Government funds

In 1998, the states were given $200 billion as settlement for the law suit against the tobacco industry over false claims about the health hazards from smoking. Much of that money was redirected to cover general operating expenses. Many states have used funds from the 1998 Tobacco Master Settlement Agreement (MSA) to pay for general operations, plug budget holes, and pay off state debt rather than for tobacco prevention or health programs. While the settlement was intended to help states recover Medicaid costs from smoking-related illnesses, most of the money has been used for non-health purposes. Something similar is happening with money given to the states from the infrastructure bill passed in 2021. Some states and local entities have used or are considering using federal infrastructure funds—specifically those from the Infrastructure Investment and Jobs Act (IIJA) and previous COVID-relief packages—to help cover general operating expenses and address budget deficits. The tobacco payouts were designed to take place over 25 years but many states couldn’t wait and accepted a lower amount to get the money up front. Spending is the key to reelection for local politicians. Many states used Covid money for general operating expenses. Many states used federal COVID-19 relief funds, particularly from the American Rescue Plan's State and Local Fiscal Recovery Funds (SLFRF), to cover general operating expenses and replace lost public-sector revenue.