Tobacco Settlement: States' Allocations of Fiscal Year 2004 and  
Expected Fiscal Year 2005 Payments (21-MAR-05, GAO-05-312).	 
                                                                 
In the 1990s, states sued major tobacco companies to obtain	 
reimbursement for health impairments caused by the public's use  
of tobacco. In 1998, 46 states and four of the nation's largest  
tobacco companies signed a Master Settlement Agreement (MSA) that
requires the tobacco companies to make annual payments to the	 
states in perpetuity as reimbursement for past tobacco-related	 
health care costs. The MSA commits the tobacco companies to pay  
the states approximately $206 billion over the first 25 years.	 
Some of the states have arranged to receive upfront proceeds	 
based on the amounts that tobacco companies owe by issuing bonds 
backed by future payments. The Farm Security and Rural Investment
Act of 2002 requires GAO to report annually on the amount of MSA 
payments that states receive through fiscal year 2006. This	 
fourth report provides information on (1) the payments the 46	 
states received in fiscal year 2004 and expect to receive in	 
fiscal year 2005 and (2) states' allocations of these funds to	 
various program categories and changes from prior years. To	 
conduct this study, GAO surveyed the 46 states. 		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-05-312 					        
    ACCNO:   A19819						        
  TITLE:     Tobacco Settlement: States' Allocations of Fiscal Year   
2004 and Expected Fiscal Year 2005 Payments			 
     DATE:   03/21/2005 
  SUBJECT:   Balances of budget authority			 
	     Budget administration				 
	     Claims settlement					 
	     Financial management				 
	     Funds management					 
	     Health care costs					 
	     Health care services				 
	     Payments						 
	     State budgets					 
	     State governments					 
	     Tobacco industry					 
	     Allocation (Government accounting) 		 
	     Reporting requirements				 
	     Reimbursements					 
	     Master Settlement Agreement			 

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GAO-05-312

     

     * Report to Congressional Requesters
          * March 2005
     * TOBACCO SETTLEMENT
          * States' Allocations of Fiscal Year 2004 and Expected Fiscal Year
            2005 Payments
     * Contents
          * highlights
          * Results in Brief
          * States Received about $9.7 Billion in MSA Payments and
            Securitized Proceeds in Fiscal Year 2004 and Expect to Receive
            about $5.4 Billion in Fiscal Year 2005
          * States Allocated the Largest Portion of their Funds to Cover
            Budget Shortfalls in Fiscal Year 2004 and Expect to Allocate the
            Largest Portion to Health- Related Programs in Fiscal Year 2005
     * Objectives, Scope, and Methodology
          * Survey Methodology and Categorization of States' Allocations
          * Categories of States' Allocations
     * Allocations of MSA Payments for 46 States
     * States' Allocations of Combined MSA Payments and Securitized Proceeds
       for Fiscal Years 2000 through 2005
     * State-Specific Information on Amounts of Master Settlement Agreement
       Payments and Securitized Proceeds Received and Allocated
          * Alabama
          * Alaska
          * Arizona
          * Arkansas
          * California
          * Colorado
          * Connecticut
          * Delaware
          * Georgia
          * Hawaii
          * Idaho
          * Illinois
          * Indiana
          * Iowa
          * Kansas
          * Kentucky
          * Louisiana
          * Maine
          * Maryland
          * Massachusetts
          * Michigan
          * Missouri
          * Montana
          * Nebraska
          * Nevada
          * New Hampshire
          * New Jersey
          * New Mexico
          * New York
          * North Carolina
          * North Dakota
          * Ohio
          * Oklahoma
          * Oregon
          * Pennsylvania
          * Rhode Island
          * South Carolina
          * South Dakota
          * Tennessee
          * Utah
          * Vermont
          * Virginia
          * Washington
          * West Virginia
          * Wisconsin
          * Wyoming
     * GAO Survey on States' Allocations of Fiscal Years 2004 and 2005 Master
       Settlement Agreement Payments
     * GAO Contact and Staff Acknowledgments
          * GAO Contact
          * Staff Acknowledgments
     * Ordering Information.pdf
          * Order by Mail or Phone

                 United States Government Accountability Office

Report to Congressional Requesters

GAO

March 2005

TOBACCO SETTLEMENT

 States' Allocations of Fiscal Year 2004 and Expected Fiscal Year 2005 Payments

                                       a

GAO-05-312

TOBACCO SETTLEMENT

States' Allocations of Fiscal Year 2004 and Expected Fiscal Year 2005
Payments

  What GAO Found

The 46 states party to the MSA expect to receive about $15.1 billion in
fiscal years 2004 and 2005. States reported they received about $9.7
billion in fiscal year 2004 and expect to receive about $5.4 billion in
fiscal year 2005. About 70 percent of these amounts will be MSA payments
from the tobacco companies, and 30 percent will be proceeds from the sale
of bonds (securitized proceeds) backed by payments tobacco companies will
make in the future. In addition, only 1 state expects to receive
securitized tobacco settlement funds in fiscal year 2005, so the amount of
securitized proceeds are expected to decline in fiscal year 2005 to about
$64 million, down from the $4.4 billion states received in 2004. Over the
4 prior fiscal years, states also reported receiving a total of about
$36.8 billion. These amounts include $25.7 billion in payments from
tobacco companies and, for some states, $11.1 billion in securitized
proceeds.

The MSA allows states to use their tobacco settlement payments for any
purpose. States reported that they used the largest portions of the fiscal
year 2004 payments to address budget shortfalls (about 44 percent) and to
fund health-related programs (20 percent). Compared with fiscal year 2004,
states in fiscal year 2005 expect to decrease allocations to address
budget shortfalls (11 percent) and to increase allocations to both
health-related programs (32 percent) and debt service on securitized funds
(23 percent).

Categories to Which States Allocated the Largest Portion of Tobacco
Settlement Payments (Fiscal Year 2004 and Expected Fiscal Year 2005
Allocations)

                 United States Government Accountability Office

                                    Contents

Letter                                                                   1 
          Results in Brief                                                  3 
                     States Received about $9.7 Billion in MSA Payments and 
                                                                Securitized 
              Proceeds in Fiscal Year 2004 and Expect to Receive about $5.4 
          Billion in Fiscal Year 2005                                       4 
               States Allocated the Largest Portion of their Funds to Cover 
                                                                     Budget 
          Shortfalls in Fiscal Year 2004 and Expect to Allocate the Largest 
               Portion to Health-Related Programs in Fiscal Year 2005       9 

Appendixes                                                           
                Appendix I: Objectives, Scope, and Methodology Survey   23 24 
                            Methodology and Categorization of States'   25    
                            Allocations Categories of States'           
                            Allocations                                 
              Appendix II:  Allocations of MSA Payments for 46 States      28 
              Appendix III: States' Allocations of Combined MSA               
                            Payments and Securitized Proceeds for       
                            Fiscal Years 2000 through 2005                 30
              Appendix IV:  State-Specific Information on Amounts of          
                            Master Settlement Agreement Payments and    
                            Securitized Proceeds Received and Allocated    31
                Appendix V: GAO Survey on States' Allocations of Fiscal       
                            Years 2004 and 2005 Master Settlement       
                            Agreement Payments                             65
              Appendix VI:  GAO Contact and Staff Acknowledgments GAO   72 72 
                            Contact                                     
                            Staff Acknowledgments                          72 

Tables  Table 1: MSA Payments and Securitized Proceeds that States      
                    Reported Receiving in Fiscal Year 2004 and Expect to   
                    Receive in Fiscal Year 2005                             5 
           Table 2: Total MSA Payments and Securitized Proceeds Received   
                    since Fiscal Year 2000                                  7 
           Table 3: MSA Payments and Securitized Proceeds Allocated or     
                    Expected to Be Allocated to Various Categories, Fiscal 
                    Years 2004 and 2005                                    12 
           Table 4: Allocation of States' Combined MSA Payments and        
                    Securitized Proceeds, Fiscal Year 2004                 14 
           Table 5: Expected Allocation of States' Combined MSA Payments   
                    and Securitized Proceeds, Fiscal Year 2005             18 
           Table 6: Alabama's MSA Payment Allocations                      32 

: Alaska's MSA Payment Allocations 32
: Arizona's MSA Payment Allocation 33
: Arkansas's MSA Payment Allocations 33
: California's MSA Payment Allocation 34
: Colorado's MSA Payment Allocations 34
: Connecticut's MSA Payment Allocation 35
: Delaware's MSA Payment Allocations 36
: Georgia's MSA Payment Allocations 37
: Hawaii's MSA Payment Allocations 38
: Idaho's MSA Payment Allocations 39
: Illinois's MSA Payment Allocations 40
: Indiana's MSA Payment Allocations 41
: Iowa's Allocations of MSA Payments and Securitized Proceeds 42
: Kansas's MSA Payment Allocations 43
: Kentucky's MSA Payment Allocations 44
: Louisiana's MSA Payment Allocations 45
: Maine's MSA Payment Allocations 45
: Maryland's MSA Payment Allocations 46
: Massachusetts's MSA Payment Allocation 47
: Michigan's MSA Payment Allocations 47
: Missouri's MSA Payment Allocations 48
: Montana's MSA Payment Allocations 49
: Nebraska's MSA Payment Allocations 50
: Nevada's MSA Payment Allocations 51
: New Hampshire's MSA Payment Allocations 52
: New Jersey's Allocations of MSA Payments and Securitized Proceeds 52
: New Mexico's MSA Payment Allocations 53
: New York's Allocation of MSA Payments and Securitized Proceeds 53
: North Carolina's MSA Payment Allocations 54
: North Dakota's MSA Payment Allocations 55
: Ohio's MSA Payment Allocations 55
: Oklahoma's MSA Payment Allocations 56
: Oregon's Allocations of MSA Payments and Securitized Proceeds 57
: Pennsylvania's MSA Payment Allocation 58
: Rhode Island's Allocations of MSA Payments and Securitized Proceeds 58
: South Carolina's MSA Payment Allocation 59
: South Dakota's MSA Payment Allocations 59

Table 44: Tennessee's MSA Payment Allocation 60 Table 45: Utah's MSA
Payment Allocations 60 Table 46: Vermont's MSA Payment Allocations 61
Table 47: Virginia's MSA Payment Allocations 61 Table 48: Washington's MSA
Payment Allocations 62 Table 49: West Virginia's MSA Payment Allocations
63 Table 50: Wisconsin's MSA Payment Allocation 63 Table 51: Wyoming's MSA
Payment Allocations 64

Figure 1: Securitized Proceeds Received by States since Fiscal Year

Figures

2000 8 Figure 2: States' Allocations of Combined MSA Payments and

Securitized Proceeds for Fiscal Years 2000-01, 2002, 2003,

and 2004 and Expected Allocations for Fiscal Year 2005 10

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A

United States Government Accountability Office Washington, D.C. 20548

March 21, 2005

Congressional Requesters:

In the 1990s, states sued major tobacco companies to obtain reimbursement
for health impairments caused by the public's use of tobacco. During 1997
and 1998, 4 states-Florida, Minnesota, Mississippi, and Texas-settled
their lawsuits with the tobacco industry by negotiating independent
agreements.1 In November 1998, four of the nation's largest tobacco
companies-Philip Morris, USA;2 R.J. Reynolds Tobacco Company; Brown &
Williamson Tobacco Corporation; and Lorillard Tobacco Company-negotiated
and signed an agreement with the attorneys general of the remaining 46
states, the District of Columbia, and the five U.S. territories, thereby
settling a number of lawsuits brought by these parties against the
companies.3 This agreement is known as the Master Settlement Agreement
(MSA). The MSA commits the tobacco companies to make annual payments to
the 46 states in perpetuity as reimbursement for health care costs, such
as Medicaid expenditures, related to tobacco use.4 These payments will
total approximately $206 billion over the first 25 years.5 Each state
receives a share of the annual MSA payments based on a fixed percentage
identified in the MSA. The MSA imposed no requirements on how states could
spend their payments.

The Farm Security and Rural Investment Act of 2002 (the 2002 Farm Bill)
requires us to report annually on payments made by tobacco companies for
fiscal years 2002 through 2006 and how states use these funds. In
addition, 14 of the 46 states have received substantial advance proceeds
based on the

1Under these agreements, tobacco companies will pay these 4 states $40
billion over 25 years.

2This company was previously known as Philip Morris Incorporated.

3Several other tobacco companies have joined the MSA since the agreement
was signed.

4For additional information on the agreement, refer to our June 2001
report on the MSA (Tobacco Settlement: States' Use of Master Settlement
Agreement Payments, GAO-01-851 (Washington, D.C.: June 29, 2001).

