Legislature(1995 - 1996)
02/01/1996 03:03 PM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 431 - INCREASE TOBACCO TAXES Number 070 CO-CHAIR TOOHEY stated Co-chair Bunde was the sponsor of HB 431 and asked him to present the sponsor statement. Number 088 CO-CHAIR BUNDE clarified this is a HESS Committee bill, offered by the HESS Committee, at Co-Chair Bunde's request. While it is a committee bill, it is a personal committee bill for Co-Chair Bunde. He explained that cigarettes killed his mother, or as some would say, she used cigarettes to kill herself. In the era when his mother began smoking, it was considered sophisticated and the positive thing to do. Number 152 CO-CHAIR BUNDE said he was very concerned that the media blitz from the tobacco industry is expanding in such a way that young people in our society will fall into the same trap his mother fell into; that it's the sophisticated, accepted thing to do. Because of his concern, Co-Chair Bunde said he was offering this legislation relating to taxes on tobacco products, which he looks at as an economic barrier more than anything else. He addressed the issue of taxes versus user fees. Without playing semantic games, he thinks taxes are what each of us pay whether we use the service or not. User fees, in this case, involve only those who smoke. CO-CHAIR BUNDE read a portion of his sponsor statement for the record: There is an epidemic in our state that is killing more Alaskans each year than motor vehicle accidents, firearms, drugs and alcohol combined. That, of course, is tobacco. This is an epidemic that usually starts in childhood and is preventable. Alaska has one of the highest smoking rates in the United States. Nearly 84 percent of Alaskan adults started smoking between the ages of 10 and 20 years of age. Obviously adults don't start smoking, children do. The average age for a youngster starting smoking is 14.5 years. Annually, 3,000 children in the United States start smoking every day. Of those, approximately one-third will die from from tobacco related illnesses. HB 431 is about prevention, it's about an economic barrier because the youth in our state are so price sensitive. They have a limited discretionary income. The passage of this legislation will drastically decrease the use of tobacco in the young. As the price of cigarette and tobacco products increase, many young smokers won't start smoking and others who already smoke will be encouraged to quit. As a matter of fact, I've talked with adults who have told me that a price increase will push them over the edge and encourage them to quit. In Alaska, the estimated total medical costs directly related to smoking in 1993 alone was $96,490,000. It makes sense to prevent future escalation of our health care costs by creating economic incentives for children and adults to quit using tobacco products. House Bill 431 will decrease the use of tobacco and help decrease further increases in our health care costs. Again, let me stress HB 431 is a user fee. The price increase caused by this fee will work in favor of Alaskans. Studies show that for every 10 percent increase in price in tobacco products, there has been a 4 percent decrease in tobacco consumption. An even greater decrease among children. Alaska's current cigarette tax is 29 cents a pack. That ranks us twenty-sixth in the nation. I urge the committee to support HB 431 for the future health of our youth and our adults. Number 416 CO-CHAIR BUNDE commented there were a number of people signed up to testify and wanted to briefly introduce those individuals who would be testifying: Commissioner Karen Perdue, Department of Health & Social Services; Pat Carr, program manager, Department of Health & Social Services; former Senator Arliss Sturgulewski; David Sweanor, nationally recognized worker in the Non-Smokers' Rights Association; Dr. Farley, physician with Valley Medical Care; representatives from the Department of Revenue; several individuals testifying via teleconference; and Ruth Parriott, American Cancer Society. REPRESENTATIVE GARY DAVIS arrived at 3:10 p.m. Number 492 CO-CHAIR TOOHEY asked if there were any comments or questions from the committee. Hearing none, the meeting was opened for public testimony. Co-Chair Toohey called Commissioner Perdue forward to testify. Number 515 KAREN PERDUE, Commissioner, Department of Health & Social Services, said on behalf of the Knowles Administration, she applauded the leadership of the HESS Committee for introducing HB 431 and fully supports the legislation. As the health agency, the department is especially interested in the public health aspects of the prevention approach. She refrained from citing statistics, but offered a few key points: Tobacco is the leading cause of death for Alaskans; there are more kids starting to smoke than ever before; smoking costs not only lives, but lots of money; and this tax is supported by the public. She commented that Alaskans will probably be hearing evidence not regarding the issue of the health effect, but how taxes relate to solving the problem. She concluded that because we are aware of the devastating effects of tobacco use and know it is the leading cause