a

GAO

United States Government Accountability Office

Report to Congressional Requesters

April 2006 TOBACCO 

SETTLEMENT

States’ Allocations of 

Fiscal Year 2005 and 

Expected Fiscal Year 

2006 Payments

GAO-06-502
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2006

TOBACCO SETTLEMENT 

States’ Allocations of Fiscal Year 2005 

Highlights of GAO-06-502, a report to and Expected Fiscal Year 2006 Payments 

congressional requesters 

In the 1990’s, states sued major 

tobacco companies to obtain 

reimbursement for health

impairments caused by the public’s

use of tobacco. In 1998, four of the 

nation’s largest tobacco companies 

signed a Master Settlement

Agreement (MSA) to make annual

payments to 46 states in perpetuity

as reimbursement for past tobaccorelated health care costs. Some

states have arranged to receive 

advance proceeds based on the

amounts that tobacco companies 

owe by issuing bonds backed by 

future payments. 

The Farm Security and Rural 

Investment Act of 2002 requires 

GAO to report annually, through 

fiscal year 2006, on how states use

MSA payments made by tobacco 

companies. To conduct this study, 

GAO surveys the 46 states. This is

the fifth and final of a series of

reports that provides information 

on 

• the payments the 46 states 

received in fiscal year 2005 and 

expect to receive in fiscal year

2006 and 

• states’ allocations of these 

funds to various program 

categories and changes from

prior years.

The 46 states that are party to the MSA reported receiving about $5.8 billion 

in fiscal year 2005 and expect to receive about $5.4 billion in fiscal year 2006. 

Over the previous 5 years, on average, states received $9.3 billion annually. 

The recent decrease in tobacco settlement funds provided to states has 

occurred because securitized proceeds—payments states obtained from the 

sale of bonds backed by future MSA payments—have declined. Proceeds 

declined because only one state (Virginia) chose to issue a bond and receive 

proceeds in fiscal year 2005, and the two states (California and New York) 

with the largest payments issued bonds in prior years. In fiscal year 2006, 

states reported that all of the tobacco settlement funds they expect to 

receive will be payments from tobacco companies, and none from 

securitized proceeds. 

The MSA allows states to use their tobacco settlement payments for any 

purpose. States reported that they used the largest portion of the fiscal year 

2005 payments and proceeds (32 percent) to fund health-related programs 

and the next largest portion (24 percent) to fund debt service on securitized 

proceeds. States expect health programs to account for the same proportion 

of funds in fiscal year 2006, while they expect debt service to increase to 29 

percent. 

Categories to Which States Allocated the Largest Portions of Tobacco Settlement Payments 

and Securitized Proceeds (Fiscal Year 2005 and Expected Fiscal Year 2006) 

0

5

10

15

20

25

30

35

Debt service on General purposes

securitized funds

Health

Fiscal year

2005

2006 (expected)

Sources: State budget offices and their designees (data); GAO (analysis).

Percentage

32 32

24

29

13 13

www.gao.gov/cgi-bin/getrpt?GAO-06-502.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Robert A. 

Robinson at (202) 512-3841 or 

robinsonr@gao.gov. 
Page i GAO-06-502 Tobacco Settlement

Contents

Letter 1

Results in Brief 3

States Received About $5.8 Billion in MSA Payments and Securitized 

Proceeds in Fiscal Year 2005 and Expect to Receive Somewhat 

Less in Fiscal Year 2006 4

States Allocated the Largest Portion of Their Funds to Address 

Health-Related Programs and Debt Service on Securitized 

Proceeds in Fiscal Year 2005 and Expect to Do the Same in Fiscal 

Year 2006 8

Appendixes

Appendix I: Objectives, Scope, and Methodology 21

Appendix II: Allocations of MSA Payments for 46 States 26

Appendix III: States’ Allocations of Combined MSA Payments and 

Securitized Proceeds for Fiscal Years 2000 through 2006 28

Appendix IV: State-Specific Information on Amounts of MSA Payments 

and Securitized Proceeds Received and Allocated 30

Appendix V: GAO Survey on States’ Allocations of Fiscal Years 2005 and 

2006 MSA Payments 60

Appendix VI: GAO Contact and Staff Acknowledgments 67

Tables Table 1: MSA Payments and Securitized Proceeds States Reported 

Receiving in Fiscal Year 2005 and Expect to Receive in 

Fiscal Year 2006 5

Table 2: MSA Payments and Securitized Proceeds Received by the 

46 States Since Fiscal Year 2000 7

Table 3: Total Amount of Securitized Proceeds Received by States, 

Fiscal Years 2000-2005 7

Table 4: Allocation of States' Combined MSA Payments and 

Securitized Proceeds, Fiscal Year 2005 12

Table 5: Expected Allocation of States’ Combined MSA Payments 

and Securitized Proceeds, Fiscal Year 2006 16

Table 6: Allocations of MSA Payments for 46 States 26

Table 7: Alabama’s MSA Payment Allocations 31

Table 8: Alaska’s MSA Payment Allocations 32

Table 9: Arizona’s MSA Payment Allocations 32

Table 10: Arkansas’ MSA Payment Allocations 33

Table 11: California’s MSA Payment Allocations 33
Contents

Page ii GAO-06-502 Tobacco Settlement

Table 12: Colorado’s MSA Payment Allocations 34

Table 13: Connecticut’s MSA Payment Allocations 35

Table 14: Delaware’s MSA Payment Allocations 35

Table 15: Georgia’s MSA Payment Allocations 36

Table 16: Hawaii’s MSA Payment Allocations 37

Table 17: Idaho’s MSA Payment Allocations 38

Table 18: Illinois’ MSA Payment Allocations 38

Table 19: Indiana’s MSA Payment Allocations 39

Table 20: Iowa’s Allocations of MSA Payments and Securitized 

Proceeds 40

Table 21: Kansas’ MSA Payment Allocations 41

Table 22: Kentucky’s MSA Payment Allocations 41

Table 23: Louisiana’s MSA Payment Allocations 42

Table 24: Maine’s MSA Payment Allocations 43

Table 25: Maryland’s MSA Payment Allocations 43

Table 26: Massachusetts’ MSA Payment Allocations 44

Table 27: Michigan’s MSA Payment Allocations 44

Table 28: Missouri’s MSA Payment Allocations 45

Table 29: Montana’s MSA Payment Allocations 46

Table 30: Nebraska’s MSA Payment Allocations 46

Table 31: Nevada’s MSA Payment Allocations 47

Table 32: New Hampshire’s MSA Payment Allocations 48

Table 33: New Jersey’s MSA Payment Allocations 48

Table 34: New Mexico’s MSA Payment Allocations 49

Table 35: New York’s Allocations of MSA Payments and Securitized 

Proceeds 49

Table 36: North Carolina’s MSA Payment Allocations 50

Table 37: North Dakota’s MSA Payment Allocations 51

Table 38: Ohio’s MSA Payment Allocations 51

Table 39: Oklahoma’s MSA Payment Allocations 52

Table 40: Oregon’s MSA Payment Allocations 53

Table 41: Pennsylvania’s MSA Payment Allocations 53

Table 42: Rhode Island’s MSA Payment Allocations 54

Table 43: South Carolina’s MSA Payment Allocations 54

Table 44: South Dakota’s Allocations of MSA Payments and 

Securitized Proceeds 55

Table 45: Tennessee’s MSA Payment Allocations 55

Table 46: Utah’s MSA Payment Allocations 56

Table 47: Vermont’s MSA Payment Allocations 56

Table 48: Virginia’s Allocations of MSA Payment and Securitized 

Proceeds 57

Table 49: Washington’s MSA Payment Allocations 58
Contents

Page iii GAO-06-502 Tobacco Settlement

Table 50: West Virginia’s MSA Payment Allocations 58

Table 51: Wisconsin’s MSA Payment Allocations 59

Table 52: Wyoming’s MSA Payment Allocations 59

Figure Figure 1: States’ Allocations of Combined MSA Payments and 

Securitized Proceeds for Fiscal Years 2000 through 2005, 

and Expected Allocations for Fiscal Year 2006 10

Abbreviations

MSA Master Settlement Agreement

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-06-502 Tobacco Settlement

United States Government Accountability Office

Washington, D.C. 20548

A

April 11, 2006 Letr

Congressional Requesters:

In the 1990s, states sued major tobacco companies to obtain 

reimbursement for health impairments caused by the public’s use of 

tobacco. During 1997 and 1998, four states—Florida, Minnesota, 

Mississippi, and Texas—settled their lawsuits with the tobacco industry by 

negotiating independent agreements.1

 In November 1998, four of the 

nation’s largest tobacco companies—Philip Morris, USA;2 R.J. Reynolds 

Tobacco Company; Brown & Williamson Tobacco Corporation; and 

Lorillard Tobacco Company—negotiated and signed an agreement with the 

attorneys general of the remaining 46 states, the District of Columbia, and 

the five U.S. territories, thereby settling a number of lawsuits brought by 

these parties against the companies.3

 This agreement is known as the 

Master Settlement Agreement (MSA).4 The MSA commits the tobacco 

companies to make annual payments to the 46 states and the 

aforementioned entities in perpetuity as reimbursement for health care 

costs, such as Medicaid expenditures, related to tobacco use.5

 Each state 

receives a share of the annual MSA payments based on a fixed percentage 

identified in the MSA. These percentages were negotiated during the 

settlement and were based, in part, on smoking-related health care costs 

for each state. The total payment fluctuates annually based on a formula 

that considers participating manufacturers’ annual U.S. shipments of 

tobacco as compared with those of 1997, as well as other factors such as 

inflation. The MSA imposed no requirements on how states spend their 

payments.

1

Under these agreements, tobacco companies will pay these four states $40 billion over 25 

years.

2

Previously known as Philip Morris Incorporated.

3

A number of tobacco companies have joined since the agreement was signed. 

4

For additional information on the agreement, refer to our June 2001 report on the MSA, 

GAO, Tobacco Settlement: States’ Use of Master Settlement Agreement Payments, GAO-01-

851 (Washington, D.C.: June 29, 2001).

5

Total payments were originally estimated at over $200 billion through 2025, but this 

estimate does not take into account adjustments in tobacco companies’ payments that have 

or will occur. 
Page 2 GAO-06-502 Tobacco Settlement

The Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill) 

requires GAO to report annually, from fiscal years 2002 through 2006, on 

how states use MSA payments made by tobacco companies. In addition to 

these payments, 15 of the 46 states have received substantial advance 

proceeds based on the amounts that tobacco companies owe by issuing 

bonds backed by payments to be made in the future, a process known as 

securitization.6

 States can securitize the expected payment stream to 

receive funds up front rather than over time as MSA payments are made. 

This report also includes information about states’ receipt and allocation of 

these securitized proceeds.7

 This report is the fifth and final in a series of 

reports responding to the 2002 Farm Bill requirement.8 In addition, we 

previously reported in June 2001 on states’ receipt and use of MSA 

payments for fiscal years 2000 and 2001.9

This report discusses the (1) amount of payments, including securitized 

proceeds, received by the 46 states party to the MSA during fiscal year 

2005, the amount of payments these states expect to receive in fiscal year 

2006, and (2) states’ allocation of these funds to various program categories 

for fiscal year 2005 and expected allocations for fiscal year 2006.

To address our objectives, we surveyed state budget offices, or their 

designees, in each of the 46 states to obtain MSA payment and allocation 

6

The bonds for Oregon, 1 of the 15 states, were not securitized with tobacco settlement 

payments.

7

While the District of Columbia and the five U.S. territories are included in the agreement, 

this study reports only on the 46 states that signed the agreement.

8

GAO, Tobacco Settlement: States’ Allocations of Phase II Funds, GAO-03-262R

(Washington, D.C.: Dec. 3, 2002); GAO, Tobacco Settlement: States’ Allocations of Fiscal 

Years 2002 and 2003 Master Settlement Agreement Payments, GAO-03-407 (Washington, 

D.C.: Feb. 28, 2003); GAO, Tobacco Settlement: States’ Allocations of Fiscal Year 2003 and 

Expected Fiscal Year 2004 Payments, GAO-04-518 (Washington, D.C.: Mar. 19, 2004); and 

GAO, Tobacco Settlement: States’ Allocations of Fiscal Year 2004 and Expected Fiscal Year 

2005 Payments, GAO-05-312 (Washington, D.C.: Mar. 21, 2005). 

9

GAO-01-851.
Page 3 GAO-06-502 Tobacco Settlement

information for fiscal years 2005 and 2006.10, 11 We asked the states to 

categorize their MSA payment allocations for fiscal year 2005 and their 

expected allocations for fiscal year 2006 using 13 categories. In addition, 

we asked states if they securitized their payments and, if so, the amount of 

proceeds they received from securitization and the categories to which 

they allocated the securitized proceeds. We took several steps to assess the 

reliability of the states’ data, including independently corroborating the 

data to the extent possible. We determined that the data were reliable 

enough for our purposes. In addition, we compared the data we received 

for fiscal years 2005 and 2006 with the payment and allocation information 

we collected from states for our earlier reports.12 We conducted our work 

from September 2005 through March 2006 in accordance with generally 

accepted government auditing standards. See appendix I for more 

information on our scope and methodology and for detailed definitions of 

the categories used in this report.13 Appendix II shows each state’s 

percentage share of annual MSA payments. 

