However, in 2000, the economy began to enter recession when the “dot.com” bubble burst and stock market indices fell rapidly. On 11 September 2001, following the terrorist attacks in New York and Washington, D.C., the economy was further hampered by the decline in tourism and air traffic. The economy began to emerge from recession in 2003, but states that had cut taxes a few years earlier found that they did not have sufficient revenues to meet the high demand in all programs. Tax increases in response would be politically dangerous for politicians who have won or created a position by promising tax cuts. Inevitably, the temptation to treat the MSA`s revenues as a “cookie pot” to be exploited for budget deficits was irresistible. In addition, there have been growing tensions in tobacco-producing states between tobacco control goals and rural economic development, with some arguing that zealous efforts to reduce tobacco use would harm the tobacco industry, and thus employment and incomes in rural areas.13,14 In an overview of congressional and state issues, one analyst noted: that the MSA “does not address the issue of state legislative ownership of settlement funds. it does not in any way determine or restrict the way in which States spend the funds. “11 Since the MSA did not require states to spend revenue on specific activities, the way was clear for states to spread the MSA`s revenues across their budgets according to their specific political and economic situation.15 Next year, the major cigarette manufacturers reached an agreement with the tobacco-producing states to compensate tobacco producers for the losses they would suffer in reason for the increase in cigarette prices as a result of previous comparisons. This agreement, dubbed the “Phase II” regulation, created the National Trust Fund for the Settlement of Tobacco Producers. Tobacco producers and quota holders in the 14 states that grow smoking tobacco and root tobacco used to make cigarettes are entitled to trust fund payments.
The states are Alabama, Florida, Georgia, Indiana, Kentucky, Maryland, Missouri, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Virginia and West Virginia. Faced with the prospect of defending multiple actions on a national scale, the majors sought recourse to Congress, mainly in the form of a national legislative arrangement.  In June 1997, the National Association of Attorneys General and the Majors jointly requested a comprehensive resolution in Congress. On June 20, 1997, Mississippi Attorney General Michael Moore and a group of other attorneys general announced the details of the settlement. The settlement included a $365.5 billion payment by companies, approval of possible regulation by the Food and Drug Administration in certain circumstances, and stronger warnings and advertising restrictions. In return, businesses would be exempt from class actions and litigation fees would be capped. :422 This fact sheet provides answers to several frequently asked questions about the largest civil settlement in U.S. history, the Framework Tobacco Settlement Agreement (SSM). In the ten years since the settlement, many state and local governments have chosen to sell so-called tobacco bonds. They are a form of securitization. In many cases, bonds allow state and local governments to shift the risk of lower future payments from framework resolution agreements to bondholders.
In some cases, however, the bonds are backed by secondary promises from government or local revenues, which some see as a perverse incentive to support the tobacco industry they now depend on for future payments against that debt.  The Framework Settlement Agreement (SSM) and the individual settlements terminated the prosecutions brought by the Attorneys General […].