5The $206 billion includes $204.5 billion in estimated total payments to
the 46 states, the District of Columbia, and the five U.S. territories and
an additional $1.8 billion for other initiatives agreed to in the MSA,
including a national foundation dedicated to significantly reducing the
use of tobacco products by youths and the administrative costs of the
National Association of Attorneys General.

amounts that tobacco companies owe by issuing bonds backed by payments to
be made in the future, a process known as securitization. States can
securitize a portion of the expected payment stream to receive funds
upfront rather than over time as MSA payments are made. The proceeds of
these bonds have often been earmarked for meeting budget shortfalls. This
report also includes information about states' receipt and allocation of
these securitized proceeds.6 This report is the fourth in a series of
reports responding to the 2002 Farm Bill requirement.7 In addition, we
previously reported in June 2001 on states' receipt and use of MSA
payments for fiscal years 2000 and 2001.8

This report discusses (1) the amount of payments, including securitized
proceeds, received by the 46 states party to the MSA during fiscal year
2004, and the amount of payments these states expect to receive in fiscal
year 2005, and (2) states' allocation of these funds to various program
categories for fiscal year 2004 and expected allocations for fiscal year
2005.

To address our objectives, we surveyed state budget offices, or their
designees, in each of the 46 states to obtain MSA payment and allocation
information for fiscal years 2004 and 2005.9,10 We asked the states to
categorize their MSA payment allocations for fiscal year 2004 and their
expected allocations for fiscal year 2005 using 13 categories. In
addition, we asked states if they securitized their payments and, if so,
the amount of proceeds they received from securitization and the
categories to which they allocated the securitized proceeds. We took a
number of steps to assess the reliability of the states' data, including
independently

6While the District of Columbia and the five U.S. territories are included
in the MSA, this study reports only on the 46 states that signed the
agreement.

7GAO, Tobacco Settlement: States' Allocations of Phase II Funds,
GAO-03-262R (Washington, D.C.: Dec. 3, 2002); Tobacco Settlement: States'
Allocations of Fiscal Years 2002 and 2003 Master Settlement Agreement
Payments, GAO-03-407 (Washington, D.C.: Feb. 28, 2003); and Tobacco
Settlement: States' Allocations of Fiscal Year 2003 and Expected Fiscal
Year 2004 Payments, GAO-04-518 (Washington, D.C.: Mar. 19, 2004).

8 GAO-01-851.

9Throughout this report, "fiscal year" refers to the state's fiscal year.
In most states, the fiscal year begins on July 1 and ends on June 30. The
exceptions are in Alabama and Michigan, where the fiscal year begins on
October 1, and in New York, where the fiscal year begins on April 1.

10Our study focuses on the states' share of MSA payments and does not
include information on MSA payments made to counties and cities in New
York and California.

                                Results in Brief

corroborating these data to the extent possible. We determined that these
data were reliable enough for our purposes. In addition, we compared the
data we received for fiscal years 2004 and 2005 with the payment and
allocation information we collected from states for our earlier GAO
reports.11 Appendix I contains more information on our scope and
methodology and detailed definitions of the categories used in this
report.12 Appendix II shows each state's percentage share of annual MSA
payments. These payments are adjusted for several factors, most notably,
the future sales of the tobacco industry. Each state's payments are
adjusted annually on the basis of the participating manufacturer's
cigarette sales and market share, as well as inflation.

We conducted our work from July 2004 through February 2005 in accordance
with generally accepted government auditing standards.

The 46 states party to the MSA expect to receive about $15.1 billion in
MSA payments and securitized proceeds in fiscal years 2004 and 2005. These
states reported receiving a total of about $9.7 billion in MSA payments
and securitized proceeds in fiscal year 2004 and expect to receive about
$5.4 billion in fiscal year 2005. About 70 percent of these amounts will
be MSA payments from the tobacco companies, and 30 percent will be
securitized proceeds. The amounts of securitized proceeds that states
received and expect to receive are declining, and only 1 state expects to
receive securitized tobacco settlement funds in fiscal year 2005.
Specifically, fiscal year 2005 securitized proceeds are expected to
decline to about $64 million, down from the $4.4 billion that states
received in 2004 and the $6.5 billion they received in 2003. In the 4
prior years, fiscal years 2000 through 2003, states reported receiving
about $36.8 billion-that is, about $25.7 billion in MSA payments from the
tobacco companies and about $11.1 billion in securitized proceeds.

States allocated the largest portions of their fiscal year 2004 tobacco
settlement funds to address budget shortfalls (44 percent) and for
health-related programs (20 percent), but they did not expect the same to
hold true for fiscal year 2005. In fiscal year 2005, states expect to
allocate the

11 GAO-01-851 , GAO-03-407, and GAO-04-518 .

12Categories include such areas as education, health, budget shortfalls,
and debt service on securitized funds.

Page 3 GAO-05-312 Tobacco Settlement

  States Received about $9.7 Billion in MSA Payments and Securitized Proceeds in
  Fiscal Year 2004 and Expect to Receive about $5.4 Billion in Fiscal Year 2005

largest portions of their tobacco settlement funds to address health-
related programs (32 percent) and debt service (23 percent) on securitized
funds. Compared with fiscal year 2004, states in fiscal year 2005 expect
to decrease allocations to budget shortfalls and to increase allocations
to health-related programs and to debt service on securitized funds. Also,
while the percentage allocations to some program categories are expected
to increase in fiscal year 2005, the dollars allocated may decrease. For
example, the percentage allocation to health care is expected to increase,
while the dollar amount is expected to decrease from about $2.3 billion in
fiscal year 2004 to about $1.9 billion in fiscal year 2005.

The 46 states party to the MSA reported receiving a total of about $9.7
billion in fiscal year 2004-that is, about $5.3 billion in MSA payments
from the tobacco companies and, for 4 of the states, about $4.4 billion in
securitized proceeds. For fiscal year 2005, the 46 states are expecting to
receive a total of about $5.4 billion-that is, about $5.3 billion in MSA
payments and, for 1 of the states, about $0.1 billion ($64 million) in
securitized proceeds, about $4.3 billion less than in fiscal year 2004 and
about $6.4 billion less than fiscal year 2003. Over these 2 fiscal years,
of the combined payments (about $15.1 billion) that states will receive,
about 70 percent ($10.6 billion) will be MSA payments from the tobacco
companies and 30 percent ($4.5 billion) will be securitized proceeds. In
fiscal years 2000 through 2003, states reported receiving a total of about
$36.8 billion- that is, about $25.7 billion in MSA payments from the
tobacco companies and about $11.1 billion in securitized proceeds. Table 1
shows the amount of MSA payments and securitized proceeds each of the 46
states reported receiving in fiscal year 2004 and the amount each state
expects to receive in fiscal year 2005.

                        Fiscal year 2004                        Fiscal year 2005
                                                                   Securitized
                       MSA   Securitized               MSA         proceeds    
                                                       payments    
                  payments      proceeds               expected to expected to 
                                                           be      
State             received      received         Total    received be received       Total 
Alabama       $101,871,680               $101,871,680  $96,000,000             $96,000,000 
Alaska          21,438,845                21,438,845    23,347,500              23,347,500 
Arizona         92,648,165                92,648,165    90,304,100              90,304,100 
Arkansas        52,688,976                52,688,976    50,000,000              50,000,000 
California     400,746,161                400,746,161  404,500,000             404,500,000 
Colorado        87,037,529                87,037,529    88,878,470              88,878,470 
Connecticut    116,578,313                116,578,313  109,000,000             109,000,000 
Delaware        24,832,878                24,832,878    26,100,000              26,100,000 
Georgia        156,330,702                156,330,702  146,123,673             146,123,673 
Hawaii          38,837,269                38,837,269    42,574,552              42,574,552 
Idaho           22,818,949                22,818,949    23,830,716              23,830,716 
Illinois       292,256,066                292,256,066  270,989,300             270,989,300 
Indiana        126,800,000                126,800,000  129,300,000             129,300,000 
Iowa            54,609,359   $63,512,236  118,121,595   55,137,861 $63,792,236 118,930,097 
Kansas          52,349,060                52,349,060    52,000,000              52,000,000 
Kentucky       109,482,959                109,482,959  108,800,000             108,800,000 
Louisiana      141,621,328                141,621,328  145,362,442             145,362,442 
Maine           48,952,964                48,952,964    48,772,127              48,772,127 
Maryland       149,942,000                149,942,000  142,607,000             142,607,000 
Massachusetts  253,621,276                253,621,276  253,600,000             253,600,000 
Michigan       270,540,221                270,540,221  285,700,000             285,700,000 
Missouri       142,829,966                142,829,966  144,000,000             144,000,000 
Montana         26,672,073                26,672,073    26,223,000              26,223,000 
Nebraska        37,858,162                37,858,162    35,600,000              35,600,000 
Nevada          38,299,907                38,299,907    38,666,164              38,666,164 
New Hampshire   41,800,000                41,800,000    39,600,000              39,600,000 
New Jersey     242,800,000                242,800,000  245,100,000             245,100,000 
New Mexico      37,449,345                37,449,345    34,779,246              34,779,246 
New York       349,494,266 4,200,000,000 4,549,494,266 406,007,613             406,007,613 

(Continued From Previous Page)
                          Fiscal year 2004                            Fiscal year 2005
                                                                         Securitized
                        MSA    Securitized                MSA payments   proceeds    
                   payments       proceeds                expected to be expected to 
State              received       received          Total       received be received          Total 
North           150,507,204                 150,507,204      163,353,241                163,353,241 
Carolina                                                                             
North Dakota     23,289,073                    23,289,073     22,972,067                 22,972,067 
Ohio            320,531,457                 320,531,457      290,886,750                290,886,750 
Oklahoma         65,062,578                    65,062,578     49,783,729                 49,783,729 
Oregon           72,065,376    109,565,000  181,630,376       73,555,259                 73,555,259 
Pennsylvania    370,856,755                 370,856,755      357,566,328                357,566,328 
Rhode Island     45,142,523      1,621,487     46,764,010     47,381,000                 47,381,000 
South            73,124,607                    73,124,607     75,582,954                 75,582,954 
Carolina                                                                             
South Dakota     21,911,498                    21,911,498     23,063,730                 23,063,730 
Tennessee       153,272,096                 153,272,096      147,800,000                147,800,000 
Utah             27,936,000                    27,936,000     26,951,100                 26,951,100 
Vermont          25,819,716                    25,819,716     24,700,000                 24,700,000 
Virginia        128,396,522                 128,396,522      123,256,595                123,256,595 
Washington      127,635,700                 127,635,700      128,000,000                128,000,000 
West             55,663,874                    55,663,874     50,800,000                 50,800,000 
Virginia                                                                             
Wisconsin       130,110,401                 130,110,401      137,126,872                137,126,872 
Wyoming          15,594,424                    15,594,424     15,594,424                 15,594,424 
Total        $5,340,128,223 $4,374,698,723 $9,714,826,946 $5,321,277,813 $63,792,236 $5,385,070,049 

Sources: State budget offices or their designees.

Note: The amounts of MSA payments received and expected by California and
New York do not include MSA payments made to the counties and cities in
those states.

Since fiscal year 2000, states have received a total of about $47 billion
in MSA payments and securitized proceeds; specifically, about $31 billion
from MSA payments and $16 billion in securitized proceeds. (See table 2.)

Table 2: Total MSA Payments and Securitized Proceeds Received since Fiscal Year

Fiscal year        MSA payments     Securitized proceeds             Total 
2000-01          $13,200,000,000              $928,900,000 $14,128,900,000 
2002                  6,238,393,496          3,740,376,465   9,978,769,961 
2003                  6,306,329,459          6,482,764,469  12,789,093,928 
2004                  5,340,128,223          4,374,698,723   9,714,826,946 
Total            $31,084,851,178           $15,526,739,657 $46,611,590,835 

Sources: GAO-01-851 , GAO-03-407 , and GAO-04-518; state budget offices or
their designees (data); and GAO (analysis).

Fourteen states have received a total of about $15.5 billion in
securitized proceeds from the sale of bonds since fiscal year 2000. Five
of these states-Alabama, Alaska, Iowa, Oregon, and Rhode Island-have
received securitized proceeds in more than 1 year. (See fig. 1.)

FY 2000 $50,000,000 FY 2002 $103,760,000

 Sources: GAO-01-851, GAO-03-407, GAO-04-518, and state budget offices or their
                                   designees.

  States Allocated the Largest Portion of their Funds to Cover Budget Shortfalls
  in Fiscal Year 2004 and Expect to Allocate the Largest Portion to
  Health-Related Programs in Fiscal Year 2005

The 46 states reported that in fiscal year 2004, they allocated the
largest portion of their combined MSA payments and securitized proceeds
(44 percent) to cover budget shortfalls, and the next largest portion (20
percent) for health-related programs. In fiscal year 2005, the states
expected to decrease allocations to budget shortfalls (to about 11
percent) and allocate the largest portion of their funds (32 percent) for
health-related programs, and the next largest portion (23 percent) for
debt servicing of securitized proceeds. While the percentage allocations
to some program categories are expected to increase in fiscal year 2005,
the dollars allocated may decrease. For example, the percentage allocation
to health care is expected to increase, while the dollar amount is
expected to decrease from about $2.3 billion in fiscal year 2004 to about
$1.9 billion in fiscal year 2005. Examples of the health-related programs
included Medicaid, the Children's Health Insurance Program, and cancer
treatment and prevention. Figure 2 provides more detail on states'
allocations of their combined MSA payments and securitized proceeds for
fiscal years 2000-01, 2002, 2003, and 2004 and expected allocations for
fiscal year 2005.