Results in Brief The 46 states party to the MSA expect to receive a total of about $11.3 

billion in fiscal years 2005 and 2006, mostly from payments made by 

tobacco companies. These states reported receiving over $5.8 billion in 

fiscal year 2005 and expect to receive $5.4 billion in fiscal year 2006. These 

amounts are substantially less than those of previous years, when total 

payments and proceeds averaged about $9.3 billion annually. The decreases 

occurred because only one state, Virginia, chose to issue a bond and 

receive securitized proceeds ($390 million) in 2005, and none plan to do so 

in 2006. Since the MSA was signed, 15 of the 46 states securitized all or part 

of their payments, including the two states (California and New York) with 

the largest payments, which alone received $6.7 billion in securitized 

proceeds in 2 prior years. Of the $46.7 billion states reported receiving over 

10Throughout this report, “fiscal year” refers to the state’s fiscal year. In most states, the 

fiscal year begins on July 1 and ends on June 30. The exceptions are in Alabama and 

Michigan, where the fiscal year begins on October 1, and in New York, where the fiscal year 

begins on April 1. 

11Our study focuses on the states’ share of MSA payments and does not include information 

on MSA payments made to counties and cities in New York and California.

12GAO-01-851, GAO-03-407, GAO-04-518, and GAO-05-312.

13Categories include such areas as education, health, budget shortfalls, and debt service on 

securitized funds.
Page 4 GAO-06-502 Tobacco Settlement

the first 5 years, about $31.1 billion were MSA payments from the tobacco 

companies and about $15.6 billion were securitized proceeds.

States allocated the largest portions of their fiscal year 2005 tobacco 

settlement funds to health-related programs (32 percent) and debt service 

on securitized proceeds (24 percent). They expect health programs to 

remain about 32 percent and debt service to increase to 29 percent for 

fiscal year 2006. These two categories increased substantially from fiscal 

year 2004, when health-related programs represented 20 percent and debt 

service was 9 percent. However, while the percentage allocations to some 

program categories increased in fiscal year 2005, the dollars allocated to 

these categories decreased because of the nearly $4 billion decrease in 

securitized proceeds from fiscal year 2004 to 2005. 

States Received About 

$5.8 Billion in MSA 

Payments and 

Securitized Proceeds in 

Fiscal Year 2005 and 

Expect to Receive 

Somewhat Less in 

Fiscal Year 2006

The 46 states party to the MSA reported receiving about $5.5 billion in MSA 

payments from the tobacco companies and about $390 million in 

securitized proceeds for 2005. For fiscal year 2006, these 46 states expect to 

receive close to the same amount of MSA payments; 14 however no states 

expect to receive securitized proceeds. While the fiscal year 2005 and 

expected fiscal year 2006 MSA payments are similar to those of 2004, the 

securitized proceeds for the 2 years are about $4 billion and $4.4 billion less 

than in fiscal year 2004, respectively. Table 1 shows the payments and 

proceeds for each state for fiscal years 2005 and 2006. 

14There is a possibility that this amount could be reduced because of certain provisions in 

the MSA. In April 2006, participating manufacturers might withhold as much as about $1.1 

billion from their expected payments for fiscal year 2006 because the MSA was found to be a 

significant factor in the 7.9 percent decline in their share of the cigarette market over 

several years following the MSA. However, according to an official from the National 

Association of Attorneys General, the participating manufacturers are not entitled to 

withhold funds from expected payments, and any reductions to 2006 payments, based on 

manufacturers’ market share loss, would be provisional pending determinations that each 

state enacted and diligently enforced a statute provided in the MSA designed to 

counterbalance the effects of the MSA by requiring nonparticipating manufacturers to pay 

funds into escrow.
Page 5 GAO-06-502 Tobacco Settlement

Table 1: MSA Payments and Securitized Proceeds States Reported Receiving in Fiscal Year 2005 and Expect to Receive in Fiscal 

Year 2006

Fiscal year 2005 Expected fiscal year 2006

State

MSA payments 

received

Securitized 

proceeds 

received Total

MSA payments 

expected to be 

received

Securitized 

proceeds 

expected to 

be received Total

Alabama $101,871,492 0 $101,871,492 $101,871,679 0 $101,871,679

Alaska 21,759,260 0 21,759,260 22,133,477 0 22,133,477

Arizona 93,933,400 0 93,933,400 89,553,200 0 89,553,200

Arkansas 52,774,224 0 52,774,224 49,500,000 0 49,500,000

Californiaa 406,932,000 0 406,932,000 401,637,000 0 401,637,000

Colorado 87,367,598 0 87,367,598 88,934,450 0 88,934,450

Connecticut 118,320,645 0 118,320,645 111,000,000 0 111,000,000

Delaware 25,207,000 0 25,207,000 27,698,000 0 27,698,000

Georgia 156,427,234 0 156,427,234 146,123,673 0 146,123,673

Hawaii 38,357,999 0 38,357,999 42,154,625 0 42,154,625

Idaho 23,151,453 0 23,151,453 24,071,285 0 24,071,285

Illinois 296,629,800 0 296,629,800 282,459,316 0 282,459,316

Indiana 130,000,535 0 130,000,535 132,132,122 0 132,132,122

Iowa 55,425,528 0 55,425,528 56,409,091 0 56,409,091

Kansas 53,131,448 0 53,131,448 52,000,000 0 52,000,000

Kentucky 112,241,980 0 112,241,980 108,600,000 0 108,600,000

Louisiana 144,591,814 0 144,591,814 145,366,560 0 145,366,560

Maine 49,033,129 0 49,033,129 49,594,690 0 49,594,690

Maryland 151,263,000 0 151,263,000 149,503,000 0 149,503,000

Massachusetts 257,411,796 0 257,411,796 253,349,780 0 253,349,780

Michigan 274,326,923 0 274,326,923 285,500,000 0 285,500,000

Missouri 144,964,644 0 144,964,644 154,000,000 0 154,000,000

Montana 27,070,703 0 27,070,703 26,102,000 0 26,102,000

Nebraska 37,919,415 0 37,919,415 36,273,307 0 36,273,307

Nevada 38,872,322 0 38,872,322 39,507,406 0 39,507,406

New Hampshire 42,400,000 0 42,400,000 43,000,000 0 43,000,000

New Jersey 246,462,646 0 246,462,646 249,152,772 0 249,152,772

New Mexico 38,009,047 0 38,009,047 29,657,921 0 29,657,921

New Yorka 410,564,424 0 410,564,424 434,741,632 0 434,741,632

North Carolina 148,640,949 0 148,640,949 163,353,241 0 163,353,241

North Dakota 23,326,754 0 23,326,754 22,972,067 0 22,972,067
Page 6 GAO-06-502 Tobacco Settlement

Sources: State budget offices or their designees.

a

The amounts of MSA payments received and expected by California and New York do not include 

MSA payments made to the counties and cities in those states.

b

We used Ohio’s 2005 MSA payment as an estimate for its expected 2006 payment based on Ohio’s 

budget document, which advises state agencies to expect the same or less tobacco funds for that year 

as was received in 2005. In responding to our survey, Ohio declined to provide an estimate of its 2006 

expected payment because of uncertainties in adjustments in MSA payments that may result from 

changes in participating manufacturers’ share of the tobacco market. 

Since fiscal year 2000, states have received a total of about $53 billion in 

MSA payments and securitized proceeds; specifically, about $37 billion 

from MSA payments and $16 billion in securitized proceeds (see table 2). 

The amount of total payments and proceeds in fiscal year 2005 ($5.8 

billion) was significantly less than in fiscal year 2004, when New York alone 

received $4.2 billion in securitized proceeds. States that have issued bonds 

backed by MSA payments must pay for debt service on these bonds.

Ohio 321,050,059 0 321,050,059 321,050,059b 0 321,050,059b

Oklahoma 66,034,977 0 66,034,977 49,348,303 0 49,348,303

Oregon 73,142,434 0 73,142,434 75,110,359 0 75,110,359

Pennsylvania 366,258,217 0 366,258,217 351,180,000 0 351,180,000

Rhode Island 45,817,205 0 45,817,205 47,988,000 0 47,988,000

South Carolina 73,361,299 0 73,361,299 74,329,662 0 74,329,662

South Dakota 22,238,977 0 22,238,977 23,232,155 0 23,232,155

Tennessee 156,708,209 0 156,708,209 153,000,000 0 153,000,000

Utah 28,353,400 0 28,353,400 29,541,000 0 29,541,000

Vermont 26,205,607 0 26,205,607 24,500,000 0 24,500,000

Virginia 130,315,484 $389,977,667 520,293,151 132,777,945 0 132,777,945

Washington 130,879,000 0 130,879,000 131,000,000 0 131,000,000

West Virginia 56,495,804 0 56,495,804 55,400,000 0 55,400,000

Wisconsin 132,054,977 0 132,054,977 138,929,751 0 138,929,751

Wyoming 15,827,492 0 15,827,492 15,827,492 0 15,827,492

Total $5,453,132,303a $389,977,667 $5,843,109,970a $5,441,567,020a, b 0 $5,441,567,020a, b

(Continued From Previous Page)

Fiscal year 2005 Expected fiscal year 2006

State

MSA payments 

received

Securitized 

proceeds 

received Total

MSA payments 

expected to be 

received

Securitized 

proceeds 

expected to 

be received Total
Page 7 GAO-06-502 Tobacco Settlement

Table 2: MSA Payments and Securitized Proceeds Received by the 46 States Since 

Fiscal Year 2000

Sources: GAO-01-851, GAO-03-407, GAO-04-518, GAO-05-312, state budget offices or their designees, and GAO analysis. 

Note: This table does not include payments or proceeds that went to cities and counties in California 

and New York. 

In fiscal year 2005, Virginia was the only state that received securitized 

proceeds. Fifteen states have received a total of about $16 billion in 

proceeds from the sale of bonds since fiscal year 2000, as shown in table 3. 

Five of the states—Alabama, Alaska, Iowa, Oregon and Rhode Island—

have received proceeds in more than one year.

Table 3: Total Amount of Securitized Proceeds Received by States, Fiscal Years 

2000-2005

Fiscal year MSA payments Securitized proceeds Total

2000-01 $13,200,000,000 $928,900,000 $14,128,900,000

2002 6,238,393,496 3,838,376,465 10,076,769,961

2003 6,306,329,459 6,482,764,469 12,789,093,928

2004 5,340,128,223 4,374,698,723 9,714,826,946

2005 5,453,132,303 389,977,667 5,843,109,970

Total $36,537,983,481 $16,014,717,324 $52,552,700,805

State Total securitized proceeds

Alabama $153,760,000

Arkansas 58,268,549

Alaska 203,000,000

California 2,485,000,000

Iowa 643,108,448

Louisiana 1,069,510,894

New Jersey 2,751,814,469

New York 4,200,000,000

Oregon 657,565,000a

Rhode Island 545,859,897

South Carolina 785,900,000

South Dakota 278,045,000

Washington 517,905,000

Virginia 389,977,667
Page 8 GAO-06-502 Tobacco Settlement

Sources: GAO-01-851, GAO-03-407, GAO-04-518, GAO-05-312, state budget offices or their designees, and GAO analysis.

a

Oregon issued bonds, but did not securitize them with tobacco settlement payments.

States Allocated the 

Largest Portion of 

Their Funds to Address 

Health-Related 

Programs and Debt 

Service on Securitized 

Proceeds in Fiscal Year 

2005 and Expect to Do 

the Same in Fiscal Year 

2006

The 46 states reported that in fiscal year 2005 they allocated the largest 

portion of their combined MSA payments and securitized proceeds (32 

percent) to health-related programs, and the next largest portion (24 

percent) was allocated to debt service on securitized proceeds. In fiscal 

year 2006, the states expected the funding proportion that is devoted to 

health programs to remain at 32 percent and that which is devoted to debt 

service to increase to 29 percent. These two categories increased 

substantially from fiscal year 2004, when health-related programs 

represented 20 percent and debt service was 9 percent. The increases were 

accompanied by substantial decreases in state allocations to cover state 

budget shortfalls. Also, while the percentage allocations to some program 

categories increased in fiscal year 2005, the total number of dollars 

allocated to these categories decreased because of the nearly $4 billion 

decrease in securitized proceeds from fiscal year 2004 to 2005. For 

example, the percentage allocation to health care increased from 20 to 32 

percent, while the dollar amount decreased from about $2.26 billion in 

fiscal year 2004 to $1.87 billion in fiscal year 2005 and is expected to remain 

about the same in fiscal year 2006. Examples of the health-related 

programs included Medicaid, Children’s Health Insurance Program, and 

cancer research and prevention. Figure 1 and appendix III provide more 

details on states’ allocations of their combined MSA payments and 

securitized proceeds for fiscal years 2000 through 2005, and expected 

allocations for fiscal year 2006. 

In addition, between fiscal years 2004 and 2005, the portion of funds that all 

states allocated to cover budget shortfalls decreased substantially from 44 

percent to 4 percent, as shown in figure 1. Our analysis shows that changes 

in the allocations (primarily securitized proceeds) by New York and New 

Jersey were the primary cause of that decrease. The funds (about $6.3 

billion) allocated by these two states accounted for over half of the total 

funds ($11.4 billion) that all states allocated in fiscal year 2004, but these 

amounts declined substantially in fiscal year 2005 and are expected to 

further decline in 2006. Specifically, in fiscal year 2004, New York allocated 

$3.8 billion to budget shortfalls while New Jersey allocated $873 million. 