of death in Alaska, we all should be willing to do everything we can, even if the evidence isn't entirely conclusive, to prevent this disease from continuing to kill people. She concluded by saying anything we can do to prevent the youth from starting to smoke and prevent adults from continuing to smoke is a very worthwhile effort. REPRESENTATIVE CAREN ROBINSON said there is not a lot of assistance available to help treat people who are trying to stop smoking. She asked Commissioner Perdue if there had been any discussion in the department about what avenues should be taken to not only target the youth who are smoking, but also help them get the information and treatment they need to stop. Number 680 PAT CARR, Health Program Manager, Division of Public Health, Department of Health & Social Services, stated she supported the comments made by Co-Chair Bunde in terms of the significance of the health problem and the cost of using tobacco. In response to Representative Robinson's question, she said the leading voluntary health organizations, particularly the American Cancer Society and American Lung Association, have been very active in the area of sponsoring programs for tobacco cessation. Some of the efforts that have also been considered are programs started within the schools to work with young people. These programs however, are not widespread. There aren't any national programs that have looked at nicotine addiction among children as young as Alaska is working with. In some communities work is being done with children in the second through sixth grades, where regular users are as high as 5 percent. Number 750 MS. CARR addressed some of the variations between the urban areas and the rural areas of the state. In some of the rural areas, one- third of the population are regular users of tobacco and sometimes it is higher. In urban areas, there's a 25 percent rate. Statistics show a lower rate among individuals who are more educated. There are some variations to work with since not all communities are the same. On the national level, there are a variety of strategies to reduce tobacco use that have been shown to have some efficacy. She pointed out that education alone is not changing the behavior among the population. A couple of the issues looked at were how do children get access to tobacco products and the advertising and promotion, but the one strategy that seemed to have the greatest effect was increasing prices of tobacco which results in children having less access to tobacco. Number 825 MS. CARR commented on things happening in Alaska in terms of organizations such as the American Heart Association, American Cancer Society, medical associations and public health associations working together. Another strong organization is the Alaska Tobacco Control Alliance, which is made up of over 200 people in rural and urban areas of the state. These organizations are able to offer some strategies to individuals calling to find out what can be done in their community. Ms. Carr concluded that as leaders who care about the health of all Alaskans and the cost of the health care system, the strategies that we can try through increasing the price of tobacco is a worthwhile endeavor. Number 885 CO-CHAIR BUNDE commented an area that hasn't been talked about yet is smokeless tobacco. He asked Ms. Carr if the horrible stories were correct about children in the rural areas as young as 4 and 5 years old beginning to chew tobacco. MS. CARR answered yes, those were the kind of anecdotal reports the department has gotten. Number 908 ARLISS STURGULEWSKI, Volunteer, Citizens to Protect Kids From Tobacco, said she was appreciative that the committee was considering legislation that was going from the treatment to the prevention side. She is enthusiastically in support of the legislation; primarily from a public policy point of view. Adults don't start smoking, it's kids that do. Eighty-nine percent of adults that smoke began using cigarettes by or at the age of 18. She believes there is really something wrong in a society where as many children recognize Joe Camel as recognize Mickey Mouse. One percent of teen-age smokers were smoking in 1988 when Joe Camel was introduced; now Camels is selling 30 percent to that particular age group. That's proof that advertising does pay. She feels the single most effective way to reduce tobacco consumption amongst children is by the "price sensitive" issue that will result with an increase. Number 1033 MS. STURGULEWSKI shared a personal story that has helped shape her view on tobacco consumption. She and her two sisters-in-law were in their late teens when World War II ended. They were all college bound, thrilled with their new freedoms, and by the choices for their futures. They all started to smoke and were soon very truly and very completely hooked on tobacco. Ms. Sturgulewski smoked 2 l/2 packs a day when she was pregnant with her son. Her doctor was a smoker and didn't warn her about the potential problems of pregnant women smoking. Her son was small at birth and was born with lots of respiratory problems. She quit smoking only because she got very ill with pneumonia. Her sisters-in-law were