Earlier this summer, the state’s nicotine prevention and cessation efforts were halted when money the state gets from a settlement with tobacco companies fell millions short of what the Department of Health had projected.
Lawmakers overseeing the funds questioned the department about the issue and got a fiscal update Wednesday and said they plan to reintroduce legislation to give nicotine prevention work in New Mexico the stability it needs.
The settlement funds that came in last fiscal year were nearly $8 million short of what the health department expected, which Sec. Patrick Allen said came as a surprise to him. He told lawmakers that, as a short-term solution, he instructed the Nicotine Use Prevention and Control Program to not spend down all of last year’s budget.
“To give ourselves at least a little bit of a buffer against potential shortfalls,” he said.
While the department previously told KUNM that the settlement funds fell short because tobacco sales were down, Eric Chenier with the Legislative Finance Committee told lawmakers this week that wasn’t the whole story.
“It’s related to arbitration,” he said. “Basically every year the state has to fight this out with the tobacco companies as far as how much we’re going to receive.”
Lawmakers received a closed-door briefing on the legal matter from the Attorney General’s Office later in the meeting.
Sec. Allen said the “most straightforward” solution to resolving the variability of the funding long term would be to pass a version of a bill that Gov. Michelle Lujan Grisham pocket vetoed earlier this year.
That bill would have protected the Tobacco Permanent Fund where the settlement money goes. The state can use the fund as a backstop during lean financial years. That happened in 2016 when the state took $109 million dollars out, according to Chenier.
“And we have never paid it back,” he said. “We paid back a little bit, but it has not gotten back to where it had been.”
The vetoed bill would also have allowed the funds to be more aggressively invested and would have included a one-time $58 million appropriation. Had that happened, Chenier said the fund, which currently sits at around $340 million, would likely be above $400 million today — an important threshold.
When the fund gets that big, state law allows DOH to pull out a steady 4.7% of its total for the prevention and cessation programs, rather than just relying on however much comes in from the tobacco companies each year.
“And voilà, we have a solid revenue source that doesn’t go up and down,” he said.
The state allocated about $5.6 million to the programs last fiscal year, according to the Centers for Disease Control and Prevention. That earned New Mexico an F grade from the agency for funding the work at about 30% of its recommended level.
Sen. Martin Hickey (D – Bernalillo), who sponsored the vetoed bill that would have helped shore up the fund, said he’d like to see the state put $30 million a year towards the effort by 2025.
“This is a scourge that’s pretty easy and pretty cheap to deal with, but we don’t do it,” he said.
He said, unlike in the private sector, state government is allowed to continually kick these kinds of cans down the road — even when work is being halted and nicotine users are both wracking up healthcare costs and dying.
“In business, we would not be allowed to not do this,” he said. “We would be fired, because there’s accountability.”
Rep. Liz Thompson (D – Bernalillo) said she and other committee members want to again pursue legislation to change the fiscal outlook of nicotine prevention and cessation in the state, and work to get the governor on board to sign it this time. She said the proposal should include paying the tobacco settlement fund back as well as preventing the state from dipping into it for anything other than the public health work.
“I’m just sending out the warning flare to folks who will lose their minds when they hear this that we want to get it back to where it should have been and we want to protect it,” she said.
She encouraged the LFC to work with the committee in the interim to help craft that legislation.