Can the Oklahoma Legislature direct how TSET (Tobacco Settlement Endowment Trust) money is spent, and can TSET money be used for Medicaid?

Plain-English summary

The Legislative Office of Fiscal Transparency asked three questions about TSET (the Tobacco Settlement Endowment Trust Fund created by Article X, § 40 of the Oklahoma Constitution after voters approved State Question 692 in 2000):

1. Can the Legislature authorize TSET money to be spent on uses not listed in the Constitution? No.
2. Can the Legislature express a preference or recommendation for how TSET money should be spent? Yes, but the recommendation is non-binding.
3. Does Medicaid count as a permissible TSET purpose? Yes.

The constitutional structure puts the Board of Directors in charge of specific TSET expenditures. Article X, § 40(F) reads "the Board of Directors may expend the amount of earnings which actually accrued to the trust fund" and "[t]he Board shall direct specific expenditures to be made for the purposes specified in subsection E." The AG reads this as an exclusive grant: "[t]he positive delegation of power by the Constitution to the Board of Directors implies a negation of its exercise by any other officer or department" (quoting the 2007 OK AG 30 opinion the AG explicitly reaffirms).

The Legislature retains the broad authority of Article V, § 36 to legislate on any rightful subject. So it can pass legislation expressing a preference about how the Board should spend TSET money. But because the constitutional power lies with the Board, those preferences carry no legal force. Similarly, if the Legislature tries to declare in a statute that a particular use is "constitutionally permitted," that declaration does not bind the courts. The Oklahoma Supreme Court remains the final interpreter.

Medicaid easily fits within the permissible purposes in § 40(E)(3) ("[p]rograms designed to maintain or improve the health of Oklahomans or to enhance the provision of health care services to Oklahomans, with particular emphasis on such programs for children"). Medicaid is a federal-state program providing medical assistance to low-income Oklahomans, including children under 19, who are presumptively eligible. The MSA itself was designed "to further the Settling States' policies regarding public health," so directing TSET money to Medicaid lines up with both the constitutional purpose and the original settlement.

What this means for you

If you sit on the TSET Board of Directors

You retain exclusive authority over specific TSET expenditures. The opinion is your strongest defense against any legislative attempt to direct or restrict your spending. You should:

• Treat any legislative direction or earmark of TSET funds as advisory, and document your independent decision-making in board minutes when adopting (or declining) a legislative recommendation.
• Continue to interpret § 40(E) purposes as broad. Medicaid funding is now firmly inside the lane.
• Maintain your own constitutional analysis when considering new programs. A statute calling something "TSET-permissible" is not the final word; the courts are.

If you are an Oklahoma legislator

You can:

• Pass non-binding sense-of-the-Legislature resolutions or aspirational statutes recommending TSET fund directions.
• Pass implementation legislation under § 40(G) that operationalizes the constitutional structure (administration, accounting, reporting).
• Pursue a constitutional amendment under Article XXIV, § 1 if you want to change who controls TSET expenditures.

You cannot:

• Pass legislation that purports to "authorize" or "approve" TSET expenditures for new purposes.
• Force the TSET Board to fund a specific program.
• Override the Board's decisions through appropriations bills.

If you administer Medicaid (Oklahoma Health Care Authority)

The opinion is helpful but not a guarantee of funding. It says Medicaid spending is a permissible TSET use, not that the Board must fund Medicaid. You can:

• Coordinate with the TSET Board on potential Medicaid-aligned programs, especially children's health initiatives.
• Use the opinion to support TSET grant proposals or shared programs.

If you are a public health advocate

The opinion confirms TSET's broad mandate and limits the Legislature's ability to repurpose TSET money outside that mandate. If you are concerned about a legislative effort to redirect TSET funds, this opinion is a strong defense. If you are pursuing a new TSET-funded program, your audience is the Board, not the Legislature.

If you are a citizen tracking how tobacco settlement money is spent

The TSET Board, not the Legislature, decides. Public records about Board decisions and grants are likely the most informative. Legislative debates about TSET earmarks may produce political signals, but legally the Board has the final say within the constitutional purposes.

Common questions

Q: What is TSET?
A: The Tobacco Settlement Endowment Trust Fund. Established by Oklahoma voters in 2000 (State Question 692, 68.81% approval) to receive a percentage of Oklahoma's annual payments under the 1998 Master Settlement Agreement with tobacco companies. The fund is preserved as endowment principal; only earnings are spent each year.