In addition, between fiscal years 2004 and 2005, the portion of funds that
all states allocate to budget shortfalls is expected to decrease
substantially from 44 percent to 11 percent, as shown in figure 2. Our
analysis shows that changes in the allocations of securitized proceeds by
New York and New Jersey were the primary cause of that decrease. Together,
the securitized funds allocated by these two states (about $4.7 billion)
accounted for about 41 percent of the total MSA funds ($11.4 billion) that
all states allocated in fiscal year 2004, but these amounts declined in
fiscal year 2005. Specifically, in fiscal year 2004, New York allocated
$3.8 billion of their securitized funds to budget shortfalls while New
Jersey allocated $873 million. Together, these allocations accounted for
about 92 percent of all funds allocated to budget shortfalls in fiscal
year 2004. In fiscal year 2005, however, New York expected to allocate
only $400 million13 of their securitized funds to budget shortfalls while
New Jersey did not expect to allocate any funds to budget shortfalls.

13The $400 million represents securitized funds that New York carried over
from fiscal year 2004. The state expects to allocate an additional $182
million of its fiscal year 2005 MSA funds to address budget shortfalls.

Page 9 GAO-05-312 Tobacco Settlement

Percentage

44

40

30

20

10

0

Budget shortfalls Debt service Economic Education General purposes Health
on securitized development for funds tobacco regions

                                       26

 Infrastructure Payments Reserves/Rainy  Social     Tax     Tobacco Unallocated 
                   to                   services reductions control 
                tobacco  day funds                                  
                growers                                             
                          Fiscal year                               

2000-01 2002 2003 2004 2005 (expected)

Sources: GAO-04-518, state budget offices and their designees (data), and
GAO (analysis).

Note: Percentages may not add up to 100 because of rounding.

aWe did not obtain data for budget shortfalls and debt service on
securitized funds for fiscal years 2000-01.

As table 3 shows, allocations of MSA payments differed somewhat from
allocations of securitized proceeds. In fiscal year 2004, the categories
to which the 46 states allocated the greatest portion of their MSA
payments were health-related programs (nearly 40 percent) and debt service
(nearly 18 percent). In contrast, the 5 states that allocated securitized
proceeds in fiscal year 2004-Iowa, New Jersey, New York, Oregon, and Rhode
Island- allocated the greatest portion of the securitized proceeds to
budget shortfalls (nearly 80 percent). In fiscal year 2005, the categories
to which the 46 states expected to allocate the greatest portion of their
MSA payments were health-related programs (about 33 percent) and debt
service (about 25 percent). The only states that expected to allocate
securitized proceeds for fiscal year 2005-Iowa and New York-planned to
allocate about 86 percent of these proceeds to budget shortfalls.

Table 3: MSA Payments and Securitized Proceeds Allocated or Expected to Be
Allocated to Various Categories, Fiscal Years 2004 and 2005

                   Fiscal Year 2004                                     Fiscal Year 2005
                                                                                              Securitized
                                  Securitized                 MSA payments       proceeds 
                    MSA payments      proceeds              expected to be expected to be  Total expected
Category               allocated     allocated   Total           allocated      allocated to be allocated
                                               allocated                                  
Budget         
shortfalls                       6.9%    79.8%          44.3%            5.2%         86.2%         11.4%
Debt service   
on             
securitized    
funds                     17.9                0.0           8.7              25.4         0.0        23.4
Economic       
development    
for            
tobacco                              5.2    0.0            2.5              5.1          0.0          4.7
regions                                                                                          
Education                            5.0    0.0            2.4              5.1          0.5          4.8
General                                                                                          
purposes                            13.3    0.1            6.5              12.0         0.5         11.1
Health                              39.6    0.9            19.8             33.3         11.7        31.6
Infrastructure                       0.7    12.3           6.6              3.0          0.0          2.7
Payments to    
tobacco        
growers                                0.4    0.0            0.2              0.5           0.0       0.4 
Reserves/Rainy 
day funds                       0.3      0.0           0.1                   0.3     0.0              0.3
Social                          2.6      0.0           1.2                   2.5     0.0              2.3
services                                                                                      
Tax reductions                  1.0      0.0           0.5                   0.0     0.0              0.0
Tobacco                         3.9      0.1           2.0                   4.8     1.1              4.5
control                                                                                       
Unallocated                     3.1      6.8           5.0                   2.9     0.0              2.7
Totala                        99.9%    100.0%         99.8%          100.1%         100.0%          99.9%
Total amount   
allocatedb     $5,576,588,405 $5,855,998,723 $11,432,587,128 $5,534,150,369   $463,792,236 $5,997,942,605
                        Sources: State budget offices or their designees (data); GAO (analysis).

bSome states received MSA payments and/or securitized proceeds in one
fiscal year and allocated them the next fiscal year. The amount of funds
allocated may not equal the amount of funds received because of carry-over
funds and interest earned.

Tables 4 and 5 show the percentage of the combined MSA payments and
securitized proceeds that individual states allocated, and expect to
allocate, to various categories in fiscal years 2004 and 2005,
respectively.

                                Debt on Economic    
                     Budget securitized development           General  
                                        for                   
State         shortfalls    proceeds tobacco     Education purposes Health 
                                        regions                        
Alabama             0.0%       12.8%        0.0%     11.5%     7.4%  43.1% 
Alaska               0.0        80.0         0.0       0.0      0.0    4.0 
Arizona              0.0         0.0         0.0       0.0      0.0  100.0 
Arkansas             0.0         9.5         0.0       4.7      0.0   84.3 
California           0.0       100.0         0.0       0.0      0.0    0.0 
Colorado             0.0         0.0         0.0      22.8      0.0   65.5 
Connecticut          0.0         0.0         0.0       0.0  100.0      0.0 
Delaware             0.0         0.0         0.0       5.2      0.7   72.2 
Georgia              0.0         0.0        37.8       0.0      0.0   51.0 
Hawaii               0.0         0.0         0.0       0.0      7.2   32.5 
Idaho                0.0         0.0         0.0       0.0      0.0    3.7 
Illinois             0.0         0.0         0.0       5.2     13.1   59.6 
Indiana              0.0         0.0        27.2       0.0      0.0   51.2 
Iowa                 0.0        36.1         0.0       1.8      1.8   56.0 
Kansas               0.0         0.0         0.0      15.9     20.5    3.3 
Kentucky             0.0         0.0        39.7       5.4      0.3   39.8 
Louisiana            0.0        60.0         0.0       0.0      0.2    8.4 
Maine               11.7         0.0         0.0      17.9      0.1   34.3 
Maryland             0.0         0.0         0.0       1.4     13.9   71.1 
Massachusetts        0.0         0.0         0.0       0.0  100.0      0.0 
Michigan            22.4         0.0         0.0      36.7      0.1   37.6 
Missouri            48.7         0.0         0.0       0.0      3.0   48.0 
Montana              0.0         0.0         0.0       0.0     11.0   68.4 
Nebraska             0.0         0.0         0.0       0.0      0.2   55.5 
Nevada               0.0         0.0         0.0      50.8      0.4   24.6 
New Hampshire        0.0         0.0         0.0      95.7      4.3    0.0 
New Jersey          50.7         7.0         0.0       0.0      0.0    7.1 
New Mexico           0.0         0.0         0.0       2.1      0.0   97.9 
New York            83.5         0.0         0.0       0.0      0.0    7.1 
North                0.0         0.0        50.0       0.0     41.6    1.3 
Carolina                                                            
North Dakota         0.0         0.0         0.0      45.0      0.0    2.1 
Ohio                72.9         0.0         4.7       2.3      0.2   11.6 
Oklahoma             0.0         0.0         0.0       0.0      2.2   47.6 

             Payments to Reserves/
                 tobacco  Rainy                           Tobacco 
Infrastructure rowers    day Social        Tax         control Unallocated 
                          funds services      reductions          
             0.0%   0.0%   0.0%         24.7%        0.0%    0.5%        0.0% 
              0.0    0.0    0.0           0.0         0.0    16.0         0.0 
              0.0    0.0    0.0           0.0         0.0     0.0         0.0 
              0.0    0.0    0.0           0.0         0.0     1.5         0.0 
              0.0    0.0    0.0           0.0         0.0     0.0         0.0 
              0.0    0.0    0.0           3.8         0.0     7.9         0.0 
              0.0    0.0    0.0           0.0         0.0     0.0         0.0 
              0.0    0.0    0.0           1.7         0.0    20.3         0.0 
              0.0    0.0    0.0           4.1         0.0     7.2         0.0 
             26.0    0.0   22.7           0.0         0.0    11.6         0.0 
              0.0    0.0    0.0           1.2         0.0     5.8        89.3 
              1.0    0.0    0.0           0.3        18.3     2.5         0.0 
              0.9    0.0    0.0          14.3         0.0     6.4         0.0 
              0.0    0.0    0.0           0.0         0.0     4.3         0.0 
              0.0    0.0    0.0          60.3         0.0     0.0         0.0 
             10.2    0.0    0.0           0.0         0.0     4.5         0.0 
              0.0    0.0    0.0           1.1         0.0     0.4        30.0 
              0.0    0.0    0.0          10.2         0.0    25.7         0.0 
              0.0    2.4    0.0           0.0         0.0     6.4         4.8 
              0.0    0.0    0.0           0.0         0.0     0.0         0.0 
              0.0    0.0    0.0           0.0         0.0     0.0         3.2 
              0.0    0.0    0.0           0.0         0.0     0.3         0.0 
              0.0    0.0    0.0           8.1         0.0     9.4         3.1 
              0.0    0.0    0.0           7.4         0.0     0.0        36.9 
              0.0    0.0    0.0          15.5         0.0     8.7         0.0 
              0.0    0.0    0.0           0.0         0.0     0.0         0.0 
             35.3    0.0    0.0           0.0         0.0     0.0         0.0 
              0.0    0.0    0.0           0.0         0.0     0.0         0.0 
              0.0    0.0    0.0           0.0         0.0     0.7         8.8 
              0.0    0.0    0.0           0.0         0.0     7.1         0.0 
             45.0    0.0    0.0           0.0         0.0     7.9         0.0 
              1.6    0.0    0.0           1.2         0.0     5.4         0.0 
              0.0    0.0    0.0          24.0         0.0    26.2         0.0 

(Continued From Previous Page)
                                Debt on Economic    
                     Budget securitized development           General  
                                        for                   
State         shortfalls    proceeds tobacco     Education purposes Health 
                                        regions                        
Oregon               0.0         4.2         0.0       0.0      0.0    8.0 
Pennsylvania         0.0         0.0         0.0       0.0      0.0  100.0 
Rhode Island         0.0        95.6         0.0       0.0      4.4    0.0 
South                0.0       100.0         0.0       0.0      0.0    0.0 
Carolina                                                            
South Dakota         0.0        60.7         0.0      39.3      0.0    0.0 
Tennessee            0.0         0.0         0.0       0.0  100.0      0.0 
Utah                28.4         0.0         0.0       0.0      0.3   37.6 
Vermont              0.0         0.0         0.0       0.0      1.6   70.0 
Virginia             0.0         0.0        34.9       0.0     40.0    0.0 
Washington           0.0        25.7         0.0       0.0      0.0   62.3 
West Virginia        0.0         0.0         0.0       0.0      0.0   39.5 
Wisconsin            0.0       100.0         0.0       0.0      0.0    0.0 
Wyoming              0.0         0.0         0.0       0.0      0.0   46.8 
Total              44.3%        8.7%        2.5%      2.4%   6.5%    19.8% 

                  Payments to Reserves/
                      tobacco  Rainy                      Tobacco 
Infrastructure      rowers    day Social    Tax        control Unallocated 
                               funds services  reductions         
                  60.3    0.0    0.0       0.0        0.0     0.0        27.4 
                  0.0     0.0    0.0       0.0        0.0     0.0         0.0 
                  0.0     0.0    0.0       0.0        0.0     0.0         0.0 
                  0.0     0.0    0.0       0.0        0.0     0.0         0.0 
                  0.0     0.0    0.0       0.0        0.0     0.0         0.0 
                  0.0     0.0    0.0       0.0        0.0     0.0         0.0 
                  0.0     0.0   16.2       5.8        0.0    11.7         0.0 
                  0.0     0.0    0.0      11.7        0.0    16.7         0.0 
                  0.0    15.1    0.0       0.0        0.0    10.0         0.0 
                  0.0     0.0    0.0       0.0        0.0    12.1         0.0 
                  0.0     0.0    0.0       0.0        0.0    10.5        50.0 
                  0.0     0.0    0.0       0.0        0.0     0.0         0.0 
                  0.0     0.0    0.0      26.0        0.0    27.1         0.0 
                  6.6%   0.2%   0.1%      1.2%       5.0%    2.0%        5.0% 

Sources: State budget offices and their designees (data); GAO (analysis).

