Objective This study presents estimates of the impact of changes in California tobacco control funding on healthcare expenditures for 2012–2016 under four funding scenarios.

Methods Smoking prevalence is projected using a cointegrated time series regression model. Smoking-attributable healthcare expenditures are estimated with econometric models that use a prevalence-based annual cost approach and an excess cost methodology.

Results If tobacco control spending in California remains at the current level of 5 cents per pack (base case), smoking prevalence will increase from 12.2% in 2011 to 12.7% in 2016. If funding is cut in half, smoking prevalence will increase to 12.9% in 2016 and smoking-attributable healthcare expenditures will be $307 million higher over this time period than in the base case. If the tobacco tax is increased by $1.00 per pack with 20 cents per pack allocated to tobacco control, smoking prevalence will fall to 10.4% in 2016 and healthcare expenditures between 2012 and 2016 will be $3.3 billion less than in the base case. If funding is increased to the Centers for Disease Control and Prevention recommended level, smoking prevalence will fall to 10.6% in 2016 and there will be savings in healthcare expenditures of $4.7 billion compared to the base case due to the large reduction in heavy smoking prevalence.

Conclusions California's highly successful tobacco control program will become less effective over time because inflation is eroding the 5 cents per pack currently allocated to tobacco control activities. More aggressive action needs to be taken to reduce smoking prevalence and healthcare expenditures in the future.