Monday, April 12, 1999
RE: Association Proposes Restoring Utah’s Permanent State School Fund
CONTACT: Howard Stephenson, President (972-8814), cell (550-8391)

Tobacco Settlement Money Should Go to
School Trust Fund

Utah’s share of tobacco settlement money should be placed in the permanent State School Fund to benefit Utah school children, today and into the future, according to the Utah Taxpayers Association. “The Taxpayers Association calls on the Governor and legislative leaders to enact legislation providing for a majority of tobacco settlement funds to be used to restore the millions of dollars taken from the State School Fund during the 1980’s, and support public education with the interest money earned by the fund.” said Association President Howard Stephenson.

The State School Fund is a permanent trust established at statehood. The interest was to be used to support the public schools. The School Trust Lands Administrators have done a remarkable job during the past ten years to increase the size of the fund from a paltry $18 million in 1983 to nearly $300 million today. However, because of past mismanagement, the size of Utah’s trust is meager compared to states such as Wyoming and New Mexico. For example, New Mexico’s fund is currently over $3 billion, Stephenson said.

The most recent erosion of the trust fund occurred in 1983 when the account was raided by the Matheson administration and the Legislature with the blessing of a Supreme Court decision declaring the raid appropriate, despite the indemnification against loss requirement in the Utah Constitution. Only one of the five justices dissented to the ruling.

“The tobacco settlement provides a rare, yet painless opportunity to restore the fund to the level it would have been had the 1983 raid and years of previous mismanagement not occurred,” Mr. Stephenson said.

Utah is expected to receive nearly $1 billion from the tobacco settlement over a period of 25 years, providing approximately $33 million annually. Attorney General Jan Graham also won an additional $15.7 million per year for a ten year period beginning in 2008 due to Utah’s early involvement in the lawsuit.

“We believe a majority of these funds should be dedicated to the State School Fund to reconcile the abuses that have occurred with the Fund since statehood,” Stephenson said. “It is altogether fitting that these funds be used to do right by our children and grandchildren and to remove the shame of the state’s failure to administer these funds properly.”

The Utah Taxpayers Association said the use of the tobacco settlement money for public education is especially appropriate for the following reasons:

  • The onset of smoking has been shown repeatedly to be related to poor academic achievement. Relevant indicators of achievement include scholastic performance (grades), high school graduation, truancy rates and future professional or educational aspirations. (1994 Surgeon General Report “Preventing Tobacco Use Among Young People”. The report contains six studies showing low school performance as a strong correlate to student smoking.)
  • The percentage of smokers among alternative school students is significantly higher (49%) than regular school students (12%), showing that smoking rates are four times higher for low performing students (Stephen Bahr, “Drug Use Among Utah Students, 1997”).
  • Tobacco use is significantly higher among high school dropouts (38.1%) than high school graduates (13.5%) and college graduates (4.1%) (“July Utah Health Status Update” Utah Department of Health, 1999).

The Association also noted that in obtaining the settlement it was argued that the tobacco companies should repay government funding of tobacco-related illnesses through Medicaid. Despite budgetary pressures, the legislature faithfully funded the Medicaid match, arguably at the expense of other spending needs such as education. It is appropriate therefore, to use these funds to provide a permanent source of future education funding.

“Since rules of good budgeting require that one-time money not be spent for ongoing programs, the placement of these monies in a trust fund is appropriate,” Stephenson said. He said the tobacco settlement money should not be treated as ongoing funding because it is anybody’s guess as to whether the tobacco settlement money will actually continue for the full twenty-five years. Since the settlement and other class action lawsuits are expected to drive up the price of cigarettes, the companies that are a part of the settlement may or may not be around in twenty-five years, especially if consumption drops or if new companies sell cigarettes for less.