Note: Percentages may not add up to 100 because of rounding. Appendix IV
shows the dollar amount each state allocated to the various categories.

                                    Economic
                              Debt service development
                      Budget      on         for              General  
                              securitized  tobacco            
State          shortfalls         funds  regions Education purposes Health 
Alabama              0.0%         13.5%     0.0%     11.4%   7.3%    42.7% 
Alaska                0.0          80.0      0.0       0.0      0.0    4.8 
Arizona               0.0           0.0      0.0       0.0      0.0  100.0 
Arkansas              0.0          10.0      0.0       4.7      0.0   83.7 
California            0.0         100.0      0.0       0.0      0.0    0.0 
Colorado             29.2           0.0      0.0      18.5      0.0   40.4 
Connecticut           0.0           0.0      0.0       0.0  100.0      0.0 
Delaware              0.0           0.0      0.0       6.3      0.7   71.9 
Georgia               0.0           0.0     30.1       0.0      0.0   57.1 
Hawaii                0.0           0.0      0.0       0.0      7.2   32.5 
Idaho                 0.0           0.0      0.0       0.0      0.0    2.1 
Illinois              0.0           0.0      0.0       4.6      8.7   80.3 
Indiana               0.0           0.0     26.9       0.0      0.0   51.9 
Iowa                  0.0          36.2      0.0       1.8      1.9   55.9 
Kansas                0.0           0.0      0.0      14.9      8.9    3.1 
Kentucky              0.0           0.0     44.4      10.1      0.0   35.4 
Louisiana             0.0          60.0      0.0       0.0      0.2    9.4 
Maine                 0.0           0.0      0.0      21.6      0.1   37.5 
Maryland              0.0           0.0      0.0       2.0     19.7   64.2 
Massachusetts         0.0           0.0      0.0       0.0  100.0      0.0 
Michigan              2.4           0.0      0.0      34.4      0.1   62.9 
Missouri             49.1           0.0      0.0       0.0      1.7   48.9 
Montana               0.0           0.0      0.0       0.0     10.7   68.8 
Nebraska              0.0           0.0      0.0       0.0      0.2   57.1 
Nevada                0.0           0.0      0.0      56.5      0.4   22.3 
New Hampshire         0.0           0.0      0.0     100.0      0.0    0.0 
New Jersey            0.0         100.0      0.0       0.0      0.0    0.0 
New Mexico            0.0           0.0      0.0       2.3     36.4   61.3 
New York             72.2          27.8      0.0       0.0      0.0    0.0 
North Carolina        0.0           0.0     53.0       0.0     36.7    2.6 
North Dakota          0.0           0.0      0.0      45.0      0.0    2.1 
Ohio                  0.0           0.0      4.3       2.1      0.3   11.8 
Oklahoma              0.0           0.0      0.0       0.0      2.0   69.5 

               Payments to  Reserves/ Social   
Infrastructure tobacco  Rainy day  services        Tax Tobacco Unallocated 
                  growers  funds               reductions control 
             0.0%     0.0%       0.0%    24.5%       0.0%    0.5%        0.0% 
              0.0      0.0        0.0      0.0        0.0    15.2         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     1.6         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              2.1      0.0        0.0      4.9        0.0     4.9         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      1.6        0.0    19.4         0.0 
              0.0      0.0        0.0      4.6        0.0     8.2         0.0 
             26.0      0.0       22.7      0.0        0.0    11.6         0.0 
              0.0      0.0        0.0      1.1        0.0     4.9        91.9 
              1.7      0.0        0.0      0.4        0.0     4.3         0.0 
              0.8      0.0        0.0     14.1        0.0     6.3         0.0 
              0.0      0.0        0.0      0.0        0.0     4.3         0.0 
              0.0      0.0        0.0     73.1        0.0     0.0         0.0 
              5.6      0.0        0.0      0.0        0.0     4.5         0.0 
              0.0      0.0        0.0      0.0        0.0     0.3        30.0 
              0.0      0.0        0.0     11.3        0.0    29.5         0.0 
              0.0      3.7        0.0      0.0        0.0     6.2         4.2 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.2 
              0.0      0.0        0.0      0.0        0.0     0.3         0.0 
              0.0      0.0        0.0      9.6        0.0    11.0         0.0 
              0.0      0.0        0.0      7.7        0.0     0.0        35.0 
              0.0      0.0        0.0     12.8        0.0     8.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              1.2      0.0        0.0      0.0        0.0     6.6         0.0 
             45.0      0.0        0.0      0.0        0.0     7.9         0.0 
             43.2      0.0        0.0      1.3        0.0    36.9         0.0 
              0.0      0.0        0.0      0.0        0.0    28.4         0.0 

                                    Economic
                              Debt service development
                      Budget      on         for              General  
                              securitized  tobacco            
State          shortfalls         funds  regions Education purposes Health 
Oregon                0.0          35.5      0.0       0.0      0.0   22.4 
Pennsylvania          0.0           0.0      0.0       0.0      0.0  100.0 
Rhode Island          0.0         100.0      0.0       0.0      0.0    0.0 
South Carolina        0.0         100.0      0.0       0.0      0.0    0.0 
South Dakota          0.0          61.7      0.0      36.3      0.0    0.0 
Tennessee             0.0           0.0      0.0       0.0  100.0      0.0 
Utah                  0.0           0.0      0.0       0.0      0.4   47.7 
Vermont               0.0           0.0      0.0       0.0      1.4   64.1 
Virginia              0.0           0.0     35.0       0.0      0.0   38.6 
Washington            0.0          29.2      0.0       0.0      0.0   70.8 
West Virginia         0.0           0.0      0.0       0.0      0.0   38.5 
Wisconsin             0.0         100.0      0.0       0.0      0.0    0.0 
Wyoming               0.0           0.0      0.0       0.0      0.8   46.8 
Total               11.4%         23.4%     4.7%      4.8%  11.1%    31.6% 

               Payments to  Reserves/ Social   
Infrastructure tobacco  Rainy day  services        Tax Tobacco Unallocated 
                  growers  funds               reductions control 
              0.0      0.0        0.0      0.0        0.0     0.6        41.5 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0     2.0         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0       29.7      7.3        0.0    15.0         0.0 
              0.0      0.0        0.0     16.8        0.0    17.7         0.0 
              0.0     16.2        0.0      0.0        0.0    10.2         0.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0      0.0        0.0    11.5        50.0 
              0.0      0.0        0.0      0.0        0.0     0.0         0.0 
              0.0      0.0        0.0     25.2        0.0    27.1         0.0 
             2.7%     0.4%       0.3%     2.3%       0.0%    4.5%        2.7% 

Sources: State budget offices and their designees (data); GAO (analysis).

Note: Percentages may not add up to 100 because of rounding. Appendix IV
shows the dollar amount each state allocated to the various categories.

We are sending copies of this report to interested congressional
committees and to others upon request. Copies are also available at no
charge on the GAO Web site at h ttp://www.gao.gov. Please contact me at
(202) 512-3841 or r [email protected] if you or your staff have any
questions concerning this report. Major contributors to this report are
listed in appendix VI.

Robert A. Robinson

Managing Director, Natural Resources and Environment

The Honorable Saxby Chambliss Chairman The Honorable Tom Harkin Ranking
Democratic Member Committee on Agriculture, Nutrition,

and Forestry United States Senate

The Honorable Robert Goodlatte Chairman, Committee on Agriculture House of
Representatives

The Honorable Jim Bunning United States Senate Appendix I

                       Objectives, Scope, and Methodology

The Farm Security and Rural Investment Act of 2002 (2002 Farm Bill)
requires GAO to report annually on the amount of Master Settlement
Agreement (MSA) payments that states receive and on how they use these
payments for the years 2002 through 2006. This report is the fourth in a
series of reports responding to the 2002 Farm Bill requirement. In
December 2002, we issued the report Tobacco Settlement: States'
Allocations of Phase II Funds ( GAO-03-262R), which provides information
on the National Tobacco Grower Settlement Trust (commonly referred to as
the Phase II agreement). In February 2003, we issued the report Tobacco
Settlement: States' Allocations of Fiscal Years 2002 and 2003 Master
Settlement Agreement Payments ( GAO-03-407 ). In March 2004, we issued the
report Tobacco Settlement: States' Allocations of Fiscal Year 2003 and
Expected Fiscal Year 2004 Payments (GAO-04-518). We also reported on
states' receipt and use of MSA payments for fiscal years 2000 and 2001 in
a June 2001 report, Tobacco Settlement: States' Use of Master Settlement
Agreement Payments (GAO-01-851 ).

To respond to the 2002 Farm Bill requirement, the objectives of this study
were to provide information on (1) the amount of payments received by the
46 states party to the MSA during fiscal year 2004, and the amount of
payments these states expect to receive during fiscal year 2005, and (2)
states' allocations of MSA funds to various program categories for fiscal
year 2004 and states' expected allocations for fiscal year 2005.1, 2

To address these objectives, we surveyed3 the executive budget offices, or
their designees, in the 46 states party to the MSA. In addition, we
performed some data reliability testing and independently corroborated
these data to the extent possible. We obtained and reviewed MSA
disbursement data provided by the National Association of Attorneys
General4 and compared it with payment data provided by the states. We
contacted state officials to discuss any data entries on the surveys that
were questionable, and we resolved all discrepancies between the survey

1Fiscal year refers to the state's fiscal year.

2Allocation refers to funds appropriated or otherwise designated (e.g.,
earmarked for a trust fund or an endowment that has a specific purpose).
It also includes funds designated for debt servicing on bonds issued when
a state securitized all or a portion of the MSA funds.

3See appendix V for a copy of the survey that we sent to each of the 46
states.

4The National Association of Attorneys General monitors the actual
payments made to states as determined by an independent auditor.

  Survey Methodology and Categorization of States' Allocations

data and the data provided by the National Association of Attorneys
General. We also reviewed previous GAO reports and other relevant studies
by organizations such as the National Conference of State Legislatures.
Finally, we contacted the National Association of State Budget Officers to
request their assistance in encouraging state officials to respond to our
survey. We conducted our work from July 2004 through February 2005 in
accordance with generally accepted government auditing standards.

Our study focuses on the states' shares of MSA payments and does not
include information on allocations of MSA payments to cities and counties
in California and New York.5 In addition, we did not collect information
on MSA payments made to the District of Columbia or the five U.S.
territories that are also party to the MSA. Because we completed our
fieldwork before states received their fiscal year 2005 payments, we were
unable to obtain final information on the actual MSA payments states
received during fiscal year 2005. Consequently, we obtained information on
states' expected fiscal year 2005 MSA payments.

We used a survey instrument somewhat similar to the one used to obtain
information for our March 2004 report. In July 2004, we contacted the 46
state budget officials, or their designees, who completed the surveys for
our March 2004 report. The officials in most of these states indicated
they would be the respondents for this year's survey; a few identified new
respondents. In August 2004, we e-mailed the survey to the identified
officials in each of the 46 states party to the MSA. We received responses
from all 46 states. From these responses, we obtained information on (1)
the MSA payments states received in fiscal year 2004 and the MSA payments
they expect to receive in fiscal year 2005 and (2) the states' allocations
and expected allocations of MSA payments in fiscal years 2004 and 2005,
respectively. We also obtained information on the states' proceeds, if
any, from securitization or expected securitization in fiscal years 2004
and 2005, respectively, and the allocation of the securitized proceeds.
Furthermore, in the survey, we asked the states to categorize their
allocations of MSA payments and securitized MSA proceeds for fiscal years
2004 and 2005, using the 13 program categories developed for our report.
(See below for the definitions of the 13 categories.)

5As we reported in 2001, California counties, four California cities, New
York counties, and New York City each receive a share of MSA payments.

Page 24 GAO-05-312 Tobacco Settlement

  Categories of States' Allocations

The level of detail for individual states varies because we relied on
state-reported information. We performed some reliability testing and
independently corroborated, to the extent possible, the accuracy of the
information provided to us by the state budget offices. We reviewed
earlier reports, compared payment amounts reported by states with amounts
reported to the National Association of Attorneys General, and contacted
many states to clarify the information they provided. On the basis of this
work, we determined that these data were reliable enough for our purposes.

In addition, there are no sampling errors because this was not a sample
survey. Nevertheless, the practical difficulties of conducting any survey
may introduce errors, commonly referred to as nonsampling errors. For
example, difficulties in how a particular question is interpreted, in the
sources of information that are available to respondents, or in how the
data are entered into a database or were analyzed can introduce unwanted
variability into the survey results. We took steps in the development of
the survey, the data collection, and the data editing and analysis to
minimize these nonsampling errors. For example, we edited the completed
surveys for consistency and contacted state budget offices to clarify
responses, verified all survey data that were entered into our database,
and verified that the computer programs were written correctly.