Q: What is the Master Settlement Agreement?
A: A 1998 agreement between 52 state and territorial attorneys general and the major U.S. tobacco companies. It settled state lawsuits seeking to recover the costs of treating tobacco-related illness and committed tobacco companies to perpetual annual payments to the settling states.

Q: What can TSET money be spent on?
A: Article X, § 40(E) lists categories: tobacco prevention and cessation, programs to maintain or improve Oklahomans' health (especially children's), educational programs, programs for senior adults, and other listed purposes.

Q: Can the Legislature pass a law saying TSET must fund X?
A: It can pass the law, but the law is non-binding. The TSET Board still controls actual expenditures. The 2007 OK AG 30 opinion (reaffirmed here) is explicit that legislation directing specific TSET expenditures is inconsistent with the Constitution.

Q: Can the Legislature pass a law saying X is constitutionally allowed under § 40?
A: It can, but the courts decide whether something is constitutionally allowed. A legislative statement that a use is constitutional is "in no respect conclusive" (Boswell v. State, 1937).

Q: Why does the AG's 2007 opinion still apply?
A: The 2007 opinion was issued under a prior administration but the AG explicitly incorporates it by reference. The constitutional text and the constitutional structure have not changed, so the analysis carries forward.

Q: Could the Legislature override the AG's view by amending § 40?
A: Yes. Constitutional amendments can change the structure. But a statute alone cannot override the constitutional grant of authority to the Board.

Q: Why does Medicaid fit when it's not specifically named?
A: Section 40(E)(3) is purposefully broad: "[p]rograms . . . designed to maintain or improve the health of Oklahomans or to enhance the provision of health care services to Oklahomans, with particular emphasis on such programs for children." Medicaid provides medical assistance to low-income Oklahomans, presumptively covers children under 19, and improves health outcomes. The text of § 40, the ballot title, and the MSA's stated public-health purposes all support including Medicaid.

Q: Does this mean TSET will fund Medicaid?
A: No. It means TSET can fund Medicaid if the Board chooses to do so. The Board's discretion remains intact.

Background and statutory framework

In 1998, after years of litigation, 52 state and territorial attorneys general and the major tobacco companies signed the Master Settlement Agreement. The companies agreed to make perpetual annual payments to the states. Oklahoma's share is paid into TSET (and other state accounts).

In 2000, Oklahoma voters approved State Question 692, adding Article X, § 40 to the Constitution. The provision creates two boards:

• A Board of Investors that manages the corpus of the trust.
• A Board of Directors that directs specific expenditures from earnings.

Earnings (not principal) are spent each year on the purposes listed in § 40(E). The principal is preserved as a permanent endowment. Section 40(G) gives the Legislature authority to enact laws "necessary to implement or carry into effect the Constitution" with respect to TSET, but that does not extend to directing specific expenditures.

The legal framework rests on two constitutional law doctrines:

1. Express grant implies negation (the expressio unius principle as applied to constitutional structure). When the Constitution gives a power to one body, other bodies do not share it.
2. Judicial review of constitutional questions. The Oklahoma Supreme Court is "the final interpreter of Oklahoma's laws, including the Oklahoma Constitution" (Inst. for Responsible Alcohol Pol'y, 2020). Legislative declarations about constitutionality do not bind the judiciary.

The opinion also engages thoughtfully with the international scholarly category of "non-law-bearing legislation," citing UK constitutional scholar David Feldman: aspirational and rhetorical statutes that do not bind. The Legislature retains the political tool of expressing preferences; it just cannot use those preferences as a legal lever over a constitutionally independent body.