Wisconsin 1,275,002,400

Total $16,014,717,324a

(Continued From Previous Page)

State Total securitized proceeds
Page 9 GAO-06-502 Tobacco Settlement

These two states’ allocations accounted for about 92 percent of all funds 

allocated to budget shortfalls in fiscal year 2004. In fiscal year 2005, 

however, New York allocated only $354 million to budget shortfalls while 

New Jersey did not allocate any funds to budget shortfalls. In fiscal year 

2006, neither New York nor New Jersey expect to allocate any funds to 

budget shortfalls. 
Page 10 GAO-06-502 Tobacco Settlement

Figure 1: States’ Allocations of Combined MSA Payments and Securitized Proceeds for Fiscal Years 2000 through 2005, and 

Expected Allocations for Fiscal Year 2006

0

5

10

15

20

25

30

35

40

45

Economic Education General purposes Health

development for

tobacco regions

Debt service

on securitized

funds

Budget shortfalls

Percentage

20

36

a

4

44

2 2

a

4

2 2

7

9

4

2

5 6

5

6

8

7

38 37

24

32 32

20

2

24

9

29

3

4 4

13 13
Page 11 GAO-06-502 Tobacco Settlement

Note: Percentages may not add up to 100 because of rounding.

a

We did not obtain data for budget shortfalls and debt service on securitized funds for fiscal year 2000 

to 2001.

Tables 4 and 5 show the percentage of the combined MSA payments and 

securitized proceeds that individual states allocated, and expect to 

allocate, to various categories in fiscal years 2005 and 2006, respectively.

Reserves/rainy Social services Tax reductions Tobacco control Unallocated

day funds

Payments to

tobacco growers

Infrastructure

2

10

7 7

5

1 2 2

5

1 2 2

1 1

33 3

0

1 1

6

3

22 2

5 5

26

5

12

5

9

0 0 0 0 00 0

1

0 0

2000-01

2002

2003

2004

2005

2006 (expected)

Sources: GAO-05-312, state budget offices and their designees (data), and GAO (analysis).

Fiscal year
Page 12 GAO-06-502 Tobacco Settlement

Table 4: Allocation of States' Combined MSA Payments and Securitized Proceeds, Fiscal Year 2005

State

Budget 

shortfalls

Debt on securitized 

proceeds

Economic development 

for tobacco regions Education

General 

purposes Health

Alabama 0.0% 12.8% 0.0% 11.5% 5.9% 44.6%

Alaska 0.0 80.0 0.0 0.0 0.0 0.0

Arizona 0.0 0.0 0.0 0.0 0.0 100.0

Arkansas 0.0 9.5 0.0 4.8 0.0 57.3

California 0.0 100.0 0.0 0.0 0.0 0.0

Colorado 0.0 0.0 0.0 13.2 51.9 29.1

Connecticut 0.0 0.0 0.0 0.0 95.5 1.7

Delaware 0.0 0.0 0.0 7.3 0.2 61.6

Georgia 0.0 0.0 30.1 0.0 0.0 57.1

Hawaii 0.0 0.0 0.0 0.0 7.3 32.5

Idaho 0.0 0.0 0.0 0.0 0.0 2.2

Illinois 0.0 0.0 0.0 4.8 17.2 71.4

Indiana 0.0 0.0 26.4 0.0 0.0 49.7

Iowa 0.0 36.0 0.0 1.8 1.9 56.0

Kansas 0.0 0.0 0.0 16.3 1.4 2.5

Kentucky 0.0 0.0 42.9 9.7 3.2 34.3

Louisiana 0.0 59.6 0.0 0.0 0.2 9.9

Maine 0.1 0.0 0.0 21.2 0.1 36.3

Maryland 0.0 0.0 0.0 2.0 19.9 66.1

Massachusetts 0.0 0.0 0.0 0.0 100.0 0.0

Michigan 2.4 0.0 0.0 34.0 0.1 63.4

Missouri 49.6 0.0 0.0 0.0 1.6 48.4

Montana 0.0 0.0 0.0 0.0 10.6 68.5

Nebraska 0.0 0.0 0.0 0.0 0.2 53.3

Nevada 0.0 0.0 0.0 54.0 0.3 21.3

New Hampshire 0.0 0.0 0.0 94.3 5.7 0.0

New Jersey 0.0 99.9 0.0 0.0 0.0 0.1

New Mexico 0.0 0.0 0.0 0.0 68.8 31.2

New York 22.6 27.8 0.0 0.0 0.0 0.0

North Carolina 0.0 0.0 17.5 0.0 38.5 34.4

North Dakota 0.0 0.0 0.0 45.0 0.0 2.1

Ohio 0.0 0.0 13.9 8.2 8.5 33.2

Oklahoma 0.0 0.0 0.0 0.0 2.7 61.2

Oregon 0.0 35.6 0.0 0.0 0.0 22.4
Page 13 GAO-06-502 Tobacco Settlement

Infrastructure

Payments to 

tobacco growers

Reserves/rainy 

day funds Social services

Tax 

reductions

Tobacco 

control Unallocated

0.0% 0.0% 0.0% 24.7% 0.0% 0.5% 0.0%

0.0 0.0 0.0 0.0 0.0 20.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 28.5 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 3.5 0.0 2.4 0.0

0.0 0.0 0.0 0.0 0.0 0.1 2.7

0.0 0.0 0.0 11.0 0.0 17.8 2.1

0.0 0.0 0.0 4.6 0.0 8.1 0.0

26.0 0.0 22.7 0.0 0.0 11.6 0.0

0.0 0.0 0.0 1.2 0.0 5.1 91.6

0.6 0.0 0.0 3.3 0.0 2.6 0.0

1.7 0.0 0.0 16.1 0.0 6.1 0.0

0.0 0.0 0.0 0.0 0.0 4.2 0.0

0.0 0.0 0.0 78.8 0.0 0.9 0.0

5.4 0.0 0.0 0.0 0.0 4.4 0.0

0.0 0.0 0.0 0.0 0.0 0.3 29.8

0.0 0.0 0.0 11.5 0.0 30.8 0.0

0.0 3.7 0.0 0.0 0.0 6.5 1.8

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.3 0.0

0.0 0.0 0.0 10.1 0.0 8.9 1.9

0.0 0.0 0.0 7.5 0.0 6.6 32.4

0.0 0.0 0.0 16.6 0.0 7.9 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 49.6

0.0 0.0 0.0 0.0 0.0 9.6 0.0

45.0 0.0 0.0 0.0 0.0 7.9 0.0

0.0 0.0 0.0 3.3 0.0 32.9 0.0

0.0 0.0 0.0 0.0 0.0 28.6 7.4

0.0 0.0 0.0 0.0 0.0 0.6 41.4
Page 14 GAO-06-502 Tobacco Settlement

(Continued From Previous Page)

State

Budget 

shortfalls

Debt on securitized 

proceeds

Economic development 

for tobacco regions Education

General 

purposes Health

Pennsylvania 0.0 0.0 0.0 0.0 0.0 88.0

Rhode Island 0.0 100.0 0.0 0.0 0.0 0.0

South Carolina 0.0 100.0 0.0 0.0 0.0 0.0

South Dakota 0.0 61.9 0.0 36.2 0.0 0.0

Tennessee 0.0 0.0 0.0 0.0 100.0 0.0

Utah 0.0 0.0 0.0 0.0 0.4 45.5

Vermont 0.0 0.0 0.0 0.0 0.6 78.7

Virginia 0.0 0.0 34.7 0.0 0.0 40.0

Washington 0.0 26.0 0.0 0.0 0.0 63.0

West Virginia 0.0 0.0 0.0 0.0 0.0 34.6

Wisconsin 0.0 100.0 0.0 0.0 0.0 0.0

Wyoming 0.0 0.0 0.0 0.0 1.7 43.7

Total 4.4 23.6 3.9 4.9 13.4 31.6
Page 15 GAO-06-502 Tobacco Settlement

Sources: State budget offices and their designees (data); GAO (analysis).

Notes: Percentages may not add up to 100 because of rounding. Appendix IV shows the dollar 

amount.

Infrastructure

Payments to 

tobacco growers

Reserves/rainy 

day funds Social services

Tax 

reductions Tobacco control Unallocated

0.0 0.0 0.0 0.0 0.0 12.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 2.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 30.0 7.1 0.0 14.4 2.7

0.0 0.0 0.0 2.4 0.0 18.3 0.0

0.0 15.3 0.0 0.0 0.0 10.0 0.0

0.0 0.0 0.0 0.0 0.0 11.0 0.0

0.0 0.0 50.0 0.0 0.0 10.4 5.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 18.8 0.0 35.9 0.0

0.5 0.4 0.8 2.5 0.0 4.7 9.2
Page 16 GAO-06-502 Tobacco Settlement

Table 5: Expected Allocation of States’ Combined MSA Payments and Securitized Proceeds, Fiscal Year 2006

State

Budget 

shortfalls

Debt on 

securitized 

proceeds

Economic 

development for 

tobacco regions Education

General 

purposes Health

Alabama 0.0% 8.7% 0.0% 7.8% 35.6% 30.5%

Alaska 0.0 76.9 0.0 0.0 0.0 0.0

Arizona 0.0 0.0 0.0 0.0 0.0 100.0

Arkansas 0.0 10.1 0.0 4.7 0.0 55.0

California 0.0 100.0 0.0 0.0 0.0 0.0

Colorado 0.0 0.0 0.0 4.9 38.4 43.9

Connecticut 0.0 0.0 0.0 0.0 85.5 14.4

Delaware 0.0 0.0 0.0 7.9 0.2 60.8

Georgia 0.0 0.0 30.1 0.0 0.0 63.3

Hawaii 0.0 0.0 0.0 0.0 7.2 32.5

Idaho 0.0 0.0 0.0 0.0 0.0 0.0

Illinois 0.0 0.0 0.0 4.5 8.6 77.1

Indiana 0.0 0.0 22.9 0.0 0.2 49.1

Iowa 0.0 35.6 0.0 1.8 2.7 55.8

Kansas 0.0 0.0 0.0 17.4 0.5 2.4

Kentucky 0.0 0.0 30.9 10.0 0.2 35.3

Louisiana 0.0 60.0 0.0 0.0 0.2 9.5

Maine 0.9 0.0 0.0 21.5 0.1 35.6

Maryland 0.0 0.0 0.0 2.0 19.7 68.4

Massachusetts 0.0 0.0 0.0 0.0 100.0 0.0

Michigan 0.0 0.0 0.0 57.5 0.1 42.3

Missouri 54.6 0.0 0.0 0.0 1.4 43.7

Montana 0.0 0.0 0.0 0.0 11.0 53.9

Nebraska 0.0 0.0 0.0 0.0 0.2 59.8

Nevada 0.0 0.0 0.0 41.2 0.6 31.7

New Hampshire 0.0 0.0 0.0 100.0 0.0 0.0

New Jersey 0.0 100.0 0.0 0.0 0.0 0.0

New Mexico 0.0 0.0 0.0 0.0 60.0 40.0

New York 0.0 100.0 0.0 0.0 0.0 0.0

North Carolina 0.0 2.0 5.0 2.0 33.9 40.1

North Dakota 0.0 0.0 0.0 45.0 0.0 1.0

Ohio 0.0 0.0 3.4 1.6 4.6 13.5

Oklahoma 0.0 0.0 0.0 0.0 2.8 60.8

Oregon 0.0 78.2 0.0 0.0 0.0 16.3
Page 17 GAO-06-502 Tobacco Settlement

Infrastructure

Payments to 

tobacco 

growers

Reserves/rainy day 

funds

Social 

services Tax reductions

Tobacco 

control Unallocated

0.0% 0.0% 0.0% 16.9% 0.0% 0.4% 0.0%

0.0 0.0 0.0 0.0 0.0 23.1 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 30.2 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

7.8 0.0 0.0 4.9 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.1 0.0

0.0 0.0 0.0 10.6 0.0 16.9 3.6

0.0 0.0 0.0 4.6 0.0 2.0 0.0

26.0 0.0 22.7 0.0 0.0 11.6 0.0

0.0 0.0 0.0 1.1 0.0 1.8 97.1

2.5 0.0 0.0 3.2 0.0 4.2 0.0

4.4 0.0 0.0 18.1 0.0 5.4 0.0

0.0 0.0 0.0 0.0 0.0 4.1 0.0

0.0 0.0 0.0 77.9 0.0 1.9 0.0

19.0 0.0 0.0 0.0 0.0 4.5 0.0

0.0 0.0 0.0 0.0 0.0 0.3 30.0

0.0 0.0 0.0 11.4 0.0 30.4 0.0

0.0 3.9 0.0 0.0 0.0 6.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.3 0.0

0.0 0.0 0.0 0.0 0.0 26.1 9.0

0.0 0.0 0.0 8.2 0.0 6.9 24.9

0.0 0.0 0.0 14.6 0.0 12.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

2.0 0.0 0.0 0.0 0.0 15.0 0.0

45.0 0.0 0.0 0.0 0.0 9.0 0.0

63.5 0.0 0.0 1.0 0.0 12.4 0.0

0.0 0.0 0.0 8.1 0.0 28.3 0.0

0.0 0.0 0.0 0.0 0.0 0.0 5.5
Page 18 GAO-06-502 Tobacco Settlement

(Continued From Previous Page)

State

Budget 

shortfalls

Debt on 

securitized 

proceeds

Economic 

development for 

tobacco regions Education

General 

purposes Health

Pennsylvania 0.0 0.0 0.0 0.0 0.0 91.0

Rhode Island 0.0 100.0 0.0 0.0 0.0 0.0

South Carolina 0.0 100.0 0.0 0.0 0.0 0.0

South Dakota 0.0 53.4 0.0 46.6 0.0 0.0

Tennessee 0.0 0.0 0.0 0.0 100.0 0.0

Utah 0.0 0.0 0.0 0.0 0.3 44.0

Vermont 0.0 0.0 0.0 0.0 0.6 78.3

Virginia 0.0 17.7 40.0 0.0 0.0 28.0

Washington 0.0 25.8 0.0 0.0 0.0 62.5

West Virginia 0.0 0.0 0.0 0.0 53.6 35.9

Wisconsin 0.0 100.0 0.0 0.0 0.0 0.0

Wyoming 0.0 0.0 0.0 0.0 1.7 43.7

Total 1.5 28.8 3.8 5.7 13.2 32.1
Page 19 GAO-06-502 Tobacco Settlement

Source: State budget offices and their designees (data); GAO (analysis)

Notes: Percentages may not add up to 100 because of rounding. Appendix IV shows the dollar 

amount each state allocated to the various categories.