We took information on MSA payments and securitized proceeds received and
allocated for fiscal years 2000 through 2003 that we collected for
previous GAO reports dealing with the MSA6 and compared it with receipts
and allocations for fiscal years 2004 and 2005.

Budget shortfalls: This category is comprised of amounts allocated to
balance state budgets and close gaps or reduce deficits resulting from
lower than anticipated revenues or increased mandatory or essential
expenditures.

Debt service on securitized funds: This category consists of amounts
allocated to service the debt on bonds issued when the state securitized
all or a portion of its MSA payments.

6 GAO-01-851 , GAO-03-407 , and GAO-04-518.

Economic development for tobacco regions: This category is comprised of
amounts allocated for economic development projects in tobacco states,
such as infrastructure projects, education and job training programs, and
research on alternative uses of tobacco and alternative crops. This
category includes projects specifically designed to benefit tobacco
growers as well as economic development that may serve a larger population
within a tobacco state.

Education: This category is comprised of amounts allocated for education
programs such as day care, preschool, Head Start, early childhood
education, elementary and secondary education, after-school programs, and
higher education. This category does not include money for capital
projects such as construction of school buildings.

General purposes: This category is comprised of amounts allocated for
attorneys' fees and other items, such as law enforcement or community
development, that could not be placed into a more precise category. This
category also includes amounts allocated to a state's general fund that
were not earmarked for any particular purpose. Amounts used to balance
state budgets and close gaps or reduce deficits should be categorized as
budget shortfalls, rather than as general purposes.

Health: This category is comprised of amounts allocated for direct health
care services; health insurance, including Medicaid and the State
Children's Health Insurance Program; hospitals; medical technology; public
health services; and health research. This category does not include money
for capital projects such as construction of health facilities.

Infrastructure: This category is comprised of amounts allocated for
capital projects such as construction and renovation of health-care,
education and social services facilities; water and transportation
projects; and municipal and state government buildings. This category
includes retirement of debt owed on capital projects.

Payments to tobacco growers: This category is comprised of amounts
allocated for direct payments to tobacco growers, including subsidies and
crop conversion programs.

Reserves/Rainy day funds: This category is comprised of amounts allocated
to state budget reserves such as rainy day and budget stabilization funds
not earmarked for specific programs. Amounts allocated to reserves that
are earmarked for specific areas are categorized under those areas-for
example, reserve amounts earmarked for economic development purposes
should be categorized in the economic development category.

Social services: This category is comprised of amounts allocated for
social services, such as programs for the aging, assisted living, Meals on
Wheels, drug courts, child welfare, and foster care. This category also
includes amounts allocated to special funds established for children's
programs.

Tax reductions: This category is comprised of amounts allocated for tax
reductions such as property tax rebates and earned income tax credits.

Tobacco control: This category is comprised of amounts allocated for
tobacco control programs such as prevention, including youth education,
enforcement, and cessation services.

Unallocated: This category is comprised of amounts not allocated for any
specific purpose, such as amounts allocated to dedicated funds that have
no specified purpose; amounts states chose not to allocate in the year MSA
payments were received that will be available for allocation in a
subsequent fiscal year; interest earned from dedicated funds not yet
allocated; and amounts that have not been allocated because the state had
not made a decision on the use of the MSA payments.

                                  Appendix II

                   Allocations of MSA Payments for 46 States

State                                                              Percent 
Alabama                                                         1.6161308% 
Alaska                                                           0.3414187 
Arizona                                                          1.4738845 
Arkansas                                                         0.8280661 
California                                                      12.7639554 
Colorado                                                         1.3708614 
Connecticut                                                      1.8565373 
Delaware                                                         0.3954695 
Georgia                                                          2.4544575 
Hawaii                                                           0.6018650 
Idaho                                                            0.3632632 
Illinois                                                         4.6542472 
Indiana                                                          2.0398033 
Iowa                                                             0.8696670 
Kansas                                                           0.8336712 
Kentucky                                                         1.7611586 
Louisiana                                                        2.2553531 
Maine                                                            0.7693505 
Maryland                                                         2.2604570 
Massachusetts                                                    4.0389790 
Michigan                                                         4.3519476 
Missouri                                                         2.2746011 
Montana                                                          0.4247591 
Nebraska                                                         0.5949833 
Nevada                                                           0.6099351 
New Hampshire                                                    0.6659340 
New Jersey                                                       3.8669963 
New Mexico                                                       0.5963897 
New York                                                        12.7620310 
North Carolina                                                   2.3322850 
North Dakota                                                     0.3660138 
Ohio                                                             5.0375098 
Oklahoma                                                         1.0361370 
Oregon                                                           1.1476582 
Pennsylvania                                                     5.7468588 

(Continued From Previous Page)                
State                                                              Percent 
Rhode Island                                                     0.7189054 
South Carolina                                                   1.1763519 
South Dakota                                                     0.3489458 
Tennessee                                                        2.4408945 
Utah                                                             0.4448869 
Vermont                                                          0.4111851 
Virginia                                                         2.0447451 
Washington                                                       2.0532582 
West Virginia                                                    0.8864604 
Wisconsin                                                        2.0720390 
Wyoming                                                          0.2483449 

            Sources: GAO-04-518 and the Master Settlement Agreement.

Appendix III

States' Allocations of Combined MSA Payments and Securitized Proceeds for Fiscal
Years 2000 through 2005

Dollars in millions (current year dollars) and percenta
                                    Fiscal year
                2000-01         2002        2003             2004            2005 
                                                                       (expected) 
Category     Allocation % Allocation  %  Allocation  % Allocation    % Allocation % 
Budget shortfalls     a   a   $2,448 20%   $5,038 36%      $5,059 44%     $686  11%
Debt service on                                                        
securitized funds     a    a     271   2         339 2        998    9    1,405  23
Economic                                                               
development for                                                        
tobacco regions   $466 4%        218   2       285   2        291    3      284   5
Education          848    7    1,132   9       531   4        280    2      287   5
General purposes   623    5      684   6     1,111   8        747    7      666  11
Health           4,788   38    4,434 37      3,455  24      2,263   20    1,898  32
Infrastructure     294    2    1,222 10      1,044   7        759    7      164   3
Payments to                                                            
tobacco growers     235    2     192   2          43 0         25    0        26  0
Reserves/                                                              
Rainy day         603   5        124   1       24    0         14    0     18     0
funds                                                                         
Social            231   2        278   2      160    1        142    1    136     2
services                                                                      
Tax               416   3         35   0      109    1         56    1      0     0
reductions                                                                    
Tobacco           790   6        375   3      276    2        223    2    268     5
control                                                                       
Unallocated     3,217  26        584   5    1,720   12        575    5    161     3
Total         $12,511 100%  $11,998  99%  $14,135 99%     $11,432 101% $5,998  100%

Sources: GAO-04-518 and state budget offices or their designees (data);
GAO (analysis).

Note: Percentages and totals may not add up due to rounding. The amounts
for each year are in the current year dollars for that year. Percentages
across years may be compared but not dollars across years because the
dollars are not adjusted to a constant base year.

aWe did not obtain information on allocations for budget shortfalls and
debt service on securitized funds in fiscal years 2000 and 2001.

Appendix IV

State-Specific Information on Amounts of Master Settlement Agreement Payments
and Securitized Proceeds Received and Allocated

This appendix presents the following information for each of the 46 states
that are party to the MSA:

     o the amount of MSA payments received and the categories to which they
       were allocated for fiscal year 2004;
     o the amount of MSA payments expected to be received and the expected
       categories to which they will be allocated for fiscal year 2005; and
     o the amount of securitized proceeds received or expected to be received
       and the categories to which they were allocated or expected to be
       allocated for fiscal years 2004 and 2005, respectively, if applicable
       (applies to 5 states).

Tables 6 through 51 include only those program categories to which a state
reported allocating funds. If a category is not listed, it means the state
did not allocate funds to the category. In some cases, the total amounts
allocated may exceed the actual MSA payments and securitized proceeds
because the amounts allocated include carry-over funds from prior years
and/or the interest earned on those funds. Some states that allocated
funds to a program category did not provide examples of programs receiving
funds. Only 5 states-Iowa, New Jersey, New York, Oregon, and Rhode
Island-received or expected to receive, or allocated or expected to
allocate, securitized proceeds in fiscal year 2004 or 2005, respectively.
In those cases, we combined securitized proceeds with MSA payments before
allocating the funds to categories.

                   Table 6: Alabama's MSA Payment Allocations

                    Fiscal year Fiscal year 2005 Examples of programs         
                           2004         expected receiving or expected to     
Program area      allocation       allocation receive allocations          
Debt service on  $13,000,000      $13,000,000 
securitized                                   
funds                                         
Education         11,675,188       10,903,817 Alternative schools          
General            7,524,430        7,027,298 Juvenile Probation Officers, 
purposes                                      Administration, Forensic     
                                                 Sciences                     
Health            43,933,579       41,030,925 Public Health, mental        
                                                 health,                      
                                                 Medicaid, senior services    
Social services   25,207,792       23,542,332 Child welfare, Children's    
                                                 programs, Youth services     
Tobacco control      530,690          495,628 Tobacco enforcement on       
                                                 minors                       
Total           $101,871,679      $96,000,000 

                    Source: Alabama Executive Budget Office.

Alaska Alaska reported receiving $21,438,845 from MSA payments in fiscal
year 2004 and expects to receive $23,347,500 in fiscal year 2005.

    Table 7: Alaska's MSA Payment Allocations Table 8: Arizona's MSA Payment
                                   Allocation

                            Fiscal year  Fiscal year Examples of programs     
                                                2005 
                                   2004     expected receiving or expected to 
Program area              allocation   allocation receive allocations      
Debt service on         $17,151,076   $18,678,000 
securitized funds                                 
Health                       857,554    1,111,500 Medicaid and public      
                                                     health                   
Tobacco control            3,430,215    3,558,000 Sting operations         
Total                   $21,438,845   $23,347,500 
Source: Alaska Office of Management  
and Budget.                          

              Fiscal year Fiscal year 2005 
Program           2004         expected Examples of programs receiving     
area        allocation       allocation or expected to receive allocations 
Health     $92,648,165      $90,304,100 
Total      $92,648,165      $90,304,100 

     Source: Arizona Governor's Office of Strategic Planning and Budgeting.

Arkansas Arkansas reported receiving $52,688,976 from MSA payments in
fiscal year 2004 and expects to receive $50,000,000 in fiscal year 2005.

                  Table 9: Arkansas's MSA Payment Allocations

                  Fiscal year Fiscal year 2005 
Program               2004         expected Examples of programs receiving 
area            allocation       allocation or expected to receive         
                                               allocations                    
Debt service    $5,000,000       $5,000,000 
on securitized                              
funds                                       

             Education 2,486,503 2,346,300 School of Public Health

Health   44,391,493  41,842,720 Prevention and cessation, biomedical       
                                   research, Medicaid, and Minority Health    
Tobacco     810,980     810,980 Sales to Minors Enforcement                
control                         
Total   $52,688,976 $50,000,000 

           Source: Arkansas Department of Finance and Administration.

                 Table 10: California's MSA Payment Allocation

                   Fiscal year Fiscal year   
                               2005          
Program                2004      expected Examples of programs receiving   
                                             or                               
area             allocation    allocation expected to receive allocations  
Debt service   $400,746,161  $404,500,000 
on securitized                            
funds                                     
Total          $400,746,161  $404,500,000 

Source: California Department of Finance.

Note: These MSA payments include only payments made to the state, which
amount to 50 percent of the annual payments made by the tobacco companies
to California. Cities and counties in the state receive the other 50
percent of the annual MSA payments to California.

Colorado Colorado reported receiving $87,037,529 from MSA payments in
fiscal year 2004 and expects to receive $88,878,470 in fiscal year 2005.

                  Table 11: Colorado's MSA Payment Allocations

                Fiscal year  Fiscal year 
                                    2005 
Program             2004     expected Examples of programs receiving       
area          allocation   allocation or expected to receive allocations   
Budget                $0  $26,159,617 
shortfalls                            
Education   11,398,410   16,592,664   Literacy programs for elementary     
Health      32,665,516   36,140,261   students, regional libraries, state  
                                         council on the arts Nurse home       
                                         visitor's program, primary and       
                                         preventive care grants, Children's   
                                         Health Insurance Program+, breast    
                                         and cervical cancer program, dental  
                                         loan repayment, Medicaid mental      
                                         health capitation, Child Mental      
                                         Health Treatment Act                 

                         (Continued From Previous Page)

Fiscal year Fiscal year 2005 Program 2004 expected Examples of programs
receiving area allocation allocation or expected to receive allocations

Infrastructure 0 1,900,000 Fitzsimons Health Sciences Center at the
University of Colorado

Social 1,902,681 4,351,876 State veteran's fund, legal services services
for victims of family violence, services to juveniles

Tobacco 3,939,029 4,351,876 Cessation and prevention grants control

                         Total $49,905,636 $89,496,294a

Source: Colorado Governor's Office of State Planning and Budgeting.

             aAmount includes carry-over funds and interest earned.