Citations and references

Constitution and statutes:
- Okla. Const. art. X, § 40 (TSET)
- 56 O.S. § 4002.1a (Medicaid health outcomes)
- 42 U.S.C. § 1396 et seq. (Federal Medicaid)

Cases:
- Institute for Responsible Alcohol Pol'y v. State, 2020 OK 5, 457 P.3d 1050 (Supreme Court is final interpreter)
- Fent v. Fallin, 2014 OK 105, 345 P.3d 1113 (ballot title as contemporaneous construction)
- Boswell v. State, 1937 OK 727, 74 P.2d 940 (legislative recital not conclusive on constitutionality)
- Wyatt-Doyle & Butler Eng'rs v. City of Eufaula, 2000 OK 74, 13 P.3d 474 (Supreme Court protects Constitution)
- Pharmcare Okla., Inc. v. State Health Care Auth., 2007 OK CIV APP 5 (Medicaid as cooperative state-federal program)

Prior AG opinion:
- 2007 OK AG 30 (incorporated by reference: legislation directing TSET expenditures is unconstitutional)

Source

• Landing page: https://oklahoma.gov/oag/opinions/ag-opinions/2023/ag-opinion-2023-5.html
• Original PDF: https://oklahoma.gov/content/dam/ok/en/oag/opinions/ag-opinions/2023/ag_opinion_2023-5_z-3.pdf

Original opinion text

GENTNER DRUMMOND
ATTORNEY GENERAL
ATTORNEY GENERAL OPINION
2023-5

Mike Jackson, Executive Director
Legislative Office of Fiscal Transparency
2300 N. Lincoln Blvd., Room 107
Oklahoma City, OK 73105

May 10, 2023

Dear Executive Director Jackson:

This office has received your request for an official Attorney General Opinion in which you ask, in effect, the following questions:

1. May the Oklahoma Legislature authorize the use of funds from the Tobacco Settlement Endowment Trust Fund for uses not specifically referenced in article X, section 40 of the Oklahoma Constitution?
2. May the Oklahoma Legislature express a legislative preference for, or recommend, the use of funds from the Tobacco Settlement Endowment Trust Fund for uses not specifically referenced in article X, section 40 of the Oklahoma Constitution?
3. Do expenditures to benefit Oklahoma's Medicaid program fall within the permissible purposes of article X, section 40 of the Oklahoma Constitution?

I. BACKGROUND

A. Tobacco Endowment Settlement Trust

In 1998, attorneys general for 52 states and territories, including Oklahoma, entered into the Master Settlement Agreement ("MSA") with some of the largest tobacco companies in the United States to settle state lawsuits seeking to recover billions of dollars in costs associated with treating tobacco-related illnesses. Among other duties, the MSA requires tobacco manufacturers to make annual payments to the settling states in perpetuity. In 2000, the citizens of Oklahoma approved OKLA. CONST. art. X, § 40, which established the Tobacco Settlement Endowment Trust Fund ("Trust Fund") from a percentage of the payments received by Oklahoma under the MSA. The Legislature referred the constitutional amendment to the citizens of Oklahoma through State Question No. 692, Legislative Referendum No. 320, which passed with 68.81% of the vote.

Article X, section 40 creates a Board of Investors and a Board of Directors and prescribes certain duties for each. This provision explains that "[e]ach fiscal year, the Board of Directors may expend the amount of earnings which actually accrued to the trust fund during the preceding fiscal year[,]" and that "[t]he Board shall direct specific expenditures to be made for the purposes specified in subsection E of this section." In sum, the Constitution specifically grants the Board of Directors, and only the Board of Directors, the authority to direct specific expenditures from the earnings of the Trust Fund, so long as those expenditures are made for the purposes specified in subsection E. Those purposes include "[p]rograms . . . designed to maintain or improve the health of Oklahomans or to enhance the provision of health care services to Oklahomans, with particular emphasis on such programs for children[]" and "[p]rograms designed to enhance the health and well-being of senior adults . . . ."

Consistent with the plain reading of article X, section 40, in 2007 the Office of the Oklahoma Attorney General issued the following opinion:

[T]he Board of Directors of the Trust Fund is responsible for directing the expenditure of earnings from the Trust Fund. Any legislation which directs expenditures to be made from the Trust Fund for specific programs or purposes or which directs the Board of Directors to make expenditures from the Trust Fund for specific programs or purposes would be inconsistent with the Oklahoma Constitution.

2007 OK AG 30, ¶ 10. The 2007 Opinion is directly relevant to the question presented and is incorporated by reference.

B. Medicaid

Medicaid is a cooperative federal-state program that provides state governments federal grants to assist states in paying for medical services for low-income citizens including pregnant women, children, the elderly, and persons with disabilities, as well as those with certain qualifying conditions. The purpose of Medicaid is "to provide 'health care to persons who cannot afford such care.'"