not quite so lucky. They tried prayer, acupuncture, patches, clinics, etc. to help them in their attempts to quit smoking. Nothing worked. One sister-in-law was buried this year; the other is being taught at a clinic how to breathe with what is left of her lung capacity. Number 1110 MS. STURGULEWSKI commented that tobacco taxation is often referred to as a "sin tax." She doesn't think of it that way, but instead thinks of it as a health tax. She said that Co-Chair Bunde had referred to it as a user fee, but it does filter down to the public through the associated costs. She pointed out that committee members, as elected officials, are paying for her insurance, their own insurance, public state employee's insurance; many of whom have tobacco related problems. It is a hidden cost to many taxpayers, including the general public. Number 1150 MS. STURGULEWSKI concluded that passage of this legislation is solidly supported by the public. It is very popular with the public, it cuts across a very broad spectrum of the population. She urged the committee to pass HB 431. Number 1210 DAVID SWEANOR, testified via teleconference from Ottawa, Canada. He spoke about the history of taxation in the United States and the evidence of the impact of tax changes, particularly in Canada. Mr. Sweanor has done a lot of work on tobacco tax policy in many countries around the world, particularly the United States and Canada. He finds it interesting that tobacco taxes in the United States are very low compared to other countries. The tax on a pack of cigarettes in British Columbia is $2.70 U.S. Many European countries are much higher. Not only does the United States have low levels of tobacco taxes, they've been falling when adjusted for inflation. Mr. Sweanor referenced graphs that were before committee members, and said the first graph shows the price of cigarettes without adjustment for inflation. The second graph depicts the price adjusted for inflation. When inflation is taken into account, taxes are actually lower now than what they were before we knew of the health consequences. Prior to the 1964 report of the U.S. Surgeon General, which was a landmark worldwide, Alaska's taxes were 8 cents a pack, as was the federal tax. When that is adjusted for inflation, the tax per pack now would be 80 cents, when in reality the tax has fallen to 53 cents. That's because the tax hasn't kept up with inflation. As can be seen in Graph 2, taxes have fallen behind and are doing so at precisely the time that scientifically we came to understand what the health problems were. Alaska has fallen behind more so than the other states. At the time of the Surgeon General's report, Alaska's tax was the highest in the United States; it is now firmly in the bottom half of taxes in the United States. The importance of that is depicted in Graph 3, which shows what has happened to the price and the consumption in the United States over the last 40 years. This clearly shows when the price goes up, consumption goes down. If the price goes down, the consumption goes up. It is very much a cause and effect relationship. That is consistent with all the academic evidence seen in other jurisdictions. Mr. Sweanor commented that a little over ten years ago when they started working on increasing the tobacco taxes in Canada, all their work was based on research done by economists in the United States which indicated there is a range of factors that affect consumption, but price is probably the most significant; certainly the most significant of anything that is within the realm of being doable. Various studies from the United States indicated the most powerful thing they could do was to increase the price. He said that made sense because we know that everything has some relationship when looking at price and consumption. Kids don't have a lot of money, they are not yet addicted to the product, they can change their behavior so if the price goes up, they may have to decide between buying a new baseball or buying a pack of cigarettes. Kids have unlimited needs, but a limited ability to buy things. Number 1438 MR. SWEANOR said Graph 4 illustrates what happened in Canada; as the price went up from the U.S. price level similar to the European level, teen tobacco consumption plummeted. At the beginning of the 1980s, over 40 percent of 15- to 19-year-olds in Canada were smoking every day. It was a huge problem. By the beginning of the 1990s, that had fallen to about 16 percent. Teen tobacco consumption fell about 60 percent and adult consumption fell about 40 percent. That's 40 percent even after taking into account the tobacco that was coming across the border from the United States, which was a problem in areas like Ontario and Quebec. MR. SWEANOR directed committee members to Graph 5 which illustrates what the impact was on government revenue. As tobacco sales fell in association with the big increase in price, total Canadian sales fell from over 70 billion cigarettes a year down to about 40 billion cigarettes a year: a very significant decline in a fairly short period of time. Revenue, however, went from about $2 billion a year to over $7 billion a year, simply because of the