Money managers might be tempted to follow the money from the master settlement tobacco agreement, but much of it is going to current budgetary appropriations, rather than reserve funds.
The 46 states party to the agreement will have received an estimated total of $24.2 billion in their respective fiscal years for 2003 and 2004, according to a report from the Government Accountability Office. The states allocated a combined $60 million of the proceeds in 2003 to reserve or rainy-day funds and plan to allocate $40 million in 2004, figures the GAO report rounds to zero. In fiscal 2001, the states allocated an aggregate 5% to such funds, and in 2002, 1%.
In all, states reported they received about $12.8 billion in tobacco settlement money and related securitized proceeds in fiscal year 2003 and expected to receive about $11.4 billion in fiscal year 2004.
"Over the three prior years — fiscal years 2000, 2001, and 2002 — states also reported receiving a total of about $24 billion," the report noted. "These amounts include payments from tobacco companies and, for some states, the proceeds of the sale of bonds backed by payments tobacco companies will make in the future (securitized proceeds)," the report noted.
The portion of the payment states allocate to meeting budget shortfalls is expected to increase to an aggregate 54% in fiscal 2004, from 36% the previous fiscal year. Allocations for debt service on states' securitized proceeds are expected to increase to 7% in fiscal 2004, from about 2% the previous fiscal year. And the states' allocation to health-related programs is expected to decline to 17% in 2004, from 24% in fiscal 2003.