Connecticut Connecticut reported receiving $116,578,313 from MSA payments
in fiscal year 2004 and expects to receive $109,000,000 in fiscal year
2005.

                 Table 12: Connecticut's MSA Payment Allocation

                Fiscal year Fiscal year 2005
Program             2004        expected Examples of programs receiving or 
area          allocation      allocation expected to receive allocations   
General    $116,578,313  $109,000,000 General fund revenue
purposes                 
Total      $116,578,313  $109,000,000    

 Source: Connecticut Office of Policy and Management, Fiscal and Program Policy
Section. Source: Hawaii Department of Budget and Finance. Source: Idaho Division
                            of Financial Management.

                  Table 13: Delaware's MSA Payment Allocations

             Fiscal year Fiscal year 2005
Program          2004   expected Examples of programs receiving or         
area       allocation allocation expected to receive allocations           
Education  $1,297,100 $1,655,200 Scholarships for nursing students at      
                                    community college and those working in    
                                    state facilities                          
General       169,700    169,700 Health Care Commission staff; survey of   
purposes                         school-age children on alcohol, drug,     
                                    and tobacco use; establishment and        
                                    support of health library network         
Health     18,070,200 18,773,100 Breast and cervical cancer screening,     
                                    Senior Prescription Assistance Program,   
                                    several cancer resource/support           
                                    programs, defibrillators                  
Social        430,000    430,000 Attendant care services for persons       
services                         living in the community with disabilities 

Tobacco 5,072,000               5,072,000 Tobacco prevention, control, and 
control                                   enforcement (e.g., Quitline      
                                             smoking                          
                                             cessation programs and           
                                             advertising,                     
                                             undercover kids, enforcement     
                                             agents)                          
Total $25,039,000a            $26,100,000 
Source: Delaware Health and               
Social Services.                          
aAmount includes carry-over               
funds.                                    

                  Table 14: Georgia's MSA Payment Allocations

               Fiscal year Fiscal year 2005
Program            2004    expected Examples of programs receiving or      
area         allocation  allocation expected to receive allocations        
Economic    $65,834,093 $47,123,333 OneGeorgia Authority                   
development                         
for tobacco                         
regions                             
Health       88,894,466  89,293,004 Support for Medicaid and State         
                                       Children's Health Insurance Program,   
                                       Critical Access Hospital               
                                       Reimbursement, Medicaid Home and       
                                       Community Based Waiver Programs,       
                                       Georgia Cancer Coalition, public       
                                       health programs                        
Social        7,149,804   7,149,804 Home and community-based services      
services                            to the elderly, early intervention for 
                                       families at risk for child abuse       

Tobacco           12,506,336       12,803,859 Tobacco Use Prevention       
                                                 Program,                     
control                                       compliance and enforcement   
                                                 for                          
                                                 underage smoking             
Total          $174,384,699a    $156,370,000a 
Source: Georgia Office of                     
Planning and Budget.                          
aAmounts include carry-over                   
funds.                                        

                   Table 15: Hawaii's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004      expected Examples of programs receiving or  
area           allocation    allocation expected to receive allocations    
General        $2,814,702   $3,054,035 Tobacco Enforcement Special Fund of
purposes                             the Attorney General's Office for MSA
                                         enforcement, assessments for central
                                         services and administrative expenses
Health         12,607,898       13,832,181 Department of Health for public
                                                                       health
                                                programs, Department of Human
                                     Services for children's health insurance
                                                 programs
Infrastructure 10,086,319  11,065,745 Debt service on University of Hawaii
                                             revenue bonds issued for the new
                                       Health and Wellness Center, to include
                                         a new biomedical research center and
                                              medical school

Reserves/   8,825,529 9,682,527 State of Hawaii's Emergency and Budget     
Rainy day             Reserve Fund                                         
funds                 
Tobacco     4,502,821       4,940,064 Tobacco Prevention and Control Trust 
control                                       Fund                         
Total     $38,837,269 $42,574,552                                          

                   Table 16: Idaho's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004       expected Examples of programs receiving or 
area           allocation     allocation expected to receive allocations   
Health           $835,000       $500,000 Catastrophic Health Care Cost     
                                            Program                           
                                            for tobacco-related disease       
                                            treatment                         
                                            and for caring for indigent       
                                            persons                           
Social services 270,000           270,000 Youth courts and status offender
Tobacco control 1,333,700  programs related to tobacco and substance abuse
Unallocated 20,380,249        issues 1,169,700 Youth smoking cessation and
Total $22,818,949              reduction program; incorporation of tobacco
                                       control model within Idaho health care
                               recommended by the Centers for Disease Control
                                    and Prevention; tobacco counter-marketing
                                     program; public health districts tobacco
                             cessation programs; youth tobacco investigations
                                                       21,891,016 $23,830,716

                  Table 17: Illinois's MSA Payment Allocations

                    Fiscal year Fiscal year 2005
Program                 2004      expected Examples of programs receiving  
                                              or                              
area              allocation    allocation expected to receive allocations 
Education        $15,760,000 $13,800,000 Payments to Centers for Academic
                                              Excellence for medical research
General           40,064,867    25,961,291 Technology marketing,           
                                              technology                      
purposes                                   centers, administrative fees    
                                              charged to                      
                                             the tobacco fund, audit expenses
                                           charged to the tobacco fund ($22.5
                                    million is automatically diverted into an
                                          escrow account for attorneys' fees)
Health           181,772,387 239,867,350 Medicaid drugs, drugs for Senior
                                                  Citizens
Infrastructure     2,963,066     5,000,000 Capital maintenance on          
                                              state-owned                     
                                                 facilities
Social             1,030,856     1,100,000 Outreach program to the aging   
services                     
Tax               55,661,645             0 Property tax reduction for      
                                              senior                          
reductions                                 citizens                        
Tobacco            7,664,670   12,914,500 Tobacco prevention activities of
                                                                        local
control                                health departments, tobacco control
                                                programs, tobacco enforcement
                                                 programs, enforcement of MSA
                                       provisions, grant to the American Lung
                                              Association                     
Total          $304,917,491a $298,643,141a 

Source: Illinois Governor's Office of Management and Budget.

aAmounts include carry-over funds.

                  Table 18: Indiana's MSA Payment Allocations

                       Fiscal year iscal year 2005 expected allocation        
Program area    2004 allocation Examples of programs receiving or expected 
                                 F to receive allocations                     
Economic          $46,200,000   $46,200,000 Rural Development              
development for                 Administration Fund, Rural Development     
tobacco                         Council Fund, Value-Added Research Fund,   
regions                         Technology Development Grant Fund, 21st    
                                   Century Research and Technology Fund       
Health            86,800,000    89,200,000 State Department of Health      
                                   administration, Cancer Registry, Sickle    
                                   Cell, Aid to TB Hospitals, AIDS Education, 
                                   HIV/AIDS Services, Test for Drug-Afflicted 
                                   Babies, State Chronic Diseases, WIC        
                                   Supplement, MCH Supplement, Breast Cancer  
                                   Education and Diagnosis, Minority Health   
                                   Initiative, Minority Epidemiology,         
                                   Children's Health Insurance Program,       
                                   Hoosier Rx, Local Health Maintenance       
                                   Fund, Local Health Department Account,     
                                   Community Health Centers                   
Infrastructure     1,450,000    1,450,000 Regional health facilities       

Social         24,300,000  24,300,000 Developmentally Disabled (DD) client 
services                              services, DD Direct Care salaries    
Tobacco        10,800,000  10,800,000 Tobacco use and prevention cessation
control                   
Total      $169,550,000a  $171,950,000a

Source: Indiana State Budget Agency.

aAmounts include carry-over funds and interest earned.

Iowa Iowa reported receiving $54,609,359 from MSA payments in fiscal year
2004 and expects to receive $55,137,861 in fiscal year 2005. In addition,
Iowa reported receiving $63,512,236 in securitized proceeds in fiscal year
2004 and expects to receive $63,792,236 in fiscal year 2005.

     Table 19: Iowa's Allocations of MSA Payments and Securitized Proceeds

                  Fiscal year Fiscal year 2005 
Program               2004         expected Examples of programs receiving 
area            allocation       allocation or expected to receive         
                                               allocations                    
Debt service   $42,595,300      $43,007,532 
on securitized                              
funds                                       

Education             2,153,250         2,153,250 Early childhood programs 
General               2,107,285      2,237,285 Correctional programs       
purposes                             

Health           66,197,195 66,445,465 Endowment for Iowa's Health Account 
Tobacco           5,068,565    5,086,565 Tobacco use/control and cessation 
control                                        programs                    
Total        $118,121,595   $118,930,097                                   

                     Source: Iowa Department of Management.

                   Table 20: Kansas's MSA Payment Allocations

              Fiscal year Fiscal year 2005
Program           2004     expected Examples of programs receiving or      
area        allocation   allocation expected to receive allocations        
Education   $8,525,000   $8,525,000 Parent education, 4-year-olds at risk, 
                                       vision research, special education     
General     11,044,144    5,111,533 To State General Fund                  
purposes                            
Health       1,800,000    1,800,000 Infants and toddlers, healthy start    
                                       home visitors, smoking prevention and  
                                       cessation, telekid health care link    
Social      32,407,931   41,865,293 Juvenile justice prevention and        
services                            sanction grants, children's mental     
                                       health initiative, family-centered     
                                       systems of care, therapeutic           
                                       preschool, childcare and child welfare 
                                       community services, healthwave,        
                                       Medicaid, smart start Kansas,          
                                       immunization outreach, school          
                                       violence prevention, family            
                                       preservation, community mental health  
                                       center grants                          
Total     $53,777,075a $57,301,826a 

Source: Kansas Division of the Budget. aAmounts include carry-over funds
and interest earned.

                  Table 21: Kentucky's MSA Payment Allocations

                Fiscal year Fiscal year 2005
Program             2004       expected Examples of programs receiving or  
area          allocation     allocation expected to receive allocations    
Economic    $43,434,000  $48,283,400 Governor's Office for Agricultural
development                            Policy, Conservation, Environmental
for tobacco                                 Stewardship
regions                  
Education      5,961,700     10,952,500 Families and Children-Childhood    
                                              Development Program, Governor's
                                       Office of Early Childhood-
                                              Development Program, Kentucky's
                                                  Higher Education Assistance
                                        Authority-Early Childhood
                                           Scholarship Program

General         382,959            0 Directed to the General Fund          
purposes                             
Health         43,624,200 38,500,700 Public Health-Health Access           
                                        Nurturing Development Services, Folic 
                                        Acid Distribution, Healthy Start,     
                                        Universal Children's Immunization;    
                                        Child advocacy centers; Early         
                                        Childhood Mental and Oral Health;     
                                        Mental Health-Substance Abuse         
                                        Services to Medicaid Eligible Women   
                                        with Dependent Children; Children     
                                        with Special Health Care              
                                        Needs-Universal Newborn Hearing       
                                        Testing and Vision Screening, Council 
                                        on Postsecondary Education-Lung       
                                        Cancer Research Program;              
                                        Insurance-Kentucky Access (High Risk  
                                        Individual Insurance Pool);Testing    
                                        and Vision Screening- First Steps     
                                        Early Intervention Program            
Infrastructure 11,116,000  6,116,600 Debt service-Kentucky Infrastructure  
                                        Authority-Water Resource Development  

Tobacco         4,964,100     4,946,800 Public Health-Smoking cessation;   
control                                 Governor's Office-Kentucky Agency  
                                           for Substance Abuse Policy-Smoking 
                                           Cessation                          
Total      $109,482,959    $108,800,000 

Source: Kentucky Governor's Office for Policy Research.

                 Table 22: Louisiana's MSA Payment Allocations

                    Fiscal year Fiscal year 2005 Examples of programs         
Program                 2004         expected receiving or expected to     
                                                 receive                      
area              allocation       allocation allocations                  
Debt service     $84,972,800      $87,217,465 
on securitized                                
funds                                         
General              341,260          350,000 Attorney General's Office    
purposes                                      for enforcement              
Health            11,831,735       13,686,244 School-based health care     
                                                 centers (OPH), Medicaid,     
                                                 Board of Regents and health  
                                                 care science grants          
Social services    1,489,137                  Starting points preschool    
                                                 programs                     
Tobacco control      500,000          500,000 Smoking prevention and       
                                                 cessation grants             
Unallocated       42,486,396       43,608,733 
Total           $141,621,328     $145,362,442 

  Source: Louisiana Division of Administration, Office of Planning and Budget.

