The Arkansas tobacco settlement funds are the state’s share of annual payments from major tobacco manufacturers under the 1998 Master Settlement Agreement, money that Arkansas voters locked into health-related spending through Initiated Act 1 of 2000. The payments flow into the Tobacco Settlement Program Fund and are split each July 1 among four accounts: Medicaid Expansion, the Arkansas Biosciences Institute, Tobacco Prevention and Cessation, and Targeted State Needs. A nine-member commission monitors how each account spends its share. Arkansas has collected more than $1.4 billion since payments began in 2001.
Where the Money Comes From
In 1998, 46 states (including Arkansas), the District of Columbia, five U.S. territories, and four major tobacco manufacturers signed the Master Settlement Agreement to resolve state lawsuits over Medicaid and healthcare costs tied to smoking.1National Association of Attorneys General. The Master Settlement Agreement In exchange for releasing their claims, the states secured perpetual annual payments.
Arkansas does not receive a flat amount. Payments are adjusted upward each year by the greater of inflation or three percent, and adjusted downward based on cigarette shipment volume compared to a 1997 baseline. Decades of declining smoking have steadily pulled the volume side down. A separate Non-Participating Manufacturer adjustment can reduce payments further if the state fails to enforce escrow requirements on tobacco companies that did not sign the MSA.
The net result is a payment that fluctuates year to year. Arkansas received roughly $60.9 million in 2022 and about $47 million in a more recent disbursement.2Arkansas Attorney General. Attorney General Griffin Announces Receipt of $47 Million in Tobacco Settlement Disbursement Cumulative receipts since 2001 now exceed $1.4 billion.
How the Funds Are Divided
Because voters created the structure through an initiated act, the division of money is set by statute rather than left to the legislature. The State Board of Finance manages the Tobacco Settlement Program Fund and distributes the proceeds each July 1 at fixed percentages:3Justia. Arkansas Code 19-12-108 – Creation and Administration of Tobacco Settlement Program Fund
- Medicaid Expansion Program Account: 34.2 percent
- Prevention and Cessation Program Account: up to 27.2 percent, funded through loans from the Budget Stabilization Trust Fund
- Arkansas Biosciences Institute Program Account: 22.8 percent
- Targeted State Needs Program Account: 15.8 percent
Money left in the Medicaid Expansion, Biosciences Institute, or Targeted State Needs accounts at the end of a two-year budget cycle is swept back and redistributed at slightly different ratios: 43.6 percent to Medicaid Expansion, 33.3 percent to the Biosciences Institute, and 23.1 percent to Targeted State Needs. The statute also bars settlement money from replacing or displacing funds already available to the programs it supports.
What Each Account Funds
Medicaid Expansion
The largest share, at 34.2 percent, goes to a Medicaid Expansion account administered by the Department of Human Services. This is a distinct program created by Initiated Act 1, not the broader Arkansas Medicaid program or the ACA-related expansion.4Justia. Arkansas Code 19-12-112 – Creation of Medicaid Expansion Program Account It has historically funded expanded benefits for low-income small-business employees, pregnant women above the standard Medicaid income threshold, Medicare beneficiaries needing supplemental coverage, and hospital care for working-age Medicaid recipients.
Arkansas Biosciences Institute
The Institute’s 22.8 percent share translates to roughly $10 million to $12 million a year in settlement funding.5Arkansas State Senate. Arkansas Biosciences Institute Surpasses Research Funding Milestone It operates as a research consortium across five member institutions: the University of Arkansas for Medical Sciences, Arkansas Children’s Hospital Research Institute, Arkansas State University, the University of Arkansas at Fayetteville, and the University of Arkansas Division of Agriculture.6Justia. Arkansas Code 19-12-111 – Creation of Arkansas Biosciences Institute Program Account Statutory research priorities include tobacco-related disease, agricultural research with medical implications, bioengineering, and nutrition and cancer prevention. The settlement money works as seed funding that member institutions use to compete for larger federal and private grants; the Institute has surpassed $1 billion in cumulative research funding, most of it from external sources.
Tobacco Prevention and Cessation
The Prevention and Cessation account, up to 27.2 percent of proceeds, funds the state’s effort to reduce tobacco use. The Arkansas Department of Health runs the program using strategies drawn from the CDC’s Best Practices for Comprehensive Tobacco Control.7Arkansas Department of Health. Tobacco Prevention and Cessation The work covers youth prevention, adult cessation services, secondhand smoke reduction, and tobacco-use disparities in the hardest-hit communities.
Youth-facing work includes Project Prevent, a coalition with chapters statewide that focuses on social norms around nicotine and e-cigarettes.8HHS TAGGS. Arkansas Tobacco Prevention and Cessation Program/Be Well Arkansas For adults, the department operates Be Well Arkansas, a cessation call center offering phone counseling and nicotine replacement therapy. It is the only state-run quitline in the country operated directly by a department of health rather than a contracted vendor.
Targeted State Needs
The Targeted State Needs account, at 15.8 percent, supports three initiatives focused on populations with specific health disparities:9Arkansas Department of Health. Arkansas Tobacco Settlement Commission
- The UAMS Centers on Aging, which provide interdisciplinary clinical care and education for older Arkansans and their families.
- The Fay W. Boozman College of Public Health at UAMS, which trains public health professionals and researches the causes, prevention, and treatment of health problems affecting Arkansans.
- The Arkansas Minority Health Initiative, created by Initiated Act 1 to screen, monitor, and treat hypertension, strokes, and other conditions that disproportionately affect minority communities, and to maintain educational programs and a health data database.
Who Oversees the Spending
The Arkansas Tobacco Settlement Commission, a nine-member body created by the same voter-approved act, monitors how the four accounts spend their allocations. Five seats go to state agency heads or their designees: the directors of the Arkansas Economic Development Commission, the Department of Elementary and Secondary Education, the Division of Higher Education, the Department of Human Services, and the Department of Health.10Justia. Arkansas Code 19-12-117 – Establishment of the Arkansas Tobacco Settlement Commission Two healthcare professionals are appointed by the Senate President Pro Tempore and the Speaker of the House, and two citizens are appointed by the Governor and the Attorney General.
The Commission meets at least quarterly, files quarterly progress reports with the legislative public health committees, and hires an independent evaluator to produce a biennial report before each regular legislative session, along with its own recommendation on whether to continue funding each program. Its operating budget comes from investment earnings on the settlement funds rather than from the program accounts.11Arkansas Department of Finance and Administration. Arkansas Tobacco Settlement Commission Budget Request
A Prior Claim on the Revenue
Not every dollar of the annual payment reaches the program accounts. Arkansas issued Tobacco Settlement Revenue Bonds in 2001, backed by a portion of future settlement payments, and state law allows the Arkansas Development Finance Authority to issue additional bonds for capital projects when debt service can be met from the Tobacco Settlement Debt Service Fund.12Justia. Arkansas Code 19-12-206 – Issuance of Additional Tobacco Settlement Revenue Bonds Debt service comes off the top before money reaches the four accounts. Because the underlying payments shrink as smoking rates fall, the room to issue new debt against this revenue continues to narrow.