Capitol Alert

AM Alert: How California offsets impact of falling smoking rates on tax revenue

Store manager Stephanie Hunt lights a cigarette while posing for photos at a Smoker Friendly shop in Pittsburgh on July 17, 2015.
Store manager Stephanie Hunt lights a cigarette while posing for photos at a Smoker Friendly shop in Pittsburgh on July 17, 2015. The Associated Press

The twin aims of Proposition 56 make for strange bedfellows.

The initiative, which voters overwhelmingly passed on Nov. 8, will increase California’s tobacco tax by $2 per pack, generating hundreds of millions of dollars in new funding for the state’s health care program for the poor. But supporters argued that raising the price of cigarettes and other tobacco products is also a benefit to public health that decreases the number of smokers – thereby reducing, in the long run, the revenue that any new tax will generate.

So how does the state resolve this conundrum? Perhaps, ultimately, by increasing the tobacco tax again.

Before any revenue from Proposition 56 is disbursed for health care, it will be used to backfill the budget losses of tobacco education, cancer research and early childhood development programs funded by previous taxes. The idea is that those programs will not be negatively impacted by changes to tobacco consumption caused by Proposition 56.

The system is already in place with the last tobacco tax that California voters approved, 1998’s Proposition 10, which created First 5 commissions. A portion of those 50 cents from each pack of cigarettes sold in California is used to offset its effects on a 2-cent excise tax for breast cancer research and detection services passed by the Legislature in 1993 and on 1989’s Proposition 99, which raised the tobacco tax by 25 cents for an array of health programs.

The backfill this year totals $15.3 million, about 3.6 percent of the $424.5 million Proposition 10 generated in the 2015-16 fiscal year, according to the State Board of Equalization, which will approve the transfer at its meeting today. That’s down slightly from last year, when $16.1 million was set aside for the budget replacement.

WORTH REPEATING: “It’s sad to see Wells Fargo join this elite hall of shame.” – Sen. Steve Glazer, D-Orinda, comparing the bank’s refusal to participate in an oversight hearing on its fake account scandal to Enron during the energy crisis.

NEW KIDS ON THE BLOCK: They haven’t even been sworn in yet, but a handful of new legislators are already being tapped for their expertise by the California Chamber of Commerce. The state’s top business organization is hosting its annual public affairs conference over the next two days in Huntington Beach, and the program today closes with a panel of incoming freshmen Assembly members: Republicans Vince Fong and Kevin Kiley, and Democrats Blanca Rubio and Cecilia Aguiar-Curry, a major beneficiary of outside spending by CalChamber in her race. A “Surf’s Up” reception for newly-elected lawmakers follows, then the conference continues Wednesday with discussions featuring more than a dozen caucus chairs and veteran members.

FOO FIGHTERS: Labor activists in California have already won their fight for a $15 minimum wage, but the campaign continues nationwide, particularly after the election of a president whose stance on the issue is anything but clear. In solidarity with hundreds of other “Fight for 15” demonstrations planned across the country by the Service Employees International Union, fast food cooks and cashiers, airport baggage handlers, Uber drivers and child care workers in cities such as Oakland, San Francisco, Los Angeles and San Diego will walk off the job starting at 6 a.m.

HOUSE OF PAIN: After more than 40 years at the Capitol protecting lawmakers, staffers and tourists, Assembly Chief Sergeant-at-Arms Ron Pane is hanging up his badge for good tomorrow. To celebrate Pane’s decades of service, his office is throwing a retirement party in his honor, 3:30 p.m. in Room 3016.

Alexei Koseff: 916-321-5236, @akoseff

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