Skip to content

Groups Look to Tobacco Tax Increase for Health Care Funding

Last month when Gov. Arnold Schwarzenegger (R) vetoed a bill to help expand health coverage for uninsured children in California, he said he endorsed the idea, but there was no way the state could pay for it.

Waiting in the wings, anticipating the veto and the rationale behind it, a newly formed alliance was ready with an answer: a new tobacco tax.

Coalition for a Healthy California — a consortium of eight groups ranging from the American Cancer Society to The Children’s Partnership — has launched a campaign to increase the state’s tax on cigarettes by $1.50 a pack. The coalition is mounting a statewide signature gathering effort to put an initiative on the November 2006 ballot that would generate about $1.4 billion annually. The new money would be used to bolster smoking prevention programs, counteract tobacco’s impacts on health care and provide health insurance for uninsured children.

The idea of raising money for health care by levying new taxes on products known to cause health problems is not new or unique. In fact, the California Association of Hospitals and Health Systems also is campaigning for a $1.50 per pack increase in the state tobacco tax to help keep emergency departments in business.

Children’s Health Care

For CHC, the right time to launch their effort was swift on the heels of Schwarzenegger’s veto of the statewide Healthy Kids legislation, according to Wendy Lazarus, founder and co-president of The Children’s Partnership, a national children’s advocacy group based in Santa Monica.

“The initiative is indeed a response to the governor’s explanation for his veto of the Healthy Kids bill,” Lazarus said. “His main reason for vetoing it was there was no money to pay for it and no vehicle to get the money. Well, here’s the vehicle.”

Lazarus said, “This is an unprecedented coalition of major, influential groups, and I think we can really get this done. Both the Legislature and the governor say they really want to get every child in California covered. They keep saying ‘Where’s the money?’ We’re saying, ‘Here’s a way to get it.'”

CHC — which consists of ACS, the American Heart Association, American Lung Association, California Primary Care Association, Campaign for Tobacco-Free Kids, Children Now, The Children’s Partnership and PICO California — plans to work in tandem next year with the second iteration of a statewide Healthy Kids bill. Although the legislation sailed through the Legislature with much support, politicians and health care policymakers didn’t think the first bill — AB 772 by Wilma Chan (D-Oakland) — had much of a chance of being signed into law.

Another Healthy Kids bill, identical to Chan’s, will be introduced in the Senate by Martha Escutia (D-Montebello), chair of the California Latino Legislative Caucus. This time, the bill will be paired with a funding mechanism — the tobacco tax — when it reaches the governor’s desk.

“We’re thinking that our initiative and Escutia’s bill together make a very good policy vehicle,” Jim Keddy at PICO California, which co-sponsored both Healthy Kids bills in the Legislature, said. “California voters understand the damage done to our state by smoking and I think the public is ready to endorse this kind of policy. This is really a very positive approach on an issue that people — all the people, the Legislature, governor and the voters — can come together in agreement on. Children’s health coverage is something we all want.”

Money from the coalition’s Tobacco Tax, Disease Prevention and Children’s Health Insurance Act would be used to augment and expand existing smoking prevention efforts and prevention, treatment and research programs associated with diseases linked to tobacco usage, such as stroke, cancer and heart and lung disease. A good portion of the money would be used to underwrite a statewide Healthy Kids program similar to smaller-scale programs now operating in about half the state’s counties. Healthy Kids programs are designed to provide coverage for the roughly 10% of the state’s under-18 population who aren’t eligible for Medi-Cal or covered by any other form of insurance.

“Many local communities are doing it now through the private sector, but no one should count on that money being there year to year,” Lazarus said. “And there are many communities that can’t afford it on their own.

“More than 800,000 children in California are without even the most basic health care coverage and the overwhelming majority of Californians believe that providing affordable insurance for kids is the right thing to do. We think this is the right way to do it,” Lazarus said.

Georjean Stoodt, president of the California division of the American Cancer Society, says the tobacco tax will do double duty for California kids.

“Taxing tobacco will save lives,” Stoodt says, by helping to discourage children from taking up the habit in the first place and by providing services to help smokers quit.

It could also save the state money in the long run. Estimates on smoking-related medical expenses in California are as high as $8.6 billion a year.

Hospital Measure

The first tobacco initiative out of the blocks — CAHHS’ Emergency Services and Tobacco Tax Initiative — got the green light last week from the attorney general’s office to begin collecting signatures. Organizers hope to have the proposition on the June ballot, but they make no predictions. Most of the money from the hospital association’s proposition would go to EDs across the state. Funds also would be earmarked for nurse education, smoking prevention and disease research.

Neither group will call the twin initiatives a competition, exactly. But both acknowledge that the existence of the other may have an impact on voters’ perceptions as well as the tobacco industry’s response.

“It’s unfortunate that there’s another initiative underway at the same time,” Lazarus said, “but at least there’s a slight difference in timing. They’re starting sooner and shooting for the June ballot.”

Kristine Deutschman, spokesperson for the hospital association’s campaign, said voters may be willing to pass both initiatives.

“We don’t see these as opposing measures,” Deutschman said. “They’re actually going toward similar goals, but with differences in priorities.”

Looking Forward

California voters next year might be presented with back-to-back tobacco tax initiatives, each calling for $1.50 per pack increases on cigarettes and similar increases in other tobacco products. (State law requires taxes on one tobacco product be applied to other tobacco products as well, such as snuff, chewing tobacco and cigars).

Representatives from Schwarzenegger’s office said the governor “has not taken a position” on the coalition’s tobacco tax initiative. Neither the governor nor his staff speculated on how the tax might influence his dealing with another Healthy Kids bill.

A spokesperson for the Department of Health Services declined to comment on either the coalition’s or the hospital association’s initiatives.

CHC and CAHHS are expecting significant opposition from smokers and the tobacco industry. If both propositions pass, the price of a pack of cigarettes in California — now about $5 — would increase to $8. Representatives of two major tobacco companies — Philip Morris and RJ Reynolds — said they have not formulated specific strategies for these two initiatives yet, but both plan active campaigns to defeat them.

Related Topics

Health Care Costs Health Industry Insight Insurance Medi-Cal Public Health