We are sending copies of this report to interested congressional 

committees and others upon request. Copies are also available at no charge 

on the GAO Web site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-3841 or robinsonr@gao.gov. Contact points for our Offices of 

Congressional Relations or Public Affairs may be found on the last page of 

this report. Key contributors to this report are listed in appendix VI.

Robert A. Robinson

Managing Director, Natural Resources

and Environment

Infrastructure

Payments to 

tobacco 

growers

Reserves/rainy day 

funds

Social 

services Tax reductions

Tobacco 

control Unallocated

0.0 0.0 0.0 0.0 0.0 9.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 25.0 6.8 0.0 13.8 10.1

0.0 0.0 0.0 2.1 0.0 18.9 0.0

0.0 7.3 0.0 0.0 0.0 7.0 0.0

0.0 0.0 0.0 0.0 0.0 11.8 0.0

0.0 0.0 0.0 0.0 0.0 10.5 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 18.8 0.0 35.9 0.0

5.4 0.3 0.3 2.7 0.0 4.7 1.5
Page 20 GAO-06-502 Tobacco Settlement

List of Congressional Requesters

The Honorable Saxby Chambliss

Chairman

The Honorable Tom Harkin

Ranking Democratic Member

Committee on Agriculture, Nutrition,

and Forestry

United States Senate

The Honorable Robert Goodlatte

Chairman, Committee on Agriculture

House of Representatives

The Honorable Jim Bunning

United States Senate
Page 21 GAO-06-502 Tobacco Settlement

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

The Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill) 

requires GAO to report annually, from fiscal years 2002 through 2006, on 

how states use Master Settlement Agreement (MSA) payments made by 

tobacco companies. This report is the fifth and final in a series of reports 

responding to the 2002 Farm Bill requirement. In December 2002, we issued 

the report Tobacco Settlement: States’ Allocations of Phase II Funds

(GAO-03-262R), which provides information on the National Tobacco 

Grower Settlement Trust (commonly referred to as the Phase II 

agreement). In February 2003, we issued the report Tobacco Settlement: 

States’ Allocations of Fiscal Years 2002 and 2003 Master Settlement 

Agreement Payments (GAO-03-407). In March 2004, we issued the report 

Tobacco Settlement: States’ Allocations of Fiscal Year 2003 and Expected 

Fiscal Year 2004 Payments (GAO-04-518). In March 2005, we issued the 

report Tobacco Settlement: States’ Allocations of Fiscal Year 2004 and 

Expected Fiscal Year 2005 Payments (GAO-05-312). We also reported on 

states’ receipt and use of MSA payments for fiscal years 2000 and 2001 in a 

June 2001 report, Tobacco Settlement: States’ Use of Master Settlement 

Agreement Payments (GAO-01-851).

To respond to the Farm Bill requirement, the objectives of this study were 

to provide information on (1) the amount of payments received by the 46 

states party to the MSA during fiscal year 2005 and the amount of payments 

these states expect to receive during fiscal year 2006 and (2) states’ 

allocations of MSA funds to various program categories for fiscal year 2005 

and states’ expected allocations for fiscal year 2006.1,2

To address these objectives, we surveyed3 the executive budget offices, or 

their designees, in the 46 states party to the MSA. In addition, we 

performed some reliability testing and independently corroborated these 

data, to the extent possible. We reviewed and compared MSA payment data 

reported by states with amounts provided by the National Association of 

Attorneys General.4

 We contacted state officials to discuss any data entries 

1

Fiscal year refers to the state’s fiscal year.

2

Allocation refers to funds appropriated or otherwise designated (e.g., earmarked for a trust 

fund or an endowment that has a specific purpose). It also includes funds designated for 

debt servicing on bonds issued when a state securitized all or a portion of MSA funds.

3

See appendix V for a copy of the survey that we sent to each of the 46 states.

4

The National Association of Attorneys General monitors the actual payments made to 

states, as determined by an independent auditor.
Appendix I

Objectives, Scope, and Methodology

Page 22 GAO-06-502 Tobacco Settlement

on the surveys that were questionable, and resolved all discrepancies 

between the survey data and the data provided by National Association of 

Attorneys General. We also reviewed previous GAO reports and other 

relevant studies. Based on this work, we determined that the data were 

reliable enough for our purposes. We conducted our work from September 

2005 through March 2006 in accordance with generally accepted 

government auditing standards.

Our study focuses on the states’ shares of MSA payments and does not 

include information on allocations of MSA payments to cities and counties 

in California and New York.5

 In addition, we did not collect information on 

MSA payments made to the District of Columbia or the five U.S. territories 

that are also party to the MSA. Because we completed our fieldwork before 

states received their fiscal year 2006 payments, we were unable to obtain 

final information on the actual MSA payments states received during fiscal 

year 2006. Consequently, we obtained information on states’ expected 

fiscal year 2006 MSA payments.

Survey Methodology and 

Categorization of States’ 

Allocations

We used a survey instrument similar to the one used to obtain information 

for our March 2005 report. In September 2005, we contacted the 46 state 

budget officials, or their designees, who completed the surveys for our 

March 2005 report. The officials in many of these states indicated they 

would be the respondents for this year’s survey and several identified new 

respondents. In September 2005, we E-mailed the survey to the identified 

officials in each of the 46 states party to the MSA. We received responses 

from all 46 states. From these responses, we obtained information on MSA 

payments states received in fiscal year 2005 and MSA payments they expect 

to receive in fiscal year 2006, and the states’ allocations and expected 

allocations of MSA payments in fiscal years 2005 and 2006, respectively. We 

also obtained information on the states’ proceeds, if any, from 

securitization or expected securitization in fiscal years 2005 and 2006, 

respectively, and the allocation of the securitized proceeds. Furthermore, 

in the survey, we asked the states to categorize their allocations of MSA 

payments and securitized MSA proceeds for fiscal years 2005 and 2006 

using the 13 program categories developed for our report. (See below for 

the definitions of the 13 categories.) The level of detail for individual states 

varies because we are relying on state-reported information. 

5

As we reported in 2001, California counties, four California cities, New York counties, and 

New York City each receive a share of MSA payments.
Appendix I

Objectives, Scope, and Methodology

Page 23 GAO-06-502 Tobacco Settlement

There are no sampling errors because this was not a sample survey. 

Nevertheless, the practical difficulties of conducting any survey may 

introduce errors, commonly referred to as nonsampling errors. For 

example, difficulties in how a particular question is interpreted, in the 

sources of information that are available to respondents, or in how the data 

are entered into a database or were analyzed can introduce unwanted 

variability into the survey results. We took steps in the development of the 

survey, the data collection, and the data editing and analysis to minimize 

these nonsampling errors. For example, we edited the completed surveys 

for consistency and contacted state budget offices to clarify responses, 

verified all survey data that were entered into our database, and verified 

that the computer programs were written correctly. 

In addition, we took information on MSA payments and securitized 

proceeds received and allocated for fiscal years 2000 through 2004 that we 

collected for previous GAO reports dealing with the MSA6

 and compared it 

with receipts and allocations for fiscal years 2005 and 2006.

Categories of States’ 

Allocations

To standardize the information reported by the 46 states, we developed the 

following categories and definitions for the program areas to which states 

allocated their payments.

Budget shortfalls: This category is comprised of amounts allocated to 

balance state budgets and close gaps or reduce deficits resulting from 

lower than anticipated revenues or increased mandatory or essential 

expenditures. 

Debt service on securitized funds: This category consists of amounts 

allocated to service the debt on bonds issued when the state securitized all 

or a portion of its MSA payments.

Economic development for tobacco regions: This category is comprised of 

amounts allocated for economic development projects in tobacco states 

such as infrastructure projects, education and job training programs, and 

research on alternative uses of tobacco and alternative crops. This 

category includes projects specifically designed to benefit tobacco growers 

6

GAO-01-851, GAO-03-407, GAO-04-518, and GAO-05-312.
Appendix I

Objectives, Scope, and Methodology

Page 24 GAO-06-502 Tobacco Settlement

as well as economic development that may serve a larger population within 

a tobacco state.

Education: This category is comprised of amounts allocated for education 

programs such as day care, preschool, Head Start, early childhood 

education, elementary and secondary education, after-school programs, 

and higher education. This category does not include money for capital 

projects such as construction of school buildings.

General purposes: This category is comprised of amounts allocated for 

attorneys’ fees and other items, such as law enforcement or community 

development, which could not be placed into a more precise category. This 

category also includes amounts allocated to a state’s general fund that were 

not earmarked for any particular purpose. Amounts used to balance state 

budgets and close gaps or reduce deficits should be categorized as budget 

shortfalls rather than general purposes.

Health: This category is comprised of amounts allocated for direct health 

care services; health insurance, including Medicaid and the State Children’s 

Health Insurance Program (SCHIP); hospitals; medical technology; public 

health services; and health research. This category does not include money 

for capital projects such as construction of health facilities.

Infrastructure: This category is comprised of amounts allocated for 

capital projects such as construction and renovation of health care, 

education, and social services facilities; water and transportation projects; 

and municipal and state government buildings. This category includes 

retirement of debt owed on capital projects.

Payments to tobacco growers: This category is comprised of amounts 

allocated for direct payments to tobacco growers, including subsidies and 

crop conversion programs.

Reserves/rainy day funds: This category is comprised of amounts 

allocated to state budget reserves such as rainy day and budget 

stabilization funds not earmarked for specific programs. Amounts 

allocated to reserves that are earmarked for specific areas are categorized 

under those areas—e.g., reserve amounts earmarked for economic 

development purposes should be categorized in the economic development 

category.
Appendix I

Objectives, Scope, and Methodology

Page 25 GAO-06-502 Tobacco Settlement

Social services: This category is comprised of amounts allocated for social 

services such as programs for the aging, assisted living, Meals on Wheels, 

drug courts, child welfare, and foster care. This category also includes 

amounts allocated to special funds established for children’s programs.

Tax reductions: This category is comprised of amounts allocated for tax 

reductions such as property tax rebates and earned income tax credits.

Tobacco control: This category is comprised of amounts allocated for 

tobacco control programs such as prevention, including youth education, 

enforcement, and cessation services.

Unallocated: This category is comprised of amounts not allocated for any 

specific purpose, such as amounts allocated to dedicated funds that have 

no specified purpose; amounts states chose not to allocate in the year MSA 

payments were received that will be available for allocation in a subsequent 

fiscal year; interest earned from dedicated funds not yet allocated; and 

amounts that have not been allocated because the state had not made a 

decision on the use of the MSA payments.
Page 26 GAO-06-502 Tobacco Settlement

Appendix II

Allocations of MSA Payments for 46 States ApendxiI

Each of the 46 states receives a share of the annual MSA payments based 

on the following fixed percentages identified in the MSA. 

Table 6: Allocations of MSA Payments for 46 States

State Percent

Alabama 1.6161308%

Alaska 0.3414187

Arizona 1.4738845

Arkansas 0.8280661

California 12.7639554

Colorado 1.3708614

Connecticut 1.8565373

Delaware 0.3954695

Georgia 2.4544575

Hawaii 0.6018650

Idaho 0.3632632

Illinois 4.6542472

Indiana 2.0398033

Iowa 0.8696670

Kansas 0.8336712

Kentucky 1.7611586

Louisiana 2.2553531

Maine 0.7693505

Maryland 2.2604570

Massachusetts 4.0389790

Michigan 4.3519476

Missouri 2.2746011

Montana 0.4247591

Nebraska 0.5949833

Nevada 0.6099351

New Hampshire 0.6659340

New Jersey 3.8669963

New Mexico 0.5963897

New York 12.7620310

North Carolina 2.3322850

North Dakota 0.3660138

Ohio 5.0375098
Appendix II

Allocations of MSA Payments for 46 States

Page 27 GAO-06-502 Tobacco Settlement

Sources: GAO-05-312 and the MSA.

