Report: Tobacco settlement funds yield 8 to 1 ROI

jbrehm2, February 3, 2011 | View original publication

Report: Tobacco settlement funds yield 8 to 1 ROI

An economic impact report by one of the leading economists in the Midwest has found that tobacco settlement funds invested into biomedical research at Nebraska’s four leading research institutions has produced an 8 to 1 return.

The report was developed by Ernest Goss, MacAllister Chair and professor of economics at Creighton University and director of the Goss Institute in Denver.

It looked at tobacco settlement dollars invested in the Research Consortium made up of Boys Town National Research Hospital, Creighton University, the University of Nebraska-Lincoln and the University of Nebraska Medical Center. This year marks the 10th anniversary of the Nebraska Legislature’s decision to direct tobacco settlement money into biomedical research.

From 2002 through 2010, annual tobacco settlement deposits to the Research Consortium totaled $106 million. With tobacco money as a springboard during that nine-year period, stewardship by the consortium has garnered an additional $853 million in grants and gifts. Every dollar invested attracted an additional $8.

In addition to the high return on investment, other economic benefits of the funding included:
• Invested as “seed” funds to researchers who were awarded nearly $853 million in grants – 80.2 percent from federal funds and 19.8 percent from non-federal sources;
• Generated nearly $2.2 billion in sales/output for the state of Nebraska;
• Generated more than $98 million in state and local tax collections;
• Supported an average of 1,791 jobs with a total payroll of approximately $783.9 million;
• Improved earnings – average salaries and wages for the direct and indirect jobs supported was more than $45,000 per year, 22.8 percent higher than the state average;
• Impacted more than 266 of Omaha’s 274 industries – research spending supported 13.7 jobs, $1.1 million in wages and salaries and $7 million in sales in the real estate industry;
• Increased the attractiveness of the community and encouraged the startup and/or relocation of other businesses in the state.

In addition, scientific and research jobs increased 105.5 percent in Nebraska between 2002 and 2008 when similar job growth expanded by only 63.8 percent across the nation.

“This is a remarkable return on investment,” Goss said. “Nebraska should be proud of what has happened with this tobacco settlement money. It is truly making a difference in the state’s economy.”

Nebraska Tobacco Settlement Biomedical Research and Development Fund Timeline

November 1998 – Four largest U.S. tobacco companies agree to provide yearly payments to 46 states provided the states drop their Medicaid lawsuits against them and exempt the companies from private tort liability regarding harm caused by tobacco use.

2001 – Nebraska Legislative Bill 692 created the Nebraska Tobacco Settlement Biomedical Research Fund. Initially, about one-third of the annual return was set aside for biomedical research. In 2001, $10 million was set aside for this purpose.

2006 – The Unicameral increased the amount of tobacco settlement funds distribution to $12 million.

2008 – The Unicameral increased the amount of tobacco settlement funds distribution to $14 million.