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Senate Leader Unveils Framework for Tobacco Trust Fund

Even though no agreement has been reached on the ultimate use of Oklahoma's $2.3 billion tobacco settlement, the state needs to begin the process of structuring a special tobacco trust fund, according to Senator Stratton Taylor, the leader of the Oklahoma State Senate.

In an effort to get such discussions underway, the Senate President Pro Tempore today announced that he has authored draft legislation that could ultimately be used as a vehicle to address the trust fund question.

"I think almost everyone agrees that a substantial share of the tobacco funds should ultimately be deposited in a trust fund. Before we get caught up in deciding where the money will be spent, it's important to start laying the groundwork for a special savings account for the people of Oklahoma," said Senator Taylor (D-Claremore).

"I'm just trying to get the ball rolling so serious discussions can begin on this issue. I want to stress that my proposal is just a draft and I fully expect it to evolve over time as we talk through the many questions that surround the creation of a trust fund."

Some of the questions that need to be answered during the trust fund discussion include:

  • Who will oversee the trust fund - The Legislature or a special board?

  • If it is a board, does it operate like a university foundation or a traditional state agency board?

  • If a board oversees the trust fund, who appoints the board members?

  • What powers does the board possess?

  • If the board option is chosen, should the money be allocated based upon grant proposals?

  • What programs should be eligible for receiving funds (i.e. tobacco cessation, children's health care, elderly programs, cancer treatment, etc.)?

  • Should the board give preference to proposals where either public or private matching funds are available?

  • Should the tobacco trust fund money be spent solely for pilot programs or should recurring, operational expenses also be eligible?

  • Should capital improvements be eligible for trust fund money, and if so, what parameters would guide such expenditures?

  • How does the state make certain that tobacco settlement funds benefit the entire state and not just certain geographic regions?

  • Should there be a cap on how much any one program area can receive from the trust fund in one calendar year?

  • Who should oversee management of the trust fund if the board option is selected? Should it be the job of the State Treasurer or the board (Obviously we are pleased with the work of Robert Butkin, but given the problems of past treasurers, do we want to entrust the tobacco fund with future holders of that office)?
  • Under Senator Taylor's draft proposal, the trust fund would be administered by a seven-member board of directors appointed by a variety of state officials. The panel would be a bipartisan body of highly qualified individuals representing all parts of the state.

    "I think it's critical that this be a bipartisan panel with representatives from all four corners of the state. It's also important to have a number of different appointing authorities so no single person will control how the state invests or spends its tobacco money. We should hear from a lot of different voices when those decisions are made," said Senator Taylor.

    Under Taylor's proposal, the following guidelines would govern the board and its appointees:

    • Board members would be appointed by the Governor, the Senate President Pro Tempore, the Speaker of the House, the Attorney General, the State Treasurer, the State Auditor and Inspector and the Superintendent of Public Instruction.

    • At least one appointee would come from each congressional district, but no more than two appointees could come from any one such district;

    • No more than four appointees could come from the same political party;

    • Appointees shall have experience in public or private finance, investment funds management, the health care industry or children's programs;

    • Appointees shall meet quarterly to oversee management of Trust Fund investments;

    • Appointees may review proposals and make recommendations to the Legislature regarding how interest from the Trust Fund should be spent.

    Currently, Oklahoma's annual share of its $2.3 billion tobacco settlement is deposited directly into the state general revenue account. The state will receive the annual payments for the next 25 years. Several state officials have talked about creating a trust fund for a portion of the money, but no official action has been taken yet.

    "Hopefully, this draft proposal will help stimulate the thoughtful discussions we need to have to reach a consensus on this important issue. It's critical that we devote some time to structuring a savings account that will best serve the people of Oklahoma," said Senator Taylor.

    Contact info
    Senate Communications Division - (405) 521-5605