Oklahoma 1.0361370

Oregon 1.1476582

Pennsylvania 5.7468588

Rhode Island 0.7189054

South Carolina 1.1763519

South Dakota 0.3489458

Tennessee 2.4408945

Utah 0.4448869

Vermont 0.4111851

Virginia 2.0447451

Washington 2.0532582

West Virginia 0.8864604

Wisconsin 2.0720390

Wyoming 0.2483449

(Continued From Previous Page)

State Percent
Page 28 GAO-06-502 Tobacco Settlement

Appendix III

States’ Allocations of Combined MSA 

Payments and Securitized Proceeds for Fiscal 

Years 2000 through 2006 ApendxiI

Dollars in millions (current year dollars) and percent

2000-2001 2002

Category Allocation Percent Allocation Percent

Budget shortfalls a a $2,448 20%

Debt service on securitized funds a a 271 2

Economic development for tobacco 

regions $466 4% 218 2

Education 848 7 1,132 9

General purposes 623 5 684 6

Health 4,788 38 4,434 37

Infrastructure 294 2 1,222 10

Payments to tobacco growers 235 2 192 2

Reserves/Rainy day funds 603 5 124 1

Social services 231 2 278 2

Tax reductions 416 3 35 0

Tobacco control 790 6 375 3

Unallocated 3,217 26 584 5

Total $12,511 100% $11,998 99%
Appendix III

States’ Allocations of Combined MSA 

Payments and Securitized Proceeds for Fiscal 

Years 2000 through 2006

Page 29 GAO-06-502 Tobacco Settlement

Sources: GAO-05-312 and state budget offices or their designees (data); GAO (analysis).

Note: Percentages may not add up to 100 percent and allocations may not add up to total allocations 

due to rounding. The amounts for each year are in the current year dollars for that year. Percentages 

across years may be compared but not dollars across years because the dollars are not adjusted to a 

constant base year.

a

We did not obtain information on allocations for budget shortfalls and debt service on securitized 

funds in fiscal years 2000 and 2001.

2003 2004 2005 Expected 2006

Allocation Percent Allocation Percent Allocation Percent Allocation Percent

$5,038 36% $5,059 44% $261 4% $85 1%

339 2 998 9 1,397 24 1,662 29

285 2 291 3 230 4 217 4

531 4 280 2 287 5 330 6

1,111 8 747 7 790 13 761 13

3,455 24 2,263 20 1,867 32 1,850 32

1,044 7 759 7 31 1 313 5

43 0 25 0 26 0 20 0

24 0 14 0 45 1 17 0

160 1 142 1 150 3 154 3

109 1 56 1 0 0 0 0

276 2 223 2 279 5 272 5

1,720 12 575 5 543 9 86 2

$14,135 99% $11,432 101% $5,907 101% $5,767 100%
Page 30 GAO-06-502 Tobacco Settlement

Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated ApendxiIV

This appendix presents the following information for each of the 46 states 

party to the MSA:

• the amount of MSA payments received and the categories to which they 

were allocated for fiscal year 2005;

• the amount of MSA payments expected to be received and the expected 

categories to which they will be allocated for fiscal year 2006; and 

• the amount of securitized proceeds received or expected to be received 

and the categories to which they were allocated or expected to be 

allocated for fiscal years 2005 and 2006, respectively, if applicable 

(applies to four states).

Tables 7 through 52 include only those program categories to which a state 

reported allocating funds. If a category is not listed, it means the state did 

not allocate funds to the category. In some cases, the total amounts 

allocated may exceed the actual MSA payments and securitized proceeds 

because the amounts allocated include carry-over funds from prior years 

and/or the interest earned on those funds. Some states that allocated funds 

to a program category did not provide examples of programs receiving 

funds. Only Virginia received securitized proceeds in fiscal year 2005; no 

states expect to receive proceeds in fiscal year 2006. However, Iowa, New 

York, and South Dakota allocated or expected to allocate funds composed 

of securitized proceeds received in prior years. In these four cases, we 

combined securitized proceeds with MSA payments.
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 31 GAO-06-502 Tobacco Settlement

Alabama Alabama reported receiving $101,871,492 from MSA payments in fiscal year 

2005 and expects to receive $101,871,679 in fiscal year 2006.

Table 7: Alabama’s MSA Payment Allocations

Source: Alabama Executive Budget Office.

a

Includes carry-over funds.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected 

to receive allocations

Debt service on securitized 

funds

$13,000,000 $13,000,000

Education 11,675,163 11,675,188 Alternative schools, Department of Education

General purposes 6,008,160 53,008,172 Juvenile probation officers, administration, 

forensic sciences

Health 45,449,741 45,449,837 Public health, mental health, Medicaid, senior 

services

Social services 25,207,739 25,207,792 Child welfare, children’s programs, youth services, 

rehabilitation services

Tobacco control 530,689 530,690 Tobacco enforcement for minors

Total $101,871,492 $148,871,679a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 32 GAO-06-502 Tobacco Settlement

Alaska Alaska reported receiving $21,759,260 from MSA payments in fiscal year 

2005 and expects to receive $22,133,477 in fiscal year 2006.

Table 8: Alaska’s MSA Payment Allocations

Source: Alaska Department of Revenue – Tax Division.

Arizona Arizona reported receiving $93,933,400 from MSA payments in fiscal year 

2005 and expects to receive $89,553,200 in fiscal year 2006.

Table 9: Arizona’s MSA Payment Allocations

Source: Arizona Governor’s Budget Office. 

a

Includes interest earned.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized 

funds

$17,407,408 $16,900,000

Tobacco control 4,351,852 5,085,339 Tobacco use prevention programs, use cessation 

grants, enforcement, counter marketing, evaluation 

of programs

Total $21,759,260 $21,985,339

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Health $94,142,500 $89,553,200 Health services, including behavioral health

Total $94,142,500a $89,553,200
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 33 GAO-06-502 Tobacco Settlement

Arkansas Arkansas reported receiving $52,774,224 from MSA payments in fiscal year 

2005 and expects to receive $49,500,000 in fiscal year 2006.

Table 10: Arkansas’ MSA Payment Allocations

Source: Arkansas Department of Finance and Administration.

California California reported receiving $406,932,000 from MSA payments in fiscal 

year 2005 and expects to receive $401,637,000 in fiscal year 2006.

Table 11: California’s MSA Payment Allocations

Source: California Department of Finance.

Notes: These MSA payments exclude payments made to California cities and counties. Cities and 

counties in the state received the same amount as the state. 

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized 

funds

$5,000,000 $5,000,000

Education 2,508,007 2,337,289 University of Arkansas’ School of Public Health

Health 30,235,237 27,230,395 Prevention and cessation, biomedical research, 

Medicaid, minority health

Tobacco control 15,030,980 14,932,316 Enforcement related to sales to minors 

Total $52,774,224 $49,500,000

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or 

expected to receive allocations

Debt service on securitized 

funds

 $406,932,000 $401,637,000

Total $406,932,000 $401,637,000
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 34 GAO-06-502 Tobacco Settlement

Colorado Colorado reported receiving $87,367,598 from MSA payments in fiscal year 

2005 and expects to receive $88,934,450 in fiscal year 2006.

Table 12: Colorado’s MSA Payment Allocations

Source: Colorado Governor’s Office of State Planning and Budgeting.

a

Includes carry-over funds and interest earned.

b

Includes interest earned.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Education $16,355,403 $4,446,723 Read to Achieve

General purposes 64,530,052 34,909,422

Health 36,172,817 39,905,273 Visiting Nurses, Primary and Preventive Care grants, 

Children’s Health Plan Plus and Prenatal Health Care, 

dental loan repayment, breast and cervical cancer, 

children’s mental health, Ryan White AID/HIV, children with 

autism, the Medicaid Management Information System

Infrastructure 0 7,114,156

Social services 4,304,053 4,446,723 Veteran’s Trust Fund, Tony Grampsas Youth Services

Tobacco control 2,951,553 0 Tobacco use cessation

Total $124,313,878a $90,822,297b
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 35 GAO-06-502 Tobacco Settlement

Connecticut Connecticut reported receiving $118,320,645 from MSA payments in fiscal 

year 2005 and expects to receive $111,000,000 in fiscal year 2006.

Table 13: Connecticut’s MSA Payment Allocations

Source: Connecticut Office of Policy and Management, Fiscal and Program Policy Section.

Delaware Delaware reported receiving $25,207,000 from MSA payments in fiscal year 

2005 and expects to receive $27,698,000 in fiscal year 2006.

Table 14: Delaware’s MSA Payment Allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

General purposes $112,984,760 $94,875,000 General Fund

Health 2,000,000 16,000,000 Biomedical Research Trust Fund, Tobacco and Health 

Trust Fund

Tobacco control 125,000 125,000

Unallocated 3,210,885 0

Total $118,320,645 $111,000,000

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Education $1,926,000 $2,188,000 Scholarships for nursing students at community college, 

survey on alcohol use, 5-year study and guidelines for lesser 

known illnesses

General purposes 57,100 57,100 Funding for one full-time staff to assist the Delaware Health 

Care Commission

Health 16,193,400 16,849,500 Delaware Prescription Drug Assistance Program, Medicaid 

coverage for Supplemental Security Income Transition and for 

Pregnant Women’s Diabetes Pilot Program, Uninsured Action 

Plan, various cancer programs, Public Access Defibrillation 

Program
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 36 GAO-06-502 Tobacco Settlement

Source: Delaware Department of Health and Social Services.

a

Includes carry-over funds.

Georgia Georgia reported receiving $156,427,234 from MSA payments in fiscal year 

2005 and expects to receive $146,123,673 in fiscal year 2006.

Table 15: Georgia’s MSA Payment Allocations

Source: Georgia Office of Planning and Budget.

a

Payments received in fiscal year 2004 were budgeted for fiscal year 2005.

b

Payments received in fiscal year 2005 were budgeted for fiscal year 2006. 

Social services 2,888,700 2,926,500 Supplemental Security Income supplement, substance abuse 

transitional housing, Heroin Residential Program, assisted 

living, attendant care services, caregiver support

Tobacco control 4,684,500 4,684,500 Tobacco use prevention education, enforcement activities, 

Smoking Cessation Quitline

Unallocated 542,700 992,400

Total $26,292,400a $27,698,000

(Continued From Previous Page)

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Economic development for 

tobacco regions

$47,123,333 $47,123,333 One Georgia Authority

Health 89,362,868 99,148,370 Medicaid, state children’s health insurance programs, critical 

access hospital reimbursement, public health, Medicaid 

home and community-based waiver programs, Georgia 

Cancer Coalition (includes the Georgia Cancer Coalition 

Eminent Cancer Scientists and Clinicians Program for 

Cancer Research)

Social services 7,149,804 7,149,804 Home and community-based services to the elderly, early 

intervention for families at risk for child abuse

Tobacco control 12,733,995 3,205,245 Tobacco Use Prevention Program, compliance and 

enforcement for underage smokers 

Unallocated 5,723

Total $156,375,723a $156,626,752b
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 37 GAO-06-502 Tobacco Settlement

Hawaii Hawaii reported receiving $38,357,999 from MSA payments in fiscal year 

2005 and expects to receive $42,154,625 in fiscal year 2006.

Table 16: Hawaii’s MSA Payment Allocations

Source: Hawaii Department of Budget and Finance.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

General purposes $2,784,010 $3,027,143 Centralized administrative services, Tobacco Enforcement 

Special Fund for the Attorney General’s Office for MSA 

Enforcement

Health 12,450,896 13,694,619 Department of Health’s public health programs, 

Department of Human Service’s children’s health 

insurance programs

Infrastructure 9,960,717 10,955,695 Debt service on University of Hawaii revenue bonds issued 

for the new Health and Wellness Center, to include a new 

biomedical research center and medical school

Reserves/rainy day fund 8,715,627 9,586,233 State of Hawaii’s Emergency and Budget Reserve Fund, 

health and social service programs

Tobacco control 4,446,749 4,890,935 Tobacco Prevention and Control Trust Fund

Total $38,357,999 $42,154,625
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 38 GAO-06-502 Tobacco Settlement

Idaho Idaho reported receiving $23,151,453 from MSA payments in fiscal year 

2005 and expects to receive $24,071,285 in fiscal year 2006.

Table 17: Idaho’s MSA Payment Allocations

Source: Idaho Division of Financial Management.

Illinois Illinois reported receiving $296,629,800 from MSA payments in fiscal year 

2005 and expects to receive $282,459,316 in fiscal year 2006.

Table 18: Illinois’ MSA Payment Allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Health $500,000 0 Catastrophic Health Care Cost Program for tobacco-related 

disease treatment

Social services 270,000 $270,000 Youth courts and status offender programs as they relate to 

tobacco and substance abuse issues

Tobacco control 1,169,700 430,000 Development of statewide youth coalitions, tobacco countermarketing, public health districts’ tobacco use cessation 

programs, youth tobacco investigations

Unallocated 21,211,753 23,371,285

Total $23,151,453 $24,071,285

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Education $13,800,000 $13,800,000 Payments to Centers for Academic Excellence for medical 

research

General purposes 49,001,698 26,553,172 Technology marketing, technology centers, administrative fees 

charged to the tobacco fund, audit expenses charged to the 

tobacco fund, Court of Claims awards

Health 203,765,481 238,414,550 Medicaid drugs, drugs for senior citizens 

Infrastructure 1,817,343 7,602,749 Capital maintenance on state owned facilities

Social services 9,319,189 9,990,900 Outreach programs to the aging 
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 39 GAO-06-502 Tobacco Settlement

Source: Illinois Governor’s Office of Management and Budget.

a

Includes carry-over funds and interest earned.

