Feature Article

Since the Master Settlement Agreement (MSA) in 1998, the tobacco industry has been paying billions of dollars to state governments to compensate the states for medical costs caused by cigarette use.  Some if this money has gone towards tobacco prevention, although nationwide only 2.6% of the settlement funds are being spent on tobacco control efforts.  In Ohio, some of the settlement dollars have been used to fund the Ohio Tobacco Prevention Foundation and its programs (including stand, the Ohio Tobacco Quit Line, and the Tobacco Public Policy Center).  At the same time that the tobacco companies have been making payments to the states, however, states have been investing their own funds in tobacco industry stocks.

Seeing the contradiction between working to reduce tobacco use and investing in tobacco stocks, some states have partially or totally divested their tobacco holdings.  The first public pension fund to sell a substantial amount of tobacco stock was the Kentucky Teachers' Retirement System, which sold more than half of its tobacco holdings in 1996.  Massachusetts followed with a more comprehensive divestment effort.  It enacted legislation that required the sale of all current tobacco stocks in pension funds and prohibited all future investments in them.  Pension funds in New York and California have since barred any new tobacco investments.  In all, at least six states, ten major municipalities, and fifteen colleges and universities have created tobacco divestment polices.  However, neither the universities nor the legislature in Ohio have acted on this issue.

A look through the Ohio Public Employees Retirement System (OPERS) 2005 Annual Financial Report reveals that Ohio has invested $390 million in Altria Group, which owns Philip Morris.  In addition, the State Teachers Retirement System holds $273 million in Altria stock, and $76 million in Japan Tobacco. Other Ohio retirement funds, such as the Highway Patrol Retirement System, also hold smaller amounts of investments in tobacco stocks. One troubling issue is that the Ohio Tobacco Prevention Foundation's (OTPF) employee salaries are subject to OPERS contribution, despite an OTPF policy that bars tobacco investments.

The legislature and the pension funds boards should act now to stop investing in an industry whose products cause addiction, death and suffering.  Throughout state divestment efforts, the tobacco industry has rebutted the responsible social policy argument for divestment by framing the issue as one of responsible fiscal policy. Sadly, the high share returns of the tobacco industry have not helped the social policy advocates. However, recent studies have shown that tobacco-free investment funds have been just as, if not more, successful than those funds that invest in tobacco stocks.  The State of Ohio should not invest its money in the tobacco industry when it is working so hard to reduce its citizens' dependence on that industry's products.