Corbett budget would shift, not deplete, tobacco fund

    Gov. Tom Corbett’s budget proposal includes a number of one-time revenue sources, but the plan for a special fund — that you might never have heard of — isn’t such a departure from Pennsylvania budgets of the past.

    Corbett wants to transfer $225 million in cash and investments from the Tobacco Settlement Fund and give it to the Public School Employees’ Retirement System (PSERS).


    Democrats criticized transferring its funds elsewhere as a budget gimmick, but the Tobacco Settlement Fund has been an irresistible source of in-a-pinch revenue in past years. Budget documents show the 2009 state spending plan, passed under former Democratic Gov. Ed Rendell, included $150 million from the fund to balance the books. In 2010, another Rendell budget used $250 million from the fund for the state’s main budget, and $121 million went to offset the state’s payment to PSERS.

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    The Tobacco Settlement Fund is the 15-year old repository of a 25-year settlement with four major tobacco companies. The money it receives, which is also invested, has been used for smoking cessation, public health, medical research, and long-term elderly care programs. Administration officials say that won’t change with the transfer of its assets to PSERS.

    When asked how the decision was made to shift the assets to the ownership of PSERS, Budget Secretary Charles Zogby said that, of the two pension funds, PSERS is in the “greatest need.”

    “We’re looking at a substantial increase in costs but for a reform in our pension system,” said Zogby. “PSERS represents about 70 percent of the overall challenge.”

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