relationship between price and consumption. The governments are doing much better in making significantly more money while selling significantly fewer packs of cigarettes. Number 1505 MR. SWEANOR stated the real test of the relationship between price and demand has been shown recently in Canada, (indisc.) as a result of smuggling in Eastern Canada. He noted the smuggling that went on was not U.S. cigarettes coming across the border in large numbers as the tobacco companies told us would happen for a long time. When it didn't, the Canadian companies simply took to shifting billions of cigarettes into upstate New York, which is one of the border crossing population centers in that part of the country. As a result of the pressure caused by smuggling, the government rolled back taxes in parts of the country. As a result, a big increase in smoking is being seen, particularly among young people. According to a major report from an Ontario government agency that came out a couple of months ago, virtually all the progress that was made in the last few years has been lost. For example, among male students the smoking rate has increased from about 22 percent in 1993 to over 28 percent in 1995. Other population groups, particularly young people have been that much or more pronounced. Again, it is the cause and effect relationship. It wasn't a mere coincidence that smoking among young people in Canada fell; it did exactly what the academic studies from the United States indicated it would do. It responded to affordability. As cigarettes become more affordable, the consumption of cigarettes has gone up. Number 1586 In conclusion, MR. SWEANOR said the tobacco industry is now saying that price doesn't affect consumption and that tax increases do not work, so do not increase taxes. He thinks that has about as much credibility as everything else the tobacco industry tells us. He commented it's odd that here's an industry that on the one hand is telling people in Washington that smoking isn't addictive, but on the other hand, it's going to Alaska with the message that no matter what you do, you can't get people to quit. He reiterated the economic research is so overwhelming. Virtually every group that has a big interest in protecting kids, looks at the evidence and says this has a tremendous impact. The only people he is aware of who are claiming that it has no association with consumption is the tobacco industry. They used to claim just the opposite until it clearly became in their interest to try to prevent these certain things from happening. When the tobacco industry says don't increase tobacco taxes, we must take into account where else will that money come from. In effect, over the last 30 years the fact that tobacco taxes have been able to fall in real terms means that revenue had to come from somewhere else, whether it was from fees charged for government services, higher property taxes, taxes on investment, taxes on income, or taxes on something else. When looking at all the various ways that governments can generate revenue, virtually all of them impact on some sort of behavior that we generally would like to encourage rather than discourage. In the case of tobacco, there is a very strong case for saying we want to discourage the use of tobacco and prevent our children from starting to use a product that medical science now tells us will result in the deaths of half of all the long-term users. The tax increase is something that works. With respect to smuggling, there's been virtually no smuggling when anti-smuggling measures are taken. He thought a lot of the information from the tobacco industry on the smuggling issue is at the very least, highly suspect and it certainly does not apply to Alaska. Number 1705 CO-CHAIR TOOHEY asked Mr. Sweanor if the higher taxes in Canada were dedicated to health-related issues, tobacco education or did the revenues go into the general fund, like Alaska's will do. MR. SWEANOR responded in Canada it went into the general fund, although it was associated with other money that went into various areas of health. For example, now there is an extra tax put on tobacco companies, as a way of punishing them for their role in the smuggling situation, that is directed specifically into tobacco control activities. CO-CHAIR BUNDE clarified that a portion of Alaska's cigarette taxes, dating back to Territorial days, goes into the educational fund and the rest goes into the general fund. Number 1760 REPRESENTATIVE NORMAN ROKEBERG referred to the comment made by Mr. Sweanor that he didn't think there would be any cross border smuggling problems between the Yukon Territory in British Columbia and the state of Alaska. Representative Rokeberg asked if that was because the price schedule in this legislation would be similar to or very close to the retail prices in the Yukon Territory. MR. SWEANOR answered that the taxes in British Columbia amount to $2.70 U.S. per pack. Even with the proposed increases of $1.00 per pack plus adding in the federal tax, Alaska's tax will be more than $1.00 a pack cheaper than British Columbia. Number 1817 ELLEN FARLEY, Physician, Valley Medical Care, testified she is a board-certified