Maine Maine reported receiving $48,952,964 from MSA payments in fiscal
year 2004 and expects to receive $48,772,127 in fiscal year 2005.

                   Table 23: Maine's MSA Payment Allocations

              Fiscal year Fiscal year 2005 
Program           2004         expected Examples of programs receiving     
area        allocation       allocation or expected to receive allocations 
Budget      $6,656,040               $0 
shortfalls                              

Education  10,166,959 11,069,704 Child care and development initiatives,
                         after-school services and Head Start
General        60,089    58,281 Attorney General enforcement and           
purposes                        administrative costs                       
Page 45                                      GAO-05-312 Tobacco Settlement

                         (Continued From Previous Page)

Fiscal year Fiscal year 2005 Program 2004 expected Examples of programs
receiving area allocation allocation or expected to receive allocations

Health 19,425,389 19,214,049 Prescription drugs, Medicaid and other health
initiatives

Social       5,808,184 5,765,892 Substance abuse prevention, intervention, 
services               testing and treatment                               
Tobacco     14,579,102 15,120,903 Community/school grants and              
control                                   statewide coordination to reduce 
                                           tobacco addiction and use; tobacco 
                                           prevention, control, and treatment 
Total     $56,695,763a $51,228,829a                                        

Source: Maine Department of Administrative and Financial Services, Bureau
of the Budget.

aAmounts include carry-over funds and/or interest earned.

Maryland Maryland reported receiving $149,942,000 from MSA payments in
fiscal year 2004 and expects to receive $142,607,000 in fiscal year 2005.

                  Table 24: Maryland's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004      expected Examples of programs receiving     
area           allocation    allocation or expected to receive allocations 
Education      $3,000,000    $3,000,000 Textbooks for nonpublic schools    
General        30,000,000    30,170,000 Legal fees and settlement with     
purposes                                outside counsel                    
Health        152,889,000    98,268,000 Cancer, heart, and lung screenings 
                                           and treatments; Maryland Health    
                                           Care Foundation; Medicaid;         
                                           management                         
Payments to     5,100,000     5,653,000 Tri-County Council of Southern     
tobacco                                 Maryland (buyout payments to       
growers                                 farmers)                           
Tobacco        13,798,000     9,484,000 Tobacco use prevention and         
control                                 cessation programs                 
Unallocated    10,360,000     6,391,000 
Total       $215,147,000a $152,966,000a 

Source: Maryland Department of Budget and Management. aAmounts include
carry-over funds and interest earned.

                Table 25: Massachusetts's MSA Payment Allocation

Program   Fiscal year 2004   Fiscal year Examples of programs receiving or 
area            allocation 2005 expected expected to receive allocations   
                                 allocation 
General     $253,943,730    $253,600,000 All MSA revenues deposited in the 
purposes                                 Commonwealth's General Fund in    
                                            fiscal years 2004 and 2005        
Total      $253,943,730a    $253,600,000 

Source: Massachusetts Executive Office of Administration and Finance,
Fiscal Affairs Division. aAmount includes interest earned.

Michigan Michigan reported receiving $270,540,221 from MSA payments in
fiscal year 2004 and expects to receive $285,700,000 in fiscal year 2005.

                  Table 26: Michigan's MSA Payment Allocations

               Fiscal year Fiscal year 2005 
Program            2004         expected Examples of programs receiving or 
area         allocation       allocation expected to receive allocations   
Budget      $64,000,000       $7,000,000 
shortfalls                               

Education 104,900,000 102,200,000 Scholarships and tuition incentive
grants for higher education students, testing for K-12 students, Michigan
Education Savings Plan, nursing scholarships, general higher education
support

General            400,000       400,000 Attorney General administrative   
purposes                                 expenses                          
Health        107,700,000    186,800,000 Elder pharmaceutical assistance,  
                                            Medicaid personal needs           
                                            allowance,                        
                                            respite care, Medicaid support,   
                                            biomedical research and           
                                            development                       
Unallocated      9,200,000       500,000 
Total        $286,200,000a $296,900,000a 

Source: Michigan Office of Health and Human Services, State Budget Office.

aAmounts include carry-over funds and interest earned.

                  Table 27: Missouri's MSA Payment Allocations

                   Fiscal year Fiscal year 2005 Examples of programs          
Program     2004 allocation         expected receiving or expected to      
area Budget     $70,715,848       allocation receive allocations           
shortfalls                       $70,772,048 
General           4,426,858        2,427,411 Transferred to state general  
purposes                                     revenue fund to support any   
                                                state program funded from     
                                                general revenue, such as      
                                                education, Medicaid and       
                                                corrections                   
Health           69,726,564       70,369,652 Payments to Medicaid          
                                                providers and grants to       
                                                hospitals for graduate        
                                                medical education,            
                                                prescription drug assistance  
                                                for low-income seniors        
                                                through the Missouri Senior   
                                                Rx Program                    

Tobacco 472,829                         482,414 Enforcement of the state's 
                                                   laws on                    
control                                         underage tobacco use       
Total $145,342,099a               $144,051,525a 
Source: Missouri Division of                    
Budget and Planning.                            
aAmounts include carry-over                     
funds.                                          

                  Table 28: Montana's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004      expected Examples of programs receiving     
area           allocation    allocation or expected to receive allocations 
General        $2,933,928    $2,884,530 General fund transfer              
purposes                                
Health         18,250,852    18,601,209 State Children's Health Insurance  
                                           Program, Medicaid, Mental health   
                                           services, hospice and home health  
                                           and Tobacco Trust Fund             
Social          2,149,579     2,589,726 Childcare, child support           
services                                enforcement, infant mortality      
                                           abatement, poison control, AIDS    
                                           prevention, independent living and 
                                           extended employment                
Tobacco         2,514,645     2,970,604 Tobacco prevention                 
control                                 
Unallocated       823,069             0 
Total         $26,672,073  $27,046,069a 

                 Source: Montana Office of Budget and Planning.

                       aAmount includes carry-over funds.

                  Table 29: Nebraska's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004      expected Examples of programs receiving     
area           allocation    allocation or expected to receive allocations 
General           $88,437       $86,595 MSA model statute enforcement      
purposes                                
Health         21,006,570    20,333,933 Behavioral health, public health,  
                                           minority health, State Children's  
                                           Health Insurance Program,          
                                           biomedical research                

Social        2,788,800        2,730,700 Community-based developmental     
services                                 disability services, respite care 
                                            assistance                        
Unallocated   13,974,355      12,448,772 
Total        $37,858,162     $35,600,000 

    Source: Nebraska Department of Administrative Services, Budget Division.

                   Table 30: Nevada's MSA Payment Allocations

                Fiscal year Fiscal year 2005
Program             2004       expected Examples of programs receiving     
area          allocation     allocation or expected to receive allocations 

Education  $29,254,375 $32,966,914 Scholarship program for Nevada students 
                                      who attend a Nevada higher education    
                                      institution                             
General      257,412       260,971 Attorney General's tobacco retail       
purposes                           enforcement and master settlement legal 
                                      expenses                                
Health     14,166,437   12,986,804 Grants to improve health services for   
                                      children and persons with disabilities, 
                                      prescription drugs and pharmaceutical   
                                      services for low-income seniors, and an 
                                      endowment fund that expends interest    
                                      earnings to provide grants for the      
                                      promotion of public health              
Social      8,948,725    7,437,291 Grants to assist senior citizens to     
services                           live independently, support senior      
                                      services, and a homemaker program       

Tobacco 5,013,173              4,679,439 Grants for tobacco cessation      
                                            programs                          
control                                  
Total $57,640,122a          $58,331,419a 
Source: Nevada Budget                    
Office.                                  
aAmounts include carry-over              
funds.                                   

               Table 31: New Hampshire's MSA Payment Allocations

                  Fiscal year Fiscal year 2005
Program               2004     expected Examples of programs receiving     
area            allocation   allocation or expected to receive allocations 
Education      $40,000,000 $39,600,000 K-12 adequate grants to schools
General          1,800,000             0 No specific programs
purposes                   
Total          $41,800,000 $39,600,000  

         Source: New Hampshire Office of Legislative Budget Assistant.

New Jersey New Jersey reported receiving $242,800,000 from MSA payments in
fiscal year 2004 and expects to receive $245,100,000 in fiscal year 2005.

       Table 32: New Jersey's Allocations of MSA Payments and Securitized
                                    Proceeds

                 Fiscal year Fiscal year 2005 
Program              2004         expected Examples of programs receiving  
area           allocation       allocation or expected to receive          
                                              allocations                     
Budget       $873,300,000               $0 
shortfalls                                 
Debt service  120,200,000      245,100,000 
on                                         
securitized                                
funds                                      

Health           122,600,000               0 Family Care, new and expanded 
                                               community options for seniors, 
                                       expansion of cancer initiative, Senior 
                                               Gold Pharmaceutical Assistance 

Infrastructure      608,000,000        0 Institutional, transportation and 
                                                  other projects              
Total            $1,724,100,000a   $245,100,000                            

Source: New Jersey Office of Management and Budget.

aAmount includes some securitized proceeds received in fiscal year 2003.

                 Table 33: New Mexico's MSA Payment Allocations

               Fiscal year Fiscal year 2005
Program            2004        expected Examples of programs receiving or  
area         allocation      allocation expected to receive allocations    
Education      $800,000        $800,000 Education in trauma, critical, and 
                                           emergency care and pediatrics      

General             0  12,644,246 Balances after appropriations to         
purposes                          education and health are deposited into  
                                     the General Fund                         
Health    36,649,345   21,335,000 Tobacco cessation and prevention,        
                                     diabetes and HIV services and            
                                     medication, breast and cervical cancer   
                                     treatment, preventing and treating       
                                     tobacco-related illnesses, poison        
                                     control, telemedicine, expanded lung and 
                                     illness research, Medicaid               
Total     $37,449,345 $34,779,246 

          Source: New Mexico Department of Finance and Administration.

New York New York reported receiving $349,494,266 from MSA payments in
fiscal year 2004 and expects to receive $406,007,613 in fiscal year 2005.
In addition, New York reported receiving $4,200,000,000 in securitized
proceeds in fiscal year 2004 and expects to receive no securitized
proceeds in fiscal year 2005.

    Table 34: New York's Allocation of MSA Payments and Securitized Proceeds

                   Fiscal year Fiscal year 2005 
Program                2004         expected Examples of programs          
                                                receiving                     
area             allocation       allocation or expected to receive        
                                                allocations                   
Budget       $3,800,000,000     $582,034,000 
shortfalls                                   
Debt service              0      223,973,217 
on                                           
securitized                                  
funds                                        

                         (Continued From Previous Page)

Fiscal year Fiscal year 2005 Program 2004 expected Examples of programs
receiving area allocation allocation or expected to receive allocations

Health 322,016,427 0 Medicaid, indigent care, elderly pharmaceutical
program, Family Health Plus, health insurance for the uninsured, breast
and cervical cancer treatment and similar programs

Tobacco            30,000,000             0 Tobacco control and prevention 
control                                     activities                     
Unallocated       400,000,000             0 
Total        $4,552,016,427   $806,007,217a 

Source: New York State Division of the Budget.

aAmount includes some securitized proceeds received in fiscal year 2004.

Note: These MSA payments include only the payments made to the state,
which amount to about 51 percent of the annual payments made by the
tobacco companies to New York. New York City and counties in the state
receive the other 49 percent of the annual MSA payments to New York.

North Carolina North Carolina reported receiving $150,507,204 from MSA
payments in fiscal year 2004 and expects to receive $163,353,241 in fiscal
year 2005.

               Table 35: North Carolina's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004      expected Examples of programs receiving     
area           allocation    allocation or expected to receive allocations 

Economic        $75,733,669   $86,569,690 Tobacco Trust Fund (Golden Leaf) 
development                   
for tobacco                   
regions                       
General         63,046,734    60,000,000                                   
purposes                      

Health          1,926,801 0    4,193,069     Health and Wellness Trust     
Infrastructure                 1,890,482     Fund (medication assistance   
                                                and childhood obesity         
                                                prevention)                   
                                                Statewide and community-based 
Tobacco control 10,700,000     10,700,000    teen tobacco use prevention   
Total           $151,407,204a  $163,353,241  and cessation                 

Source: North Carolina Office of State Budget and Management.

                      a Amount includes carry-over funds.

North Dakota North Dakota reported receiving $23,289,073 from MSA payments
in fiscal year 2004 and expects to receive $22,972,067 in fiscal year
2005.

                Table 36: North Dakota's MSA Payment Allocations

                 Fiscal year Fiscal year 2005 expected allocation Examples of 
                        2004 programs receiving or expected to receive        
Program area   allocation allocations                                      
Education     $10,480,083 $10,337,430 Forty-five percent of the MSA funds  
                             are deposited in the common schools trust fund   
                             and interest earned on the fund is used for K-12 
                             education                                        
Health 482,000               482,000 Dental loan repayment program, breast 
Infrastructure 10,480,083   and cervical cancer screening 10,337,430 Water 
Tobacco control 1,846,907    projects 1,815,207 Tobacco cessation programs 
Total $23,289,073                                              $22,972,067 

    Source: North Dakota Office of Management and Budget, Fiscal Management
                                   Division.

