What Virginia's Tobacco Commission Could Teach Us for Opioid Settlements

Sep 10, 2019

Virginia's Tobacco Commission spends settlement money helping revitalize the region hit hardest by the decline in tobacco sales. The unique fund could serve as an example for how to make settlement dollars last.
Credit Kentucky Photo File / Flickr CC

Oklahoma state officials recently won half a billion dollars from Johnson & Johnson. The landmark opioid payout could just be the first. Many states, including Virginia, are investigating pharmaceutical companies for their role in the opioid epidemic. 

Virginia’s Tobacco Region Revitalization Commission could serve as an example for how to make payout money last. 

 

In the late 1990’s the country’s five largest cigarette manufacturers admitted that they misled consumers about the harm of smoking. They agreed to pay up, in perpetuity. Every year they pay states a lump sum. 

At the same time, the tobacco industry took a hit.

“A lot of farms just quit operating,” remembers Republican Delegate Terry Kilgore. “That was a big problem when you saw a lot of people go out of farming altogether.” 

Kilgore represents the southwest corner of Virginia. He says the collapse of the tobacco industry was devastating and the settlement money became a crucial tool. 

Virginia used it to attract new businesses, including a Tempurpedic mattress factory, a tech call center, even a vet school in Lee County. 

Not all of the tobacco settlement money goes to economic development. About half slips quietly into the state’s general fund each year, earmarked for healthcare. Another small chunk supports the Virginia Foundation for Healthy Youth. 

But the remaining portion, 45-percent, goes to the Tobacco Commission. Whit Clement was a Democeatic delegate from Danville who helped come up with the idea.  He says they had unanimous support because they made a plan before the money started coming in. 

“We had the foresight, planned or otherwise, to get that law on the books so when the checks first came in the law required they be appropriated the Tobacco Commission,” recalls Clement. 

You'd certainly love to have a Virginia, 100 years, 150 years from now, with big pots of money that serve the public interest. That do nothing but grow.

Clement says the Commission did something very different than many other states. It took its annual payouts to the bond market, leveraging the consistent revenue to raise a little over one billion dollars up front. 

Clement says the idea was partially out of necessity. Unlike people in many other states, Virginia citizens were facing big economic losses. 

“A lot of the states didn’t have that direct impact on a locality. So they absorbed that money into the general fund and I’m sure they felt like they made good uses of it every year,” says Clement. 

But Virginia was able to use the money right away, to bail out those tobacco farmers. Plus the billion dollars was enough they were even able to sit on most of it, like an endowment. It continued to earn more money through interest. 

Almost 20 years later and the Tobacco Commission still has about half a billion dollars in the bank. 

Evan Feinman, who runs the Commission today, says they’re still doling out grants to economic development projects in southside and southwest Virginia.

“We are able to be flexible,” Feinman says. “We can ramp up when there’s big opportunities, we can come down when there’s not much work to be done.”

Feinman says the fund could still last another 20 years, and if an opioid settlement is in Virginia’s future he thinks doing something similar would be a smart use of the money. 

“You’d certainly love to have a Virginia, 100 years, 150 years from now, with big pots of money that serve the public interest - that do nothing but grow - and will continue to serve the public interest for years to come,” says Feinman. 

Like Oklahoma’s lawsuit against Johnson & Johnson, Virginia is suing Purdue Pharma, the maker of Oxycontin. Virginia is also part of a multistate investigation of other drug companies. 

 This report, provided by Virginia Public Radio, was made possible with support from the Virginia Education Association.