Texas has collected more than $15.8 billion from cigarette makers since settling its landmark tobacco lawsuit in early 1998, a legal win still ranked as the largest single-plaintiff civil settlement in history. Yet today, the state budgets just $6.08 million a year for tobacco prevention programs — a figure public health advocates say is nowhere near enough to counter an industry that keeps profiting off Texans' addiction.
The lawsuit that produced that windfall was filed in federal court in Texarkana on March 28, 1996, according to Dallas News. Then-Attorney General Dan Morales accused cigarette makers of fraud, deceptive trade practices, conspiracy and violations of federal racketeering laws, initially seeking $8.6 billion before raising the demand to $13 billion. Morales hired outside plaintiff attorneys John Eddie Williams, Walter Umphrey, John O'Quinn, Harold Nix and Wayne Reaud, whose firms committed $10 million upfront to fund the litigation in exchange for 15% of any recovery.
Morales publicly framed the case around public health, saying the litigation would reduce teen smoking, bring billions of dollars to Texas to fight smoking and improve healthcare, and force cigarette companies to make less dangerous and addictive products, per Dallas News. On January 16, 1998, in Austin, he announced a $15.32 billion settlement for the state. John Eddie Williams called it an extraordinary outcome for Texas, according to the same report.
A Landmark Deal With a National Ripple Effect
Texas was one of four pioneer states — alongside Mississippi, Florida and Minnesota — that reached individual settlements with tobacco companies before the remaining 46 states signed the Master Settlement Agreement in November 1998 for $206 billion, according to the Campaign for Tobacco-Free Kids. Mississippi settled for $3.4 billion in July 1997 and Florida for $11.3 billion that September; combined, the four pioneer states collected $37.2 billion, while the other 46 states received an additional $171.2 billion, Dallas News reports. The litigation also gave the Texas team nationwide subpoena power, a tool former Mississippi Attorney General Michael Moore said made the case the most important health-related litigation in history, per the same account.
The settlement's public-health impact showed up quickly in some ways. Cigarette use overall declined substantially afterward, and teen smoking in Texas dropped dramatically, Dallas News notes. Philip Morris ended its Marlboro Man advertising and R.J. Reynolds retired Joe Camel, while the litigation also limited how cigarette makers and distributors could market to young people and pushed the retail cost of cigarettes up by more than $1.50 per pack. Separately, Liggett Group had already settled with state attorneys general in March 1996, agreeing to pay roughly $50 million annually and to testify that its products were dangerous, addictive and targeted teenagers.
Where the Billions Actually Went
But cigarettes remain just as addictive and dangerous as before, Dallas News reports, and the money has mostly flowed somewhere other than public health programs. Texas collected $430.7 million from tobacco companies in 2025 alone and will keep collecting hundreds of millions annually for decades, yet the Texas Legislature put nearly all of that settlement money into the state's general budget rather than dedicated health initiatives. Texas trial lawyers, meanwhile, received $2.2 billion in legal fees over 25 years, collecting their final litigation payment in 2025.
State law did carve out one health-specific channel: the Tobacco Settlement Permanent Trust Account, managed by the Texas Comptroller, distributes annual investment earnings to local health departments, hospital districts and public hospitals to offset indigent care costs, according to the Texas Department of State Health Services. Still, that structure functions more as a local hospital safety net and general revenue source than as a dedicated public-health intervention engine, the agency's own program materials indicate. Of the settlement's proceeds, only $6.1 million has gone toward antismoking initiatives — representing less than one-tenth of one percent of total Texas tobacco settlement payments, per Dallas News.
Prevention Funding Falls Far Short of Federal Benchmarks
That $6.1 million figure lines up closely with current state budgeting: for Fiscal Year 2026, Texas allocated $6.08 million for tobacco control programs, just 3.6% of the $264.1 million the Centers for Disease Control and Prevention recommends for the state, according to the American Lung Association. That gap is stark next to the toll tobacco takes on Texans' health — commercial tobacco use drives an estimated $10.29 billion in direct annual health care costs statewide, with about $2.1 billion of that paid directly through the state's Medicaid program, per the American Cancer Society Cancer Action Network.
Texas also collects roughly $1.48 billion annually from its $1.41-per-pack cigarette excise tax, a rate unchanged since 2007, the state's own figures show. Add that to settlement payments, and Texas is bringing in close to $1.9 billion a year from tobacco-related revenue while directing less than half a percent of it toward prevention. Nationally, the mismatch looks even starker: tobacco manufacturers spend an estimated $8.6 billion annually on advertising and promotion, outspending combined state prevention budgets across the country by nearly 12 to 1, according to the Campaign for Tobacco-Free Kids.
Vaping Fills the Gap Left by Falling Cigarette Use
Even as youth cigarette smoking in Texas has fallen below 5%, e-cigarette use among high schoolers has held near 18.8%, and 13.1% of Texas adults still smoked as of 2024, according to the American Cancer Society Cancer Action Network. Rather than boosting prevention spending, state lawmakers have leaned on regulation to respond — recent sessions produced Senate Bills 1313, 1316 and 2024, which ban e-cigarette sales within 1,000 feet of schools or churches and prohibit marketing designed to appeal to children or disguise vaping devices as office supplies, per the American Lung Association.
Federal support for tobacco control hasn't offered much of a backstop either. Public health initiatives faced uncertainty through 2025 and 2026 amid administrative reorganizations and proposed cuts to the CDC's Office on Smoking and Health, prompting national coalitions to press Congress to preserve federal tobacco control grants, the Campaign for Tobacco-Free Kids reports.
The Prosecutor Who Went to Prison
The case's legal legacy carries its own dark chapter. Dan Morales, the attorney general who filed the original racketeering lawsuit in 1996 and later appointed Harry Potter as general supervisor of the litigation, was found to have falsified contract agreements in an attempt to funnel hundreds of millions of dollars from the settlement to a Houston lawyer friend and former law partner. He went to federal prison in 2003 to serve a four-year sentence after the scheme unraveled, according to Dallas News. A separate account from Prison Legal News, drawing on Washington Post reporting, adds that Morales secretly backdated government contracts and forged public records in an effort to steer $520 million in legal fees to that attorney, Marc Murr, who performed little to no work on the underlying lawsuit.
Three decades after Texas first filed suit in Texarkana, the settlement stands as both a public-health milestone and a cautionary tale about follow-through. The state extracted a historic sum from an industry it accused of fraud and racketeering, curbed marketing to kids and watched teen cigarette use plunge — but as vaping fills the void and Medicaid absorbs billions in smoking-related costs each year, prevention funding remains, by the state's own numbers, a rounding error against the scale of the problem.
-4.webp?w=160&h=400&fit=crop&crop=edges)