II. DISCUSSION

A. May the Legislature authorize the use of funds for uses not specifically referenced in article X, section 40?

Black's Law Dictionary defines authorize as "[t]o give legal authority; to empower" or "[t]o formally approve; to sanction." Yet, article X, section 40 does not leave the Legislature any role in the specific expenditure of earnings from the Trust Fund. Rather, this authority lies solely with the Board of Directors.

The 2007 Opinion directly addresses this issue, and indeed it resolves this question by concluding that the "positive delegation of power by the Constitution to the Board of Directors implies a negation of its exercise by any other officer or department." The 2007 Opinion explains that because "[t]he Constitution specifically grants the Board of Directors the power to direct the expenditures to be made from the earnings of the Trust Fund[,] . . . [l]egislation which would grant the Legislature the power to direct the expenditures from the Trust Fund or which would allow the Legislature to direct the Board of Directors to spend the earnings from the Trust Fund for specific programs or purposes, would be inconsistent with the Constitution."

B. May the Legislature express a legislative preference?

The Oklahoma Constitution does not expressly preclude the Legislature from expressing a preference or encouraging some course of action. Nevertheless, when the Legislature expresses a preference, it is just that—an expressed preference. Therefore, it does not have any real legal force or effect, especially when the power to act on that preference has been expressly bestowed elsewhere. Stated another way, aspirational statements of the Legislature's policy preferences are not legal mandates and do not establish any affirmative legal duty.

Similarly, a legislative enactment attempting to declare or deem a specific expenditure constitutionally permissible does not bind the judicial branch. While the Legislature is empowered to enact laws necessary to implement or carry into effect the Constitution, it is the well-established province of the judicial branch, not the legislative branch, to conclusively interpret the Oklahoma Constitution.

As a result, this office concludes that the Legislature may enact legislation expressing a preference that the Board of Directors expend earnings of the Trust Fund for certain uses not specifically referenced in OKLA. CONST. art. X, § 40, but such legislation has no legal force or effect.

C. Do expenditures to benefit Oklahoma's Medicaid program fall within the permissible purposes?

Article X, section 40 defines the purposes for which earnings of the Trust Fund may be expended as including "[p]rograms . . . designed to maintain or improve the health of Oklahomans or to enhance the provision of health care services to Oklahomans, with particular emphasis on such programs for children." The plain language of article X, section 40(E)(3) appears purposefully broad. The Board of Directors is granted wide discretion in spending Trust Fund earnings to maintain, improve, or enhance health and health care services to Oklahoma citizens.

Although Medicaid is not a program specifically mentioned in either article X, section 40 of the Oklahoma Constitution or the MSA, the program is designed and administered to maintain, enhance, and improve the health of Oklahomans. By presumptively covering children under 19 years of age, Medicaid also places particular emphasis on providing medical services to children, consistent with article X, section 40(E)(3). It is therefore the opinion of the Attorney General that expenditures to benefit Oklahoma's Medicaid program fall within the permissible purposes of article X, section 40 of the Oklahoma Constitution.

It is, therefore, the official Opinion of the Attorney General that:

1. The Oklahoma Legislature may not authorize or formally approve the use of funds from the Trust Fund for uses not specifically referenced in article X, section 40, because the Legislature cannot direct the Board of Directors to make expenditures from the Trust Fund for specific programs or purposes.

2. The Oklahoma Legislature may enact legislation expressing a preference, or recommending, that the Board of Directors of the Tobacco Settlement Endowment Trust Fund expend earnings to the Trust Fund for certain uses not specifically referenced in OKLA. CONST. art. X, § 40. Notwithstanding, such legislation has no legal force or effect because it is not binding on (1) the Board of Directors, which has ultimate authority to make expenditures from the Trust Fund, or (2) the judicial branch, which has ultimate authority on questions of constitutional interpretation.

3. Expenditures to benefit Oklahoma's Medicaid program, a program designed to provide medical assistance to the poor, specifically including children, fall within the permissible purposes of article X, section 40 of the Oklahoma Constitution.

GENTNER DRUMMOND
ATTORNEY GENERAL OF OKLAHOMA

AUDREY A. WEAVER
ASSISTANT SOLICITOR GENERAL