Alaska is making the best use of cigarette taxes and Big Tobacco settlement money distributed to states in the decade after authorities negotiated a deal with the companies over smoking-related health costs incurred by the states, according to a new report released today by a coalition of advocacy groups. South Carolina ranks the worst.

States have received $203.5 billion in tobacco revenue since the Master Settlement Agreement between states’ attorneys general and cigarette makers in 1998. The agreement required the companies to reimburse states for the money they spent treating smoking-related illnesses. It didn’t stipulate how states should spend the funds, but many attorneys general and public health officials said they’d use it and revenue from cigarette taxes to discourage children from smoking. But just over 3 percent of that money – about $65 billion – has been spent on tobacco prevention and treatment programs, according to the report.

This year, Alaska is spending 86 percent of what the Centers for Disease Control and Prevention (CDC) recommends it should, compared to 1.6 percent by South Carolina, the report says. The CDC guidelines are different for each state, based on its population and percentage of smokers. The complete rankings can be found here.

Most of the money has been spent plugging budget holes, says Joel Spivak, a spokesman for the Campaign for Tobacco-Free Kids, one of the groups that worked on the report.

Under the terms of the agreement, states “are not bound by any formula to spend anything if they don’t want to and a lot of people are shocked by that: Wasn’t the purpose of this settlement to indemnify states for all the sick smokers?” Spivak says. “The answer is yes but, at the time the settlement was reached, the governors and attorneys general said they didn’t want to be bound by any formula. The CDC guidelines were just that: guidelines. In effect, they [the AGs and governors] said, ‘trust us do the right thing,’ and they haven’t.”

U.S. smoking rates fell to just below 20 percent this year, the CDC reported last week. But it kills nearly half a million people annually through cancer and heart disease.

The report calls on Congress to pass legislation that would require the Food and Drug Administration to regulate the manufacturing and marketing of tobacco products. The legislation was approved by the House in July by a 326 to 102 margin, and it has wide support in the Senate.

Other organizations that contributed to the report were the American Heart Association, American Cancer Society Cancer Action Network, American Lung Association and Robert Wood Johnson Foundation.

Image by iStockphoto/Ivan Mateev