessation and prevention and smoking prevalence.”

Oklahoma ranks eighth-best nationally for spending on anti-tobacco efforts, but still ranks 40th worst for smoking with one of the nation’s highest prevalence rates among adults, and ranks 44th for youth smoking, according to the report.

“Connecticut, which does not dedicate any state funding to tobacco prevention, ranks fourth in adult-smoking prevalence, further demonstrating a disconnect between spending and outcomes,” Rios said.

“Connecticut currently appropriates no funds towards tobacco cessation either from their general funds or from the Master Settlement Agreement,” said Frank Magness, financial analyst at LOFT.

Similarly, the state of Washington spends just 3.4 percent of the amount recommended by the federal Centers for Disease Control and Prevention (CDC) for anti-tobacco efforts, yet Washington has the sixth-lowest rate of adult smoking. Rhode Island spends just 3.1 percent of the CDC-recommended level and has the 10th-lowest adult smoking rate.

Nationally, states spend less than 20 percent of the amount recommended by the CDC on anti-smoking efforts. Oklahoma spends more than 50 percent of the recommended amount, but the LOFT report indicated Oklahoma is spending more for less.

“Oklahoma’s smoking rates remain among the highest in the nation,” Rios said. “While there’s been progress over the past 20 years, the state’s improvements lag behind the progress achieved in other states.”

In 2018, data showed 19.7 percent of Oklahoma adults smoked tobacco, compared to a national average of 16.1 percent, while 9 percent of Oklahoma high-school students smoked tobacco cigarettes compared to 6 percent nationally.

According to the LOFT report, over the past decade the annual healthcare-related and economic costs of tobacco use in Oklahoma have increased from $3.1 billion to more than $4 billion.

Some health measures have even declined amidst the backdrop of TSET spending.

“With cardiovascular-disease deaths, Oklahoma has worsened its ranking, now having the highest heart-disease mortality rate in the nation,” said Zach Sumner, senior project manager of financial operations and change management at LOFT. “Cigarette smoking is responsible for approximately 20 percent of these deaths.”

Trends in other areas are little better, he said.

“As demonstrated with trend data on cancer deaths, cardiovascular-disease deaths, and obesity, these health outcomes do not show TSET’s expenditures have had a measurable impact,” Sumner said.

TSET officials defended the agency’s spending, saying it is unrealistic to expect one organization to generate major behavioral change.

“No one single entity, no one single program is going to be the thing that makes you change your behavior,” said Julie Bisbee, executive director for TSET. “Your family, your environment, your job, your health insurance are all playing into that factor.”

Regina Birchum, deputy director of LOFT, said the review also found “no apparent alignment of TSET resources with the areas of the state that have the highest rates of smoking prevalence.”

Other than Kiowa and Nowata counties, Birchum said the “counties with the highest smoking rates do not align with the counties receiving the highest level of funding from TSET.”

Greer County, which is among counties with the highest levels of smoking—between 29 percent and 37 percent—“does not have any community-grant investment by TSET,” Birchum said.

Bisbee told lawmakers some communities with high levels of smoking have not been interested in TSET grants.

“We run competitive-grant processes, which means folks in the local community have to come together and apply, because we want to be making investments with organizations that can do the work and are a good investment,” Bisbee said. “So in some of those counties you’ll see that they have not applied for grants.”

Sen. Roger Thompson, R-Okemah and co-chair of the LOFT oversight committee, questioned if TSET grants lead to behavioral changes, saying grants for walking trails do not necessarily eliminate smoking.

“You can offer a grant to a city for nonsmoking and then people (are) still smoking on the sidewalks and still smoking in the city,” Thompson said. “They’ll take a break on one of the walking trails for a smoke before they get to the end of it.”

He suggested officials from applicant cities may be more interested “in raising additional cash for the city” than “interested in raising the culture of health.”

“If our grant dollars bring people to the table and they still are not successful, that’s still a win,” Bisbee said. “We see benefit when people are coming together to talk about health.”

Birchum noted the Oklahoma Tobacco Helpline reports 34 percent of those who use its services succeed in tobacco cessation, but the helpline is used by just 3 percent of the population and the share of callers registering for services “has been declining for several years.”

While tobacco-tax increases are often sold as a way to drive down consumption, LOFT officials said that has not occurred to the degree expected in Oklahoma.

“Tax increases have not had a significant impact on smoking rates,” Rios said.

When Oklahoma’s cigarette tax was previously increased to $1.03 per pack, starting in 2005, the share of adult smokers in Oklahoma represented 25 percent of the population and barely moved for most the next decade. It was not until 2014 when the share of adult smokers fell to 21 percent.

The cigarette tax was increased by another $1 per pack in 2018, raising the tax to $2.03, which is higher than the rate in all but 16 states, according to the LOFT report.

Magness said the data indicates Oklahomans are “less sensitive to tax-rate increases as a method of lowering” tobacco use than what is typical in “other states.”

A written question submitted by Rep. Cyndi Munson, D-Oklahoma City, asked how high the tobacco tax would have to be raised to slash Oklahoma’s adult-smoking rate to 10 percent of the population, the goal of many health officials.

“Based on U.S. Surgeon General data, as well as a financial look at what it would take to get to 10 percent using tax as the only way to actually drive smoker prevalence, the tax would have to be $13.88,” said Mike Jackson, executive director of LOFT. “The total price is estimated at $20.23 per pack.”