Indiana Indiana reported receiving $130,000,535 from MSA payments in fiscal year 

2005 and expects to receive $132,132,122 in fiscal year 2006.

Table 19: Indiana’s MSA Payment Allocations

Source: Indiana State Budget Agency.

a

Includes carry-over funds and interest earned.

Tobacco control 7,539,377 12,917,900 Tobacco prevention activities of local health departments, 

tobacco control programs, tobacco enforcement of MSA 

provisions, grant to the American Lung Association

Total $285,243,088a $309,279,271a

(Continued From Previous Page)

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Economic development for 

tobacco regions

$46,300,000 $43,100,000 Value Added Research Fund, Rural Development Administration 

Fund, Rural Development Council Fund, Technology 

Development Grant Fund, 21st Century Research and 

Technology Fund, Commission on Hispanic and Latino Affairs

General purposes 0 300,000 Attorney General’s Office

Health 87,400,000 92,200,000 Breast cancer education and diagnosis; prostate cancer 

education and diagnosis; sickle cell; State Department of Health 

Administration; cancer registry; minority health initiative; 

HIV/AIDS services; testing for drug-afflicted babies; AIDS 

education; state chronic diseases; Women, Infants, and Children 

supplement; Maternal and Child Health supplement; aid to TB 

hospitals; Local Health Maintenance Fund; Local Health 

Department Trust Account; Community Health Centers; minority 

epidemiology; Children’s Health Insurance Program; Prescription 

Drug Account/Hoosier Rx; Community Health Centers

Infrastructure 2,900,000 8,200,000 Regional health care construction

Social services 28,300,000 33,900,000 Developmentally Disabled Client Services, Division of Disability, 

Aging and Rehabilitative Services; Social Services Block Grant

Tobacco control 10,800,000 10,100,000 Tobacco use prevention and cessation

Total $175,700,000a $187,800,000a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 40 GAO-06-502 Tobacco Settlement

Iowa Iowa reported receiving $55,425,528 from MSA payments in fiscal year 2005 

and expects to receive $56,409,091 in fiscal year 2006. In addition, Iowa 

reported $63,852,236 was available in fiscal year 2005 from a fund 

composed of (1) securitized proceeds received in prior years and (2) 

interest earned on these proceeds. Iowa expects $66,284,236 to be available 

from this fund in fiscal year 2006.

Table 20: Iowa’s Allocations of MSA Payments and Securitized Proceeds 

Source: Iowa Department of Management.

a

Includes carry-over funds and interest earned.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized 

funds

$42,978,000 $43,680,000

Education 2,153,250 2,153,250 Early childhood development

General purposes 2,297,285 3,331,285 Correctional programs

Health 66,837,664 68,517,227 Medicaid, substance abuse

Tobacco control 5,011,565 5,011,565 Tobacco use, control, cessation programs

Total $119,277,764a $122,693,327a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 41 GAO-06-502 Tobacco Settlement

Kansas Kansas reported receiving $53,131,448 from MSA payments in fiscal year 

2005 and expects to receive $52,000,000 in fiscal year 2006. 

Table 21: Kansas’ MSA Payment Allocations

Source: Kansas Division of the Budget.

a

Includes interest earned.

Kentucky Kentucky reported receiving $112,241,980 from MSA payments in fiscal 

year 2005 and expects to receive $108,600,000 in fiscal year 2006.

Table 22: Kentucky’s MSA Payment Allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Education $8,684,755 $9,329,045 Parent education, 4-year olds at risk, vision research, 

special education

General purposes 752,882 252,882 State General Fund, Children’s Cabinet Administration

Health 1,337,792 1,300,000 Healthy Start Home Visitor, Telekid Health Care Link

Social services 41,865,293 41,863,081 Juvenile justice prevention and sanction grants, children’s 

mental health initiative, family-centered systems of care, 

therapeutic preschool, childcare and child welfare 

community services, Healthwave, Medicaid, Smart Start 

Kansas (early childhood care and education), 

immunization outreach, school violence prevention, family 

preservation, attendant care for independent living

Tobacco control 500,000 1,000,000 Smoking prevention and cessation

Total $53,140,722 a $53,745,008a

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Economic development for 

tobacco regions

$48,195,900 $33,541300 Governor’s Office for Agricultural Policy, 

Conservation: Environmental Stewardship

Education 10,908,800 10,908,800 Families and Children: Early Childhood Development 

Program, Governor’s Office of Early Childhood 

Development Program; Kentucky Higher Education 

Assistance Authority: Early Childhood Scholarship 

Program
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 42 GAO-06-502 Tobacco Settlement

Source: Kentucky Governor’s Office for Policy Research.

Louisiana Louisiana reported receiving $144,591,814 from MSA payments in fiscal 

year 2005 and expects to receive $145,366,560 in fiscal year 2006.

Table 23: Louisiana’s MSA Payment Allocations

Source: Louisiana Division of Administration, Office of Planning and Budget.

a

Includes carry-over funds.

General purposes 3,616,980 175,000 General Fund, Department of Revenue: enforcement

Health 38,461,300 38,370,400 Public Health: Health Access Nurturing Development 

Service, Folic Acid Distribution, Healthy Start, 

Universal Children’s Immunization, Child Advocacy 

Centers, Early Childhood Mental and Oral Health; 

Mental Health: Substance Abuse Services to 

Medicaid-Eligible Women with Dependent Children; 

Children With Special Health Care Needs: Universal 

Newborn Hearing Testing and Vision Screening; 

Council on Postsecondary Education: Lung Cancer 

Research Program; 

Insurance: Kentucky Access (High Risk Individual 

Insurance Pool)

Infrastructure 6,116,600 20,671,200 Debt Service: Water Resource Development, Rural 

Development Bond Fund

Tobacco control 4,942,400 4,933,300 Smoking cessation 

Total $112,241,980 $108,600,000

(Continued From Previous Page)

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized 

funds

$86,242,759 $87,148,112

General purposes 350,000 350,000 Attorney General enforcement programs

Health 14,377,675 13,758,480 Medicaid, School-based Health Centers, Louisiana 

Children’s Health Insurance Programs, health care 

science grants

Tobacco control 500,000 500,000 Smoking prevention and cessation grants 

Unallocated 43,121,380 43,609,968

Total $144,591,814a $145,366,560
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 43 GAO-06-502 Tobacco Settlement

Maine Maine reported receiving $49,033,129 from MSA payments in fiscal year 

2005 and expects to receive $49,594,690 in fiscal year 2006.

Table 24: Maine’s MSA Payment Allocations

Source: Maine Department of Administrative and Financial Services, Bureau of the Budget.

a

Includes carry-over funds and interest earned.

Maryland Maryland reported receiving $151,263,000 from MSA payments in fiscal 

year 2005 and expects to receive $149,503,000 in fiscal year 2006.

Table 25: Maryland’s MSA Payment Allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Budget shortfalls $55,218 $451,010

Education 10,423,452 10,793,711 Child care and development activities, after-school 

services, Head Start

General purposes 56,552 65,747 Attorney General enforcement and administration

Health 17,883,261 17,920,623 Prescription drugs, Medicaid, other health initiatives

Social services 5,658,262 5,741,915 Substance abuse prevention, intervention, testing, 

treatment 

Tobacco control 15,159,818 15,295,990 Community and school grants and statewide coordination 

to reduce tobacco addiction and use; tobacco prevention, 

control, treatment

Total $49,236,563a $50,268,996a

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Education $3,000,000 $3,000,000 Text books for nonpublic schools

General purposes 30,169,000 30,052,000 Legal fees (settlement with outside counsel), Attorney 

General’s Office for Nonparticipating Manufacturers’ 

Enforcement

Health 99,924,000 104,362,000 Medicaid, cancer prevention, screening and treatment; 

heart and lung disease; breast and cervical cancer; 

management; drug addiction

Payments to tobacco growers 5,653,000 5,956,000 Tri-County Council of Southern Maryland 
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 44 GAO-06-502 Tobacco Settlement

Source: Maryland Department of Budget and Management.

a

Includes carry-over funds.

Massachusetts Massachusetts reported receiving $254,593,761 from MSA payments in 

fiscal year 2005 and expects to receive $253,349,780 in fiscal year 2006.

Table 26: Massachusetts’ MSA Payment Allocations

Source: Massachusetts Executive Office of Administration and Finance.

Michigan Michigan reported receiving $274,326,923 from MSA payments in fiscal year 

2005 and expects to receive $285,500,000 in fiscal year 2006.

Table 27: Michigan’s MSA Payment Allocations

Tobacco control 9,854,000 9,230,000 Countermarketing, minority outreach and technical 

assistance, surveillance and evaluation, administration 

Unallocated 2,663,000 0

Total $151,263,000 $152,600,000a

(Continued From Previous Page)

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

General purposes $254,593,761 $253,349,780 Commonwealth’s General Fund

Total $254,593,761 $253,349,780

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Budget shortfalls $7,000,000 0

Education 99,300,000 $166,300,000 Merit Award scholarships and tuition incentive grants 

for higher education students, Michigan Educational 

Assessment Program testing for K-12 students, 

nursing scholarships, Michigan Education Savings 

Plan, general higher education support
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 45 GAO-06-502 Tobacco Settlement

Source: Michigan Office of Health and Human Services, State Budget Office.

a

Includes carry-over funds and interest earned.

Missouri Missouri reported receiving $144,964,644 from MSA payments in fiscal year 

2005 and expects to receive $154,000,000 in fiscal year 2006.

Table 28: Missouri’s MSA Payment Allocations

Source: Missouri Division of Budget and Planning.

a

Includes carry-over funds.

General purposes 368,200 386,800 Attorney General administration 

Health 185,100,000 122,300,000 Elder pharmaceutical assistance, Medicaid personal 

needs allowance, respite care, Medicaid support, 

biomedical research and development

Total $291,768,200a $288,986,800a

(Continued From Previous Page)

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Budget shortfalls $72,149,994 $84,089,532

General purposes 2,375,886 2,145,573 General revenue fund to support programs such as 

education, Medicaid, corrections

Health 70,369,652 67,282,481 Payments to Medicaid providers, grants to hospitals for 

graduate medical education, prescription drug 

assistance for low-income seniors through the Missouri 

Senior Rx Program

Tobacco control 482,414 482,414 Enforcement of state laws on underage tobacco use

Total $145,377,946a $154,000,000
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 46 GAO-06-502 Tobacco Settlement

Montana Montana reported receiving $27,070,703 from MSA payments in fiscal year 

2005 and expects to receive $26,102,000 in fiscal year 2006.

Table 29: Montana’s MSA Payment Allocations

Source: Montana Office of Budget and Program Planning.

a

Includes carry over funds.

Nebraska Nebraska reported receiving $37,919,415 from MSA payments in fiscal year 

2005 and expects to receive $36,273,307 in fiscal year 2006.

Table 30: Nebraska’s MSA Payment Allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

General purposes $2,977,777 $2,871,220 General Fund 

Health 19,263,236 14,065,685 State Children’s Health Insurance Program (SCHIP), 

Medicaid, Mental Health Services, Hospice and Home 

Health, Tobacco Trust Fund, Montana Comprehensive 

Health Insurance

Social services 2,844,884 0 Childcare, child support enforcement, infant mortality 

abatement, poison control, AIDS prevention, independent 

living, extended employment

Tobacco control 2,509,368 $6,825,385 Tobacco prevention

Unallocated 524,562 2,339,710

Total $28,119,823 a $26,102,000

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

General purposes $86,595 $88,437 MSA and tobacco tax law enforcement 

Health 20,216,433 21,678,570 Behavioral health (Medicaid and non-Medicaid), public health, 

State Children’s Health Insurance Program, biomedical 

research

Social services 2,848,200 2,983,029 Community-based developmental disability services, respite 

care assistance 
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 47 GAO-06-502 Tobacco Settlement

Source: Nebraska Department of Administrative Services-Budget Division.

Nevada Nevada reported receiving $38,872,322 from MSA payments in fiscal year 

2005 and expects to receive $39,507,406 in fiscal year 2006.

Table 31: Nevada’s MSA Payment Allocations

Source: State Treasurer’s Office.

a

Includes carry-over funds and interest earned.

Tobacco control 2,500,000 2,500,000 Tobacco use prevention, control, and cessation programs for 

youth and adults

Unallocated 12,268,187 9,023,271

Total $37,919,415 $36,273,307

(Continued From Previous Page)

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or 

expected to receive allocations

Education $33,003,114 $16,250,000 Scholarship program for Nevada students who 

attend a Nevada higher education institution

General purposes 286,523 427,350 Attorney General’s tobacco retail enforcement 

and master settlement legal expenses

Health 12,990,070 12,523,141 Grants to improve health services for children 

and persons with disabilities, prescription 

drugs and pharmaceutical services for lowincome seniors, endowment fund to provide 

grants for the promotion of public health

Social services 10,121,699 5,757,637 Grants that assist senior citizens to live 

independent of care facilities, senior services, 

homemaker program

Tobacco control 4,680,754 4,528,847 Grants to help fund tobacco cessation 

programs 

Total $61,082,160a $39,486,975a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 48 GAO-06-502 Tobacco Settlement

New Hampshire New Hampshire reported receiving $42,400,000 from MSA payments in 

fiscal year 2005 and expects to receive $43,000,000 in fiscal year 2006.

