A new, large, flexible, and perpetual source of State and local funding which might be used to support homeless activities is a massive settlement of tobacco litigation.^[6]  On November 16, 1998 the attorneys general of most States (including California) and the major U.S. tobacco companies settled lawsuits brought by states against the tobacco industry. Under the settlement agreement the tobacco industry will make payments to the States in perpetuity. The funds will then be divided by the States 50/50 between State and local governments. In California the local funding will go to each of California’s 58 counties and four cities (including San Francisco and San Jose) which had separately sued the tobacco companies. Ninety percent (90%) of the local half of the California tobacco settlement money will be distributed to counties based on population.^[7] The remaining 10% will be split equally among San Francisco, San Jose, Los Angeles, and San Diego. These funds are in addition to and independent of funds from the tobacco industry which local governments are receiving pursuant to Proposition 10.

There is a logical connection between tobacco settlement money and health issues for the homeless, particularly related to lung cancer and other tobacco-related illness programs. The relationship is less strong between the tobacco funds and other homeless issues.

Legal barriers to securing tobacco settlement funding for homeless use are minimal.  There are no restrictions on use of the funds either in the settlement or the Memorandum of Understanding (MOU) between the California attorney general and local jurisdictions. The law permits some or even all of the tobacco settlement funds to be earmarked for homeless programs.

However, competition for the funds is intense. The current State budget contemplates depositing the State portion of the tobacco settlement funding into the State general fund. While there are still a number of bills in the legislature that would dedicate the State’s share to specific purposes (mostly health care), the Governor has been resistant to earmarking the money.^[8] Thus any effort to secure State-level homeless funds for regional homeless activities would compete directly with the Governor and with other groups already lobbying for a portion of the funds. Since years of tobacco litigation have focused on reimbursing State and local government for health-related costs such as Medi-Cal payments due to tobacco-related illness, there are strong pressures to use most of the money for health-related uses.

Bay Area jurisdictions are currently deciding how to use tobacco settlement funding. San Francisco intends to use $1 million of their portion of the settlement for tobacco control programs and the rest to help rebuild Laguna Honda a facility which provides both housing and medical services to the indigent elderly and chronically ill or disabled. The supervisors will seek voter approval for the Laguna Honda funding from San Francisco voters in Fall, 1999. While use of the funds for Laguna Honda does not fit directly within the definitions of regional homeless projects that BARI has developed, the funding will provide shelter and medical services to indigent people. Many of those served by Laguna Honda would otherwise be competing for space in homeless shelters or making demands on organizations which provide health and other social services to homeless people.

Phone interviews with people in other Bay Area counties indicated that critical decisions regarding use of the funds have not yet been made, but will be made soon.^[9]

Tobacco settlement funds represent a large amount of money. The California Office of the Legislative Analyst estimates payments to counties in the BARI region plus the city of San Jose will total about $125 a year—over $3 billion over the next twenty-five years.^[10]

The California legislative analyst’s projections for the 25 year total tobacco settlement funding for the BARI region are indicated in table 2 below. The annual average amount of funding was computed by dividing the 25 year total by 25. The actual amount received will vary from year to year.
 

Source: Office of the California Legislative Analyst, The Tobacco Settlement: What Will It Mean for California (Office of the Legislative Analyst, Sacramento, January 14, 1999), Appendix I, pp. 15 16.

There is some uncertainty related to the date tobacco settlement funds will become available.^[11] The current California budget assumes that this will occur within this fiscal year. Some counties project the funds will be available next fiscal year.

The tobacco funding will vary over time and there is uncertainty about the tobacco settlement funding stream in the long run. While the Office of the California Legislative Analyst considers it is relatively certain that the State will receive the projected amounts of revenues from the settlement during the next three years, it is not certain how much tobacco settlement money will be available for Bay Area and other local governments in the long run.^[12] the amount of payments per year will not be constant. Initial payments are projected to be lower than the 25 year average, to peak in 2003, decline modestly, and rise again after 2018. The settlement settled only pending State and participating city litigation. A multi-billion dollar class action suit decided at the trial court level in Florida in July, 1999 (The Engle case) does not directly affect the State settlement. The settlement did not prohibit additional suits by individuals and classes. In September, 1999 the federal government filed another massive lawsuit against the tobacco industry seeking reimbursement of medicare, VA, and other funds spent on tobacco-related health care costs.

It appears probable that the State portion of tobacco settlement funds will go into the State general fund. If any of this funding is earmarked it will be almost certainly be to reimburse the state for tobacco-related medical costs, tobacco education, and tobacco control programs. A campaign to secure State-level tobacco settlement funds for homeless programs in the BARI region does not appear to be justified.

Pursuing local tobacco settlement funds for homeless programs appears more promising. Tobacco settlement funding at the county (and San Jose city) level is:
 

1. a very large amount;
2. new money which has not been fully committed;
3. perpetual, and;
4. unrestricted.

1. Many well organized claimants at the local (county and city) level have been involved in the litigation, have carefully followed the settlement, and are already in line to claim the funds;
2. While there are no legal restrictions on use of the funds the history and politics of the litigation make it probable that most of the local share of tobacco settlement funds will go to county-level health purposes which might or might not relate to homelessness. Some counties may decide to allocate some tobacco settlement funds to transportation, housing, or other uses they consider priorities to them.

Deciding whether or not to pursue tobacco settlement funds for regional homeless programs is time critical. Unlike other potential funding sources discussed in this report the window of opportunity may close as funds are committed within the next year.

Homeless organizations, including BARI, should consider immediate campaign(s) to secure some local tobacco settlement funds for homeless programs. Consistent with its role as a source of information for homeless organizations in the region, BARI might allocate staff resources to carefully monitor the tobacco settlement and educate homeless service providers about opportunities it may afford. BARI should look to tobacco settlement funds to support existing and new cross-jurisdictional and regional BARI projects.

Since prospects are best to secure funding related to medical programs, homeless health organizations should pay particular attention to tobacco settlement funds. BARI might identify a lead agency with expertise in homeless health issues, experienced in regional collaboration, and with the capacity to organize and advocate effectively to integrate homeless organizations into the competition for tobacco settlement funds.

Centralized BARI support might permit a staff person to master the intricacies of the settlement, monitor it continuously, and help organize a collaborative approach to securing funding from this source for appropriate homeless programs, most likely in the homeless health area.