Ohio Ohio reported receiving $320,531,457 from MSA payments in fiscal year
2004 and expects to receive $290,886,750 in fiscal year 2005.

                    Table 37: Ohio's MSA Payment Allocations

               Fiscal year Fiscal year 2005 
Program            2004         expected Examples of programs receiving    
area         allocation       allocation or expected to receive            
                                            allocations                       
Budget     $234,678,219               $0 
shortfalls                               

Economic         15,144,938 12,600,000 Grants to make capital improvements 
development for             in marketable industrial sites                 
tobacco regions             
Education        7,553,152  6,274,109 Technology enhancements in schools   

                         (Continued From Previous Page)

Fiscal year Fiscal year 2005 Program 2004 expected Examples of programs
receiving area allocation allocation or expected to receive allocations

General 786,109 801,831 Administration, oversight,

purposes enforcement activities related to the MSA

Health 37,237,451 34,681,892 Minority health programs, alcohol and drug
abuse prevention and biomedical tech transfer

            Infrastructure 5,000,000 126,389,326 School construction

Social 3,852,400 3,855,051 Funding for uncompensated health services care
of uninsured

Tobacco 17,487,294 108,136,000 Under-age tobacco use enforcement control
and tobacco use prevention and cessation programs

                       Total $321,739,563a $292,738,209a

Source: Ohio Office of Budget and Management.

a Amounts include carry-over funds and interest earned.

Oklahoma Oklahoma reported receiving $65,062,578 from MSA payments in
fiscal year 2004 and expects to receive $49,783,729 in fiscal year 2005.

                  Table 38: Oklahoma's MSA Payment Allocations

                  Fiscal year Fiscal year 2005
Program               2004     expected Examples of programs receiving     
area            allocation   allocation or expected to receive allocations 
General         $1,411,918   $1,016,000 Attorney General's Evidence Fund   
purposes                                
Health          30,964,800   34,613,717 Medicaid and deposit to Tobacco    
                                           Settlement Endowment Trust Fund on 
                                           behalf of health programs          
Social services 15,610,837      0 Child welfare, foster care, services for
Tobacco control 17,075,023           homebound elders and senior nutrition
Total $65,062,578             14,154,012 Deposit to the Tobacco Settlement
                                    Endowment Trust Fund on behalf of tobacco
                                                 control programs $49,783,729

Source: Oklahoma Office of State Finance.

Oregon Oregon reported receiving $72,065,376 from MSA payments in fiscal
year 2004 and expects to receive $73,555,259 in fiscal year 2005. In
addition, Oregon reported receiving $109,565,000 in securitized proceeds
in fiscal year 2004 and expects to receive no securitized proceeds in
fiscal year 2005.

    Table 39: Oregon's Allocations of MSA Payments and Securitized Proceeds

                  Fiscal year Fiscal year 2005 
Program               2004         expected Examples of programs receiving 
area            allocation       allocation or expected to receive         
                                               allocations                    
Debt service    $7,603,713      $43,860,304 
on securitized                              
funds                                       

Health           14,608,216   27,600,000 Oregon health plan/family health
                                                 insurance assistance program
Infrastructure  109,565,000            0 Capital projects at Oregon Health
                                              and Sciences University-a state
                                              teaching hospital
Tobacco                     0   700,000 Tobacco enforcement and prevention
control                                                services            
Unallocated      49,853,447                 51,248,402 
Total          $181,630,376              $123,408,706a 

Source: Oregon Department of Administrative Services.

aAmount includes carry-over funds.

                Table 40: Pennsylvania's MSA Payment Allocation

             Fiscal year Fiscal year 2005
Program          2004      expected Examples of programs receiving         
area       allocation    allocation or expected to receive allocations     
Health  $416,818,000   $370,857,000 Smoking prevention and cessation; home 
                                       and community-based care; venture      
                                       capital for medical equipment, support 
                                       for                                    
                                       the uninsured; and catastrophic and    
                                       uncompensated care                     
Total   $416,818,000a $370,857,000a 

Source: Pennsylvania Governor's Office of the Budget.

aAmounts include carry-over funds and interest earned.

Rhode Island Rhode Island reported receiving $45,142,523 from MSA payments
in fiscal year 2004 and expects to receive $47,381,000 in fiscal year
2005. In addition, Rhode Island reported receiving $1,621,487 in
securitized proceeds in fiscal year 2004 and expects to receive no
securitized proceeds in fiscal year 2005.

      Table 41: Rhode Island's Allocations of MSA Payments and Securitized
                                    Proceeds

                  Fiscal year Fiscal year 2005 
Program               2004         expected Examples of programs receiving 
area            allocation       allocation or expected to receive         
                                               allocations                    
Debt service   $44,688,862      $47,381,000 
on securitized                              
funds                                       

General          2,075,148             0 Any program that receives general 
purposes                                 fund support                      
Total        $46,764,010     $47,381,000 

 Source: State of Rhode Island Budget Office. Source: South Carolina Office of
                                 State Budget.

               Table 42: South Carolina's MSA Payment Allocation

                  Fiscal year Fiscal year 2005 
Program               2004         expected Examples of programs receiving 
area            allocation       allocation or expected to receive         
                                               allocations                    
Debt service   $73,124,607      $75,582,954 
on securitized                              
funds                                       
Total          $73,124,607      $75,582,954 

South Dakota South Dakota reported receiving $21,911,498 from MSA payments
in fiscal year 2004 and expects to receive $23,063,730 in fiscal year
2005.

                Table 43: South Dakota's MSA Payment Allocations

                  Fiscal year Fiscal year 2005 
Program               2004         expected Examples of programs receiving 
area            allocation       allocation or expected to receive         
                                               allocations                    
Debt service   $21,911,948      $23,063,730 
on securitized                              
funds                                       

Education   14,161,048  13,572,737 State aid to general education, special 
                           education, supplemental K-12 allocation,           
                           technology in schools, SD Opportunity scholarship, 
                           postsecondary vocational education                 
Tobacco               0 750,000                                            
control                 
Total      $36,072,996a $37,386,467a                                       

Source: South Dakota Bureau of Finance and Management.

aAmounts include interest earned.

                  Table 44: Tennessee's MSA Payment Allocation

Program   Fiscal year 2004   Fiscal year Examples of programs receiving or 
area            allocation 2005 expected expected to receive allocations   
                                 allocation 
General     $153,272,096    $147,800,000 Allocated to the General Fund;    
                                            not                               
purposes                                 earmarked                         
Total       $153,272,096    $147,800,000 

          Source: Tennessee Department of Finance and Administration.

Utah Utah reported receiving $27,936,000 from MSA payments in fiscal year
2004 and expects to receive $26,951,100 in fiscal year 2005.

                    Table 45: Utah's MSA Payment Allocations

                Fiscal year Fiscal year 2005 Examples of programs receiving   
Program area        2004         expected or expected to receive           
Budget        allocation    allocation $0 allocations                      
shortfalls    $9,821,500                  
General          100,000          100,000 Attorney General's office        
purposes                                  
Health        13,002,800       13,002,800 State Children's Health          
                                             Insurance Program, cancer        
                                             research, immunizations, health  
                                             promotion                        
Reserves/      5,587,200        8,085,300 Tobacco Permanent Trust Fund-an  
Rainy day                                 endowment that allows the        
funds                                     Legislature to allocate the      
                                             interest to fund programs        

Social          2,000,000     2,000,000 Drug courts, drug board pilot      
services                                program                            
Tobacco         4,057,900     4,076,000 Tobacco Quit line, TV campaign and 
control                                 prevention partnerships            
Total       $34,569,400a   $27,264,100a 

Source: Utah Governor's Office of Planning and Budget.

aAmounts include carry-over funds.

                  Table 46: Vermont's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004      expected Examples of programs receiving     
area           allocation    allocation or expected to receive allocations 
General          $388,000      $388,000 Attorney General, Tax Department,  
purposes                                Drug Court                         
Health         17,250,000    17,250,000 Medicaid state match               
Social          2,885,266     4,522,111 Alcohol and drug programs; safe    
services                                housing (domestic violence)        
Tobacco         4,120,177     4,756,157 School and public education        
control                                 programs                           
Total        $24,643,443a  $26,916,268a 

Source: Vermont Department of Finance and Management.

aAmounts include carry-over funds.

Virginia Virginia reported receiving $128,396,522 from MSA payments in
fiscal year 2004 and expects to receive $123,256,595 in fiscal year 2005.

                  Table 47: Virginia's MSA Payment Allocations

               Fiscal year Fiscal year 2005
Program            2004    expected Examples of programs receiving         
area         allocation  allocation or expected to receive allocations     
Economic    $44,776,339 $43,094,800 Economic development projects,         
development                         infrastructure, education, job         
                                       training,                              
for tobacco                         research and administration of the     
regions                             Tobacco Indemnification and            
                                       Community Revitalization               
                                       Commission                             
General      51,358,608           0 Deposited to the state general fund    
purposes                            and appropriated through the budget    
                                       process                                
Health                0  47,542,895 Deposited to the Virginia Health Care  
                                       Fund and used to support the           
                                       Medicaid Program                       

                         (Continued From Previous Page)

Fiscal year Fiscal year 2005 Program 2004 expected Examples of programs
receiving area allocation allocation or expected to receive allocations

Payments to 19,421,923 20,000,000 Indemnification payments to tobacco
tobacco growers growers

Tobacco    12,839,652   12,618,900 Public education campaigns to           
control                            discourage tobacco consumption by       
                                      minors, research and the                
                                      administrative budget of the Virginia   
                                      Tobacco Settlement Foundation           
Total    $128,396,522 $123,256,595 

              Source: Virginia Department of Planning and Budget.

Washington Washington reported receiving $127,635,700 from MSA payments in
fiscal year 2004 and expects to receive $128,000,000 in fiscal year 2005.

                 Table 48: Washington's MSA Payment Allocations

               Fiscal year Fiscal year 2005 
Program            2004         expected Examples of programs receiving    
area         allocation       allocation or expected to receive            
                                            allocations                       
Debt        $37,269,600      $37,376,000 
service on                               
securitized                              
funds                                    

Health      90,366,100 90,624,000 Children's Medicaid; subsidized health   
                          insurance for low-income state residents; grants to 
                          community clinics; grants to local public health    
                          jurisdictions; statewide public health programs     
                          such as childhood immunizations                     
Tobacco     17,500,000 0 Tobacco prevention and cessation programs         
control                
Total    $145,135,700a $128,000,000                                        

Source: Washington State Office of Financial Management.

aAmount includes carry-over funds.

               Table 49: West Virginia's MSA Payment Allocations

                 Fiscal year Fiscal year 2005
Program              2004      expected Examples of programs receiving     
area           allocation    allocation or expected to receive allocations 

Health       $21,990,532   $19,549,408 Institutional facilities operations 
Tobacco       5,850,592          5,850,592 Tobacco education program, ABCA 
control                                         Tobacco Retailer Education 
                                                  Program                     
Unallocated   27,822,750   25,400,000                                      
Total        $55,663,874   $50,800,000                                     

       Source: West Virginia Department of Revenue, State Budget Office.

Wisconsin Wisconsin reported receiving $130,110,401 from MSA payments in
fiscal year 2004 and expects to receive $137,126,872 in fiscal year 2005.

                  Table 50: Wisconsin's MSA Payment Allocation

                   Fiscal year Fiscal year   
                               2005          
Program                2004      expected Examples of programs receiving   
area             allocation    allocation or expected to receive           
                                             allocations                      
Debt service   $130,110,401  $137,126,872 
on securitized                            
funds                                     
Total          $130,110,401  $137,126,872 

    Source: Badger Tobacco Asset Securitization Corporation. Source: Wyoming
                Department of Health, Substance Abuse Division.

                  Table 51: Wyoming's MSA Payment Allocations

               Fiscal year Fiscal year 2005
Program            2004       expected Examples of programs receiving      
area         allocation     allocation or expected to receive allocations  
General              $0      $125,000 Attorney General's Office-fees
purposes                
Health        7,305,151      7,305,151 Substance abuse treatment and       
                                          prevention services                 
Social        4,056,823      3,931,823 Adolescence services and drug court 
services                

Tobacco       4,232,450    4,232,450 Tobacco prevention, regional prenatal 
control                                        programs, community tobacco 
                                            prevention activities and tobacco 
                                                 cessation                    
Total        $15,594,424   $15,594,424                                     

Appendix V

GAO Survey on States' Allocations of Fiscal Years 2004 and 2005 Master
Settlement Agreement Payments

Appendix VI

                     GAO Contact and Staff Acknowledgments

Robert A. Robinson, 202-512-3841

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Pagano, and Stuart Ryba

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