Table 32: New Hampshire’s MSA Payment Allocations

Source: New Hampshire Office of Legislative Budget Assistant.

New Jersey New Jersey reported receiving $246,462,646 from MSA payments in fiscal 

year 2005 and expects to receive $249,152,772 in fiscal year 2006.

Table 33: New Jersey’s MSA Payment Allocations

Source: New Jersey Office of Management and Budget.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Education $40,000,000 $43,000,000 Education Trust Fund, which distributes grants to school 

districts

General purposes 2,400,000 0 General Fund

Total $42,400,000 $43,000,000

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Debt service on securitized 

funds

$245,110,225 $249,152,772

Health 135,242 0 New Jersey Family Care, new and expanded Community 

Options for Seniors, expansion of Cancer Initiative, Senior 

Gold Pharmaceutical Assistance

Total $245,245,467 $249,152,772
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 49 GAO-06-502 Tobacco Settlement

New Mexico New Mexico reported receiving $38,009,047 from MSA payments in fiscal 

year 2005 and expects to receive $29,657,921 in fiscal year 2006.

Table 34: New Mexico’s MSA Payment Allocations

Source: New Mexico Department of Finance and Administration.

New York New York reported receiving $410,564,424 from MSA payments in fiscal 

year 2005 and expects to receive $434,741,632 in fiscal year 2006. These 

MSA payments include only the payments made to the state, which amount 

to about 51 percent of the annual payments made by the tobacco 

companies to New York. New York City and counties in the state receive 

the other 49 percent of the annual MSA payments to New York. 

Table 35: New York’s Allocations of MSA Payments and Securitized Proceeds 

Source: New York State Division of the Budget.

a

This amount includes securitized proceeds received in fiscal year 2004.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

General Purposes $26,139,047 $17,787,921

Health 11,870,000 11,870,000 Lung and tobacco illness research, poison control

Total $38,009,047 $29,657,921

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Budget shortfalls $354,313,266 0

Debt service on securitized 

funds

447,946,434 $434,741,632

Total $802,259,700a $434,741,632
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 50 GAO-06-502 Tobacco Settlement

North Carolina North Carolina reported receiving $148,640,949 from MSA payments in 

fiscal year 2005 and expects to receive $163,353,241 in fiscal year 2006. 

Table 36: North Carolina’s MSA Payment Allocations

Source: North Carolina Office of State Budget and Management.

a

Includes carry-over funds and interest earned. In addition, officials reported that they excluded the 

allocation for administrative expenses for fiscal year 2005 because the data were not available.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Debt service on securitized 

funds

0 $1,979,096

Economic development for 

tobacco regions

$27,200,505 5,059,214 Aerospace Alliance Initiative Awards, Economic Catalyst 

Awards, Diversification Initiatives, Agri-Economic 

Development, Workforce Development, Conservation of 

Natural Resources

Education 0 2,000,000 Golden Leaf Foundation

General purposes 60,000,000 34,000,000 General Fund 

Health 53,500,000 40,245,278 Senior Care Prescription Drug Program, Childhood Obesity 

Reduction, Medication Assistance Program, Health Disparities

Infrastructure 0 1,979,096 Tobacco Trust fund transfer

Tobacco control 15,000,000 15,000,000 Youth tobacco use prevention and cessation, enforcement of 

tobacco laws prohibiting sales to minors

Total $155,700,505a $100,262,684a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 51 GAO-06-502 Tobacco Settlement

North Dakota North Dakota reported receiving $23,326,754 from MSA payments in fiscal 

year 2005 and expects to receive $22,972,067 in fiscal year 2006.

Table 37: North Dakota’s MSA Payment Allocations

Source: North Dakota Office of Management and Budget, Fiscal Management Division.

Ohio Ohio reported receiving $321,050,059 from MSA payments in fiscal year 

2005. We used Ohio’s 2005 MSA payment as an estimate for its expected 

2006 payment based on Ohio’s budget documents, which advise state 

agencies to expect the same or less tobacco funds for that year as was 

received in 2005. In responding to our survey, Ohio declined to provide an 

estimate of their 2006 expected payment because of uncertainties in 

adjustments in MSA payments that may result from changes in 

participating manufacturers’ share of the tobacco market.

Table 38: Ohio’s MSA Payment Allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Education $10,497,039 10,337,430 45 percent of the MSA Funds are deposited in the 

common schools trust fund and interest earned on the 

fund is used for K-12 education

Health 489,862 229,721 Dental loan repayment program, breast and cervical 

cancer screening 

Infrastructure 10,497,039 10,337,430 Water projects 

Tobacco control 1,842,814 2,067,486 Tobacco cessation programs

Total $23,326,754 $22,972,067

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Economic development 

for tobacco regions

$15,584,593 $13,030,277 Programs to increase the variety, quantity, and value of 

nontobacco agricultural products, strategic investment in 

communities adversely impacted by a reduction in tobacco 

demand, education and training for tobacco growers

Education 9,277,865 6,274,109 Technology enhancements in schools 
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 52 GAO-06-502 Tobacco Settlement

Source: Ohio Office of Budget and Management.

a

Ohio supports each year’s programs with MSA payments received during the prior fiscal year as well 

as interest earned.

Oklahoma Oklahoma reported receiving $66,034,977 from MSA payments in fiscal year 

2005 and expects to receive $49,348,303 in fiscal year 2006.

Table 39: Oklahoma’s MSA Payment Allocations

Source: Oklahoma Office of State Finance.

a

Includes carry-over funds.

General purposes 9,533,109 17,971,831 Administration, oversight, and enforcement activities related to 

the MSA, law enforcement facilities improvements

Health 37,307,790 52,080,892 Minority health programs, alcohol and drug abuse prevention, 

biomedical technology transfer, support for children’s 

hospitals, lung cancer and disease research and prevention

Infrastructure 0 245,922,706 School construction

Social services 3,725,000 3,982,451 Funding for uncompensated health care of uninsured

Tobacco control 37,050,428 47,905,890 Underage tobacco enforcement, use prevention and cessation 

programs

Total $112,478,785a $387,168,156a

(Continued From Previous Page)

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

General purposes $1,806,502 $1,500,000 Attorney General’s Evidence Fund

Health 40,445,047 32,649,026 Medicaid, Tobacco Settlement Endowment Trust Fund (to be 

used for health programs)

Social services 0 4,345,788 Child welfare, foster care services for homebound elders, 

senior nutrition

Tobacco control 18,886,011 15,199,277 Tobacco Settlement Endowment Trust Fund (to be used for 

control programs)

Unallocated 4,897,417 0

Total $66,034,977 $53,694,091a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 53 GAO-06-502 Tobacco Settlement

Oregon Oregon reported receiving $73,142,434 from MSA payments in fiscal year 

2005 and expects to receive $75,110,359 in fiscal year 2006. 

Table 40: Oregon’s MSA Payment Allocations

Source: Oregon Department of Administrative Services.

a

Includes carry-over funds.

Pennsylvania Pennsylvania reported receiving $366,258,217 from MSA payments in fiscal 

year 2005 and expects to receive $351,180,000 in fiscal year 2006. 

Table 41: Pennsylvania’s MSA Payment Allocations

Source: Pennsylvania Governor’s Office of the Budget.

a

Includes carry-over funds. 

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Debt service $43,770,304 $58,737,984

Health 27,600,000 12,250,000 Oregon Health Plan, the state’s Medicaid acute health care 

delivery system

Tobacco control 700,000 0

Unallocated 50,925,577 4,122,375

Total $122,995,881a $75,110,359

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

Healtha $326,354,000 $333,295,000 Health research, adult health insurance, uncompensated 

care, medical assistance for workers with disabilities, 

community medical assistance

Tobacco control 44,503,000 32,963,000 Tobacco use prevention and cessation

Total $370,857,000 a $366,258,000a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 54 GAO-06-502 Tobacco Settlement

Rhode Island Rhode Island reported receiving $45,817,205 from MSA payments in fiscal 

year 2005 and expects to receive $47,988,000 in fiscal year 2006.

Table 42: Rhode Island’s MSA Payment Allocations

Source: State of Rhode Island Budget Office.

South Carolina South Carolina reported receiving $73,361,299 from MSA payments in fiscal 

year 2005 and expects to receive $74,329,662 in fiscal year 2006. 

Table 43: South Carolina’s MSA Payment Allocations

Source: South Carolina Office of State Budget.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized funds $45,315,618 $47,988,000

Total $45,315,618 $47,988,000

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized funds $73,361,299 $74,329,662

Total $73,361,299 $74,329,662
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 55 GAO-06-502 Tobacco Settlement

South Dakota South Dakota reported receiving $22,238,977 from MSA payments in fiscal 

year 2005 and expects to receive $23,232,155 in fiscal year 2006. In addition, 

South Dakota reported $14,322,737 was available in fiscal year 2005 from a 

fund composed of (1) securitized proceeds received in prior years and (2) 

interest earned on these proceeds. South Dakota expects $15,005,263 to be 

available from this fund in fiscal year 2006.

Table 44: South Dakota’s Allocations of MSA Payments and Securitized Proceeds 

Source: South Dakota Bureau of Finance and Management and South Dakota Health and Education Facilities Authority.

a

The Education Enhancement Funding Corporation pays for the debt service on securitized funds 

because the MSA payments are issued directly to the corporation rather than to the state.

b

The state allocates these funds based on interest earned.

Tennessee Tennessee reported receiving $156,708,209 from MSA payments in fiscal 

year 2005 and expects to receive $153,000,000 in fiscal year 2006. 

Table 45: Tennessee’s MSA Payment Allocations

Source: Tennessee Department of Finance and Administration.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized 

fundsa

$23,222,138 $17,167,994

Educationb 13,572,737 15,005,263 General and special education, technology in schools, 

scholarships, postsecondary vocational education

Tobacco controlb 750,000 0 Tobacco prevention and reduction plan 

Total $37,544,875 $32,173,257

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

General purposes $156,708,209 $153,000,000 General Fund

Total $156,708,209 $153,000,000
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 56 GAO-06-502 Tobacco Settlement

Utah Utah reported receiving $28,353,400 from MSA payments in fiscal year 2005 

and expects to receive $29,541,000 in fiscal year 2006. 

Table 46: Utah’s MSA Payment Allocations

Source: Utah Governor’s Office of Planning and Budget.

Vermont Vermont reported receiving $26,205,607 from MSA payments in fiscal year 

2005 and expects to receive $24,500,000 in fiscal year 2006. 

Table 47: Vermont’s MSA Payment Allocations

Source: Vermont Department of Finance and Management.

a

Includes carry-over funds.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to receive 

allocations

General purposes $100,000 $100,000 Attorney General’s Office

Health 12,891,800 13,002,800 State Children’s Health Insurance Program, cancer 

research, immunizations, health promotion

Reserves/rainy day funds 8,506,000 7,385,300 Tobacco Permanent Trust Fund (an endowment that allows 

the Legislature to allocate the interest to fund programs)

Social services 2,000,000 2,000,000 Drug Courts, Drug Board Pilot Program

Tobacco control 4,076,000 4,062,100 Tobacco Quit Line, TV campaign, prevention partnerships

Unallocated 779,600 2,990,800

Total $28,353,400 $29,541,000

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

General purposes $158,000 $158,000 Tax and Fund administration

Health 21,111,951 21,233,111 State Medicaid Match, drug and alcohol programs

Social services 652,349 579,000 Safe housing (project against domestic violence)

Tobacco control 4,919,317 5,132,698 Media campaigns, marketing enforcement

Total $26,841,617a $27,102,809a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 57 GAO-06-502 Tobacco Settlement

Virginia Virginia reported receiving $130,315,484 from MSA payments in fiscal year 

2005 and expects to receive $132,444,540 in fiscal year 2006. In addition, 

Virginia reported receiving $389,977,677 in securitized proceeds in fiscal 

year 2005.

Table 48: Virginia’s Allocations of MSA Payment and Securitized Proceeds

Source: Virginia Department of Planning and Budget.

a

Includes carry-over funds and interest earned.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or 

expected to receive allocations

Debt service on securitized 

funds

0 $33,444,540

Economic development for 

tobacco regions

$45,157,742 75,601,135 Economic development projects, infrastructure, 

education, job training, research, administration 

of the Tobacco Indemnification and Community 

Revitalization Commission 

Health 52,126,193 52,977,816 Virginia Health Care Fund for support of the 

Medicaid program

Payments to tobacco growers 20,000,000 13,710,000 Indemnification payments to tobacco growers

Tobacco control 13,031,549 13,244,454 Public education campaigns to discourage 

tobacco consumption by minors, research, 

administrative budget of the Virginia Tobacco 

Settlement Foundation 

Total $130,315,484 $188,977,945a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 58 GAO-06-502 Tobacco Settlement

Washington Washington reported receiving $130,879,000 from MSA payments in fiscal 

year 2005 and expects to receive $131,000,000 in fiscal year 2006. 

Table 49: Washington’s MSA Payment Allocations

Source: Washington State Office of Financial Management.

a

Includes carryover funds. 

West Virginia West Virginia reported receiving $56,495,804 from MSA payments in fiscal 

year 2005 and expects to receive $55,400,000 in fiscal year 2006. 

