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The Associated Press May 2, 2011, 4:38PM ET

2 tobacco settlement funds end in NC House budget

House Republicans want to abolish two trust funds that receive half of North Carolina's share of the national tobacco settlement and intercept money from the third -- a direction health and economic development advocates contend will raise youth smoking rates and discourage economic recovery.

The GOP-penned state budget proposal heading to floor debate Tuesday would eliminate by Dec. 31 the Health and Wellness Trust Fund and the Tobacco Trust Fund. The two funds have cumulatively received more than $900 million from the 1998 tobacco settlement with 46 states, including about $69 million this year.

The Golden LEAF Foundation, which gets the other half of the state's share and gives out grants, scholarships and economic sweeteners to help small towns and others once dependent on tobacco, wouldn't receive its $68 million annual payment for the next two years. It would keep operating and retain $600 million in assets it now holds.

The General Assembly has required the tobacco and health trust funds to give up about half of their annual over the years for university building construction, cancer research and filling shortfalls in the state's general operating budget. The health trust fund has offered grants to boost anti-smoking and anti-obesity efforts and the trust fund to help farmers switch to different crops since they were created in 1999.

The two now have so little money without strings attached it doesn't make sense to keep in place the funds or the commissions that operate them, said House Majority Leader Paul Stam, R-Wake.

Democratic Gov. Beverly Perdue is likely to take issue with any final budget bill she'll be asked to sign into law that contain the trust fund changes. Perdue was chairwoman of the Health and Wellness Trust Fund while she was lieutenant governor.

"This proposal rips away tools that the state uses to create jobs and protect the health of its citizens," spokesman Mark Johnson said.

About $15 million still would be set aside in the budget proposal next year for health and tobacco industry grants and programs overseen by the Board of Agriculture and Division of Public Health. But there's no guarantee there will be additional money for these efforts in future years, said Dr. Laura Gerald, executive director of the Health and Wellness Trust Fund Commission.

"We are shocked that the House would propose to abolish the (fund) given our successful track record," Gerald said. "Even in these tough economic times, we cannot afford to dismantle the structure that we have in place for local communities."

Anti-smoking advocates point out smoking rates among high school students have dropped by a third and middle-schoolers by half when commission's tobacco prevention programs began in 2003. The trust fund has funded the Tobacco Reality Unfiltered, or "TRU" television ad campaign and an effort to make the state's colleges and universities 100 percent tobacco-free.

The Tobacco Use Prevention Coalition of Guilford County benefits from $250,000 in annual grants that helps hire two staff workers to coordinate teen and college smoking prevention programs. The college program promotes a smoking cessation hotline and works at 30 Piedmont colleges from Duke University to Wake Forest University, coalition coordinator Mary Gillett said.

"The Health and Wellness Trust Fund has a successful track record in reducing smoking rates among teenagers," said Pam Seamans with the North Carolina Alliance for Health, adding that without the fund "we would run the risk of seeing the teen smoking rates go straight back up."

Stam said the anti-smoking and other efforts at reducing chronic health problems can be performed by the state health department. The commission has 14 employees to manage the $17 million it had to work with this year.

"The over-administration was in the Health and Wellness Trust Fund," Stam said. Gerald said the fund keeps its operational expenses at 2.5 percent.

The Tobacco Trust Fund Commission, which only has three employees, was supposed to have $10 million in grant money available this year. But the General Assembly took $5 million of it for last year's budget and Perdue listed the other $5 million as money she may need to help pay the state's bills this spring, said Jeff Jennings, the commission's program officer.

Stam and others had considered earlier this year trying to abolish the Golden LEAF Foundation, which been criticized frequently over the years by Republicans who question its efficacy and call its board members too politically connected.

This budget would mark the first time funds heading for Golden LEAF would be diverted. That would set a bad precedent after more than a decade in which lawmakers refused to touch the foundation money, Foundation President Dan Gerlach said.

"If the General Assembly diverts this money away, it will be gone forever," he said.

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