A yes vote on State Question 814 on November 3 would free up hundreds of millions of dollars to supplement the rising cost of Medicaid services in Oklahoma.

SQ 814, placed on the ballot by the Legislature and Gov. Kevin Stitt, would change put less money in the Tobacco Settlement Endowment Trust (TSET) and more money into the hands of lawmakers to spend on health care.

The annual amount going to TSET would drop from 75% to 25% with the subtracted portion going to the state’s Medicaid program.

In 1998, Oklahoma and 45 other states sued tobacco companies for the damage and death their products inflicted on Americans.

As the case was scheduled to go to trial, the companies and the participating states reached a compromise known as the “Master Settlement Agreement.” As part of this settlement, Big Tobacco is required to make annual payments to participating states that will continue as long as cigarettes are sold nationally.

Oklahoma is the only state in the nation to protect a portion of these funds in a constitutionally protected trust. Approved by voters in 2000, the Tobacco Settlement Endowment Trust is supposed to use earnings from the trust to fund programs to improve the health of Oklahomans.

TSET’s budget is based not on the MSA payment, but on earnings from the endowment. To create stability year-over-year, the annual budget is based on a three-year rolling average of earnings.

The investment of the endowment is managed by a five-member Board of Investors. Spending decisions are made by a seven-member Board of Directors.

The FY2021 budget is $46 million.

Each annual payment is split three ways:

  • 75% to the Tobacco Settlement Endowment Trust (TSET) 18.75% to the state legislature
  • 6.25% to the Office of the Attorney General
  • The 2020 MSA payment to Oklahoma was $66,280,746 and $49,710,560 went to TSET, $12,427,640 went to the legislature and $4,142,547 went to the Office of the Attorney General.
  • The total payments to Oklahoma have been $1,607,498,160 with TSET getting $1,088,139,669.
  • The state legislature has had total payments of $397,347,638 and the Office of the Attorney General got $76,590,154.

On September 29, the TSET account had $1,331,292,014 on hand.  Earnings from the permanent trust is what funds the TSET agency and their projects.

If it passes, SQ814 would not touch the money already collected but would decrease the amount of new payments.

Payments are made usually in April. The amount of money that the tobacco companies are required to annually contribute to the states varies but all payments are based primarily on the number of cigarettes sold. Payments to Oklahoma for the past 5 years:

2020 – $66,280,746

2019 – $69,766,823

2018 – $71,663,337

2017 – $77,953,045

2016 – $76,009298

Based on state law, the breakdown of the payment for 2020 would be divided this way: 

  • Permanent trust fund 75% – $49,710,560
  • Appropriated TSET Fund 18.75% – $12,427,640  (The actual appropriated amount was $11,718,750 due to using an estimate from the February board meeting.)
  • Attorney General Evidence Fund 6.25% -$4,142,547.

According to its website, TSET spends its funding on incentive grants for schools and communities, training sponsorships, research, advertising on television, smoking education and other projects.