Table 50: West Virginia’s MSA Payment Allocations

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or 

expected to receive allocations

Debt service on securitized 

funds

$38,217,000 $38,252,000

Health 92,662,000 92,748,000 Health services, including state match on 

optional children’s Medicaid and State 

Children’s Health Insurance Program; 

subsidized health insurance for low-income 

state residents; grants to community clinics; 

grants to local public health jurisdictions; 

statewide public health programs such as 

childhood immunizations

Tobacco control 16,164,000 17,500,000 Tobacco prevention and cessation

Total $147, 043,000a $148,500,000a

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or 

expected to receive allocations

General purposes 0 $30,000,000 Worker’s Compensation Debt Reduction Fund

Health $19,549,408 20,078,744 Institutional facilities operation

Reserves/rainy day funds 28,247,902 0 Medical Trust Fund

Tobacco control 5,850,592 5,850,592 Tobacco Education Program, Alcohol 

Beverage Control Administration’s Tobacco 

Retailer Education Program

Unallocated 2,847,902 0

Total $56,495,804 $55,929,336a
Appendix IV

State-Specific Information on Amounts of 

MSA Payments and Securitized Proceeds 

Received and Allocated

Page 59 GAO-06-502 Tobacco Settlement

Source: West Virginia Department of Revenue-State Budget Office.

a

Includes carry-over funds and interest earned.

Wisconsin Wisconsin reported receiving $132,054,977 from MSA payments in fiscal 

year 2005 and expects to receive $138,929,751 in fiscal year 2006. 

Table 51: Wisconsin’s MSA Payment Allocations

Source: Wisconsin Department of Administration.

Wyoming Wyoming reported receiving $15,827,492 from MSA payments in fiscal year 

2005 and expects to receive $15,827,492 in fiscal year 2006. 

Table 52: Wyoming’s MSA Payment Allocations

Source: Wyoming Department of Health, Substance Abuse Division.

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

Debt service on securitized 

funds

$132,054,977 $138,929,751

Total $132,054,977 $138,929,751

Fiscal year allocation

Program area 2005 Expected 2006

Examples of programs receiving or expected to 

receive allocations

General purposes $261,245 $261,245 Alcohol compliance, attorney 

Health 6,918,275 6,918,275 Substance abuse treatment and prevention and 

intervention services

Social services 2,967,736 2,967,736 Drug court-related juvenile and family mentoring, 

community services, day care, intensive supervised 

probation

Tobacco control 5,680,236 5,680,236 Tobacco prevention, regional prenatal programs, 

community tobacco prevention activities, tobacco 

cessation, media

Total $15,827,492a $15,827,492a
Page 60 GAO-06-502 Tobacco Settlement

Appendix V

GAO Survey on States’ Allocations of Fiscal 

Years 2005 and 2006 MSA Payments ApendxiV

United States Government Accountability Office

Survey on States’ Allocations of Fiscal Years 

2005 and 2006 Master Settlement Agreement 

Payments

Introduction

 1

The U.S. Government Accountability Office (GAO) is an 

independent agency of the legislative branch that 

supports Congress in meeting its Constitutional

responsibilities. We are currently gathering information

on states’ allocation of fiscal years 2005 and 2006 Master

Settlement Agreement (MSA) payments as required by

the Farm Security and Rural Investment Act of 2002.

This year we are seeking information on (1) the actual 

amount of fiscal year 2005 MSA payments and 

securitized proceeds received and the amount of fiscal 

year 2006 MSA payments and securitized proceeds 

expected to be received by each of the 46 states party to

the MSA, and (2) how states allocated the 2005 payments

and securitized proceeds and plan to allocate the 2006 

payments and securitized proceeds.

In March 2005, we reported to the Congress on states’

fiscal year 2004 actual payments and allocations and 

fiscal year 2005 expected payments and allocations. You 

can obtain a copy of the report via the internet at 

www.gao.gov and request report number GAO-05-312. 

Most of the questions in this survey can be answered by

checking boxes or filling in blanks. Space has been 

provided at the end of the survey for any additional 

comments. Your participation is very important and we 

urge you to complete this survey. We cannot provide

meaningful information to the Congress on states’ receipt 

and use of the tobacco settlement payments without your

responses. Thank you for your time and assistance.

Instructions

You can either print out the survey and fill in the

responses in hard copy and fax it to Beverly Peterson at 

(202) 512-4852 or you can save the file containing the

survey on your computer and e-mail the completed file to

Beverly Peterson (petersonb@gao.gov).

Contacts

If you have any questions about any aspect of this survey,

please contact:

Beverly Peterson 

Phone: (202) 512-7438

E-mail: petersonb@gao.gov

We need your responses to this survey by Monday, 

October 3, 2005. Thank you in advance for your

cooperation.

______________________________________________________________________________________________
Appendix V

GAO Survey on States’ Allocations of Fiscal 

Years 2005 and 2006 MSA Payments

Page 61 GAO-06-502 Tobacco Settlement

 2

Glossary

Please refer to the following definitions when completing this survey: 

Allocation – Refers to funds appropriated or otherwise designated (e.g., earmarked for a 

trust fund or an endowment that has a specific purpose). It also includes funds designated 

for debt servicing on bonds issued when a state securitized all or a portion of the MSA 

funds.

Fiscal year - Refers to your state’s fiscal year. 

MSA - Refers to the November 1998 Master Settlement Agreement, under which the 

attorneys general of 46 states signed a comprehensive agreement with four of the nation’s 

largest tobacco companies requiring them to make annual payments to states in perpetuity 

as reimbursement for past tobacco-related costs. 

Securitization - Refers to the use of MSA payments to back the issuance of bonds. More 

specifically, securitization is a type of structured financing method based on the cash flow 

of receivables or rights to future payments. 

Definitions of MSA payment allocation categories 

To standardize the information reported by the 46 states in prior years, GAO developed categories 

for the program areas to which states allocated their MSA payments. When classifying funds to a 

category, please include administrative costs that apply to that category. 

Budget Shortfalls: This category is comprised of amounts allocated to balance state 

budgets and close gaps or reduce deficits resulting from lower than anticipated revenues or 

increased mandatory or essential expenditures. 

Debt Service on Securitized Funds: This category consists of amounts allocated to 

service the debt on bonds issued when the state securitized all or a portion of its MSA 

payments. 

Economic Development for Tobacco Regions: This category is comprised of amounts 

allocated for economic development projects in tobacco states such as infrastructure 

projects, education and job training programs, and research on alternative uses of tobacco 

and alternative crops. This category includes projects specifically designed to benefit 

tobacco growers as well as economic development that may serve a larger population 

within a tobacco state. 

Education: This category is comprised of amounts allocated for education programs such 

as day care, preschool, Head Start, early childhood education, elementary and secondary 

education, after-school programs, and higher education. This category does not include 

money for capital projects such as construction of school buildings. 
Appendix V

GAO Survey on States’ Allocations of Fiscal 

Years 2005 and 2006 MSA Payments

Page 62 GAO-06-502 Tobacco Settlement

 3

Glossary (Continued)

General Purposes: This category is comprised of amounts allocated for attorneys’ fees and 

other items, such as law enforcement or community development, that could not be placed in a 

more precise category. This category also includes amounts allocated to the state’s general fund 

that were not earmarked for any particular purpose. Amounts used to balance state budgets and 

close gaps or reduce deficits should be categorized as budget shortfalls rather than general 

purposes.

Health: This category is comprised of amounts allocated for direct health care services, health 

insurance including Medicaid and the State Children’s Health Insurance Program (SCHIP), 

hospitals, medical technology, public health services, and health research. This category does 

not include money for capital projects such as construction of health facilities. 

Infrastructure: This category is comprised of amounts allocated for capital projects such as 

construction and renovation of health care, education and social services facilities, water and 

transportation projects, and municipal and state government buildings. This category includes 

retirement of debt owed on capital projects.

Payments to Tobacco Growers: This category is comprised of amounts allocated for direct 

payments to tobacco growers including subsidies and crop conversion programs. 

Reserves/Rainy Day Funds: This category is comprised of amounts allocated to state budget 

reserves such as rainy day and budget stabilization funds not earmarked for specific programs. 

Amounts allocated to reserves that are earmarked for specific areas are categorized under those 

areas--e.g., reserve amounts earmarked for economic development purposes should be 

categorized in the economic development category. 

Social Services: This category is comprised of amounts allocated for social services such as 

programs for the aging, assisted living, Meals on Wheels, drug courts, child welfare, and foster 

care. This category also includes amounts allocated to special funds established for children’s 

programs.

Tax Reductions: This category is comprised of amounts allocated for tax reductions such as 

property tax rebates and earned income tax credits. 

Tobacco Control: This category is comprised of amounts allocated for tobacco control 

programs such as prevention, including youth education, enforcement and cessation services. 

Unallocated: This category is comprised of amounts not allocated for any specific purpose, 

such as amounts allocated to dedicated funds that have no specified purpose; amounts states 

chose not to allocate in the year MSA payments were received that will be available for 

allocation in a subsequent fiscal year; interest earned from dedicated funds not yet allocated; 

and amounts that have not been allocated because the state had not made a decision on the use 

of the MSA payments. 

 ____________________________________________________________________________________ 
Appendix V

GAO Survey on States’ Allocations of Fiscal 

Years 2005 and 2006 MSA Payments

Page 63 GAO-06-502 Tobacco Settlement

 4

Contact Information

Please provide the following information about the primary person completing this survey in case we need to clarify a 

response.

 Name: 

 Agency: 

 Title: 

 Telephone number: 

 E-mail address: 

 Fax number: 

MSA Payments and Securitized Proceeds Received 

1. What was the amount of fiscal year 2005 MSA payments and securitized proceeds your state received? 

MSA Payments: $

Securitized proceeds: $

Total: $

Note: If you would like to see the information your state submitted regarding expected fiscal year 2005 allocations on last 

year’s survey, please contact us using the contact information listed on page 1 of this document and we will be happy to 

supply you with that information. 

2. What is the amount of fiscal year 2006 MSA payments and securitized proceeds your state expects to receive? 

Expected MSA payments: $

Expected securitized proceeds: $

Total: $
Appendix V

GAO Survey on States’ Allocations of Fiscal 

Years 2005 and 2006 MSA Payments

Page 64 GAO-06-502 Tobacco Settlement

 5

3. For each of the categories below (listed in alphabetical order), please provide the amount of MSA payments and 

securitized proceeds your state allocated for fiscal year 2005 (including any unallocated funds). In addition, please 

provide specific examples of programs for each of the categories to which funds were allocated. 

Allocation of MSA Payments for Fiscal Year 2005 

Category Amount of MSA 

payments 

allocated for

fiscal year 2005

Amount of 

securitized

proceeds allocated 

for fiscal year 

2005

Examples of programs receiving funds 

Budget

shortfalls $ $ NA 

Debt service 

on securitized 

funds

$ $ NA 

Economic 

development 

for tobacco 

regions

$ $

Education $ $

General

purposes

$ $

Health $ $

Infrastructure $ $

Payments to 

tobacco

growers

$ $

Reserves/ 

rainy day 

funds

$ $

Social services $ $

Tax reductions $ $

Tobacco

control

$ $

Unallocated $ $ NA

Total $ $

4. Do MSA payments and securitized proceeds, reported in question 3, include the following? (Check all that apply.) 

[ ] Carry-over funds 

[ ] Interest earned 

[ ] Neither carry-over funds nor interest earned 
Appendix V

GAO Survey on States’ Allocations of Fiscal 

Years 2005 and 2006 MSA Payments

Page 65 GAO-06-502 Tobacco Settlement

 6

5. For each of the categories below (listed in alphabetical order), please provide the amount of MSA payments 

and securitized proceeds your state plans to allocate for fiscal year 2006 (including any unallocated funds). In 

addition, please provide specific examples of programs for each of the categories to which funds will be allocated. 

Planned Allocation of MSA Payments for Fiscal Year 2006 

Category Amount of MSA 

payments planned 

to be allocated for 

fiscal year 2006

Amount of 

securitized

proceeds planned 

to be allocated for 

fiscal year 2006

Examples of programs planned to receive funds 

Budget

shortfalls $ $ NA 

Debt service 

on securitized 

funds

$ $ NA 

Economic 

development 

for tobacco 

regions

$ $

Education $ $

General

purposes

$ $

Health $ $

Infrastructure $ $

Payments to 

tobacco

growers

$ $

Reserves/rainy 

day funds $ $

Social services $ $

Tax reductions $ $

Tobacco

control

$ $

Unallocated $ $ NA

Total $ $

6. Do MSA payments and securitized proceeds, reported in question 5, include the following? (Check all that apply.) 

[ ] Carry-over funds 

[ ] Interest earned 

 [ ] Neither carry-over funds nor interest earned 
Appendix V

GAO Survey on States’ Allocations of Fiscal 

Years 2005 and 2006 MSA Payments

Page 66 GAO-06-502 Tobacco Settlement

 7

Comments

7. If you have any additional comments relating to any of the issues raised in this survey, please enter them in the 

 space provided. 

Thank you for your cooperation.
Page 67 GAO-06-502 Tobacco Settlement

Appendix VI

GAO Contact and Staff Acknowledgments ApendxiVI

GAO Contact Robert A. Robinson, 202-512-3841

Staff 

Acknowledgments

In addition to the contact named above, Charles M. Adams, Assistant 

Director; Beverly Peterson; Bernice H. Dawson; Chuck Bausell; Kevin Bray; 

Stuart Kaufman; and Alison O’Neill made key contributions to this report.

(360634)
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