OKLAHOMA CITY — As lawmakers grapple with how to fund Medicaid expansion, voters must decide whether they want to overhaul the state’s constitutionally protected tobacco settlement.

State Question 814 proposes reducing the amount of annual payment that flows into the Tobacco Settlement Endowment Trust (TSET) by 50%. Proponents say this would cover some of the expense of the upcoming Medicaid expansion approved by voters earlier this year.

Last budget year, Oklahoma’s share of the annual payment from “big tobacco” amounted to about $66.3 million, said Thomas Larson, a spokesman for TSET.

Of that, the state’s tobacco endowment received 75% — or $49.7 million. The other 25% was split between the Legislature and the Attorney General’s evidence fund. The Legislature received $12.4 million and the Attorney General received 6.25% — or $4.1 million.

The ballot question proposes flipping that allotment so that the Legislature would receive 75% and TSET would receive 25%. The Attorney General’s Office is slated to continue to receive its share.

Oklahoma will receive the tobacco payment as long as cigarettes are sold in the United States. However, the payment has been a declining revenue source as Americans smoke less or shift to e-cigarettes, Larson said.

If the measure passes, lawmakers must use the TSET funds to pay the state’s required 10 percent Medicaid expansion contribution. The federal government is responsible for paying the remaining 90 percent.

The voter-mandated Medicaid expansion is expected to shore up struggling hospitals and insure as many as 200,000 more Oklahomans. However, it comes amid a worsening state budget situation and doesn’t provide lawmakers any guidance on how to pay the estimated $164 million to $246 million price tag next year.

State Sen. Roger Thompson, R-Okemah, said the Legislature needs to come up with the funds without cutting other services. Even if SQ 814 passes, lawmakers will still need to find at least another $115 million to cover their share.

Passage of State Question 814 will be “major for us,” said Thompson, the Senate appropriations chair.

“The concept of using the $50 million, absolutely I support (that), and many of those services that TSET’s now taking care of, Medicaid expansion will take care of,” he said.

If the measure fails, the Legislature will have to come up with another $50 million somewhere else and cuts are more likely, he said.

But voters have long been skeptical of giving lawmakers access to the trust.

Nearly two decades ago, voters feared lawmakers would squander Oklahoma’s share of a settlement from the tobacco industry, so they locked it away from the Legislature’s grasp into the trust. Board members appointed by elected officials oversee the trust’s activities.

The corpus of the trust, which is earmarked to promote health for generations to come, has grown to $1.3 billion. TSET spends a portion of the yearly earnings on programming and administrative costs. Lawmakers wouldn’t be able to tap the $1.3 billion.

While Thompson said he has no complaints about how TSET is using the funds, the agency has faced criticism for some of its spending priorities as rural hospitals remain on life support, thousands of Oklahomans struggle to access care and the state’s health outcomes continue to flounder even as the trust continues to grow.

Last year, CNHI Oklahoma filed an open records request seeking a detailed explanation of how TSET disbursed nearly $218.3 million in voter-entrusted funds during the 2014-2018 budget cycles.

While the agency spent millions on tobacco cessation, research, physician residency and loan repayment programs, financial records showed TSET spent more than $2.8 million on things like sidewalks, water fountains, pools, splash pads, signage, farmers markets, pavilions, trails and playgrounds in local communities statewide.

It also spent nearly $177,000 sponsoring various events hosted by doctors, dental hygienists, school and municipal groups and child advocates. Nearly $1.2 million was spent on the “Free the Night” advertising campaign to promote smoke-free bars.

Matt Glanville, Oklahoma government relations director for the American Cancer Society Cancer Action Network, is part of the Vote No — 814 is Not OK coalition. The group’s membership also includes the American Heart Association, the American Lung Association and the Campaign for Tobacco-Free Kids.

The group is urging Oklahomans to vote no because TSET and Medicaid are two fundamentally different areas.

“Medicaid is obviously a health care program,” Glanville said. “TSET funds prevention, not health care. So with the state question, Oklahoma voters are being put into a position of being asked to diminish the state’s investment in prevention in order to fund health care when there are numerous other ways for the Legislature to fund health care.”

Glanville suggested lawmakers raise taxes on alcohol, tobacco or cigars. He said the state still doesn’t regulate or tax e-cigarettes. Lawmakers also could eliminate industry tax credits that cost taxpayers hundreds of millions each year, he said.

The state needs TSET’s programs that focus on preventing heart disease, strokes, and diabetes while encouraging physical activity to improve Oklahoma’s overall health outcomes, he said. TSET also funds the development of breakthrough cancer treatments and prevention and helps pay for physician residency programs to bring doctors to the state, he said.

Stecklein covers the Oklahoma Statehouse for CNHI's newspapers and websites. Reach her at jstecklein@cnhi.com.

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