family physician who has lived and practiced here in Juneau for 7 l/2 years. Prior to that, she practiced in a variety of settings including training, Indian Health Service, teaching in a residency and others. Everywhere she goes, tobacco related illness is a very painful issue for people and their doctors. She is testifying before the committee as an individual and as a volunteer with the Alaska Chapter of the American Cancer Society. She is also a member of the American Academy of Family Physicians (AAFP), which is a national organization for education and health policy. She said the AAFP is very enthusiastically behind this kind of measure. The family practice report this month proclaimed their public health initiatives -- AAFP fights tobacco. She believes that all across the country, family practice doctors are feeling an increased urgency about this issue and about the need to take steps to prevent new smokers. Number 1910 DR. FARLEY commented as a family doctor, she gets to see up close and personal, how tobacco use can ravage a person's health and the tragic losses it brings to families. The frustration is that it was preventable, it didn't need to be like that. It has been well established that smoking and tobacco use has major negative impacts on the health of most users and creates enormous costs to society. Tobacco is extremely addictive and the addiction will occur within a very short time of regular use. Once a person is addicted, it is very difficult to quit. She took issue with a recent article in the Juneau Empire from an individual who said that most smokers don't start as teens; they experiment a little bit, but start later as an informed choice by responsible adults. She stated that is not true. Number 1976 DR. FARLEY said that in her work with teens, they often tell her they thought they were experimenting. They despise smoking, but they were rebellious, curious and very susceptible to the messages in the advertising. They started experimenting, but found they were hooked very quickly. She commented that in her work she sees smokers as individuals who are suffering. They have poorer health, are less productive and have a poorer quality of life in old age. Her personal belief is that smokers suffer a kind of insidious erosion of self-esteem, similar to what is seen with other kinds of addictions. Most smokers want to quit. In her practice, she makes every effort to work at smoking cessation counseling. She does a lot of counseling particularly in January and February because of New Year's resolutions and she is always ready to help people. It turns out to be frustrating for both her and the smoker because it is so difficult to quit. It all comes back to prevention and how much sense it makes to try to prevent people from becoming smokers. DR. FARLEY pointed out that research has shown there are multiple contributing factors in the establishment of a new smoker. It takes multiple and usually combined approaches to help people quit smoking and to prevent people from starting to smoke. Education is a factor, restricting access especially by minors is a factor, eliminating advertising directed especially at young people is a factor, as well as taxes. It is her belief that as a single action, raising taxes is the most powerful and effective tool. She urged the committee to pass this legislation. Number 2108 REPRESENTATIVE ROBINSON remarked that she is in favor of the tax and it is her hope that the tax increase will bring down tobacco consumption. She has personal experience with family and friends of just how difficult it is to make the decision to quit smoking. She asked Dr. Farley what kind of advice she gives her patients in smoking cessation counseling. Also, what avenues did Dr. Farley feel should be explored for counseling for addiction within the school system. DR. FARLEY said individually, when she is seeing a teen-ager or pre-teen she brings up the issue of smoking to find out what their beliefs are, have they experimented, what are their friends doing as far as smoking, to get a conversation established and make the point of how quickly a person can become addicted, etc. Dr. Farley commented she had personal experience with that because she started smoking at the age of 11 and was firmly hooked by the time she was 13. It was surprising to her how quickly it happened. After several attempts, she was able to quit smoking at the age of 19. One of the things limiting her effectiveness is that most young people at that age are very healthy and don't come to the doctor very often. There is what she believes to be a very good education program in Alaska called "Here's Looking at you 2000". It includes some conflict resolution, deals with issues of drugs, alcohol, tobacco and different forms of abuse. It is a comprehensive program and she has observed the use of it in the Juneau School District. She commented it is surprising how little effect education by itself has and how much effect the economic factor has. As far as helping people stopping to smoke, she thinks many people will be encouraged to either quit or cut down their consumption which will benefit their health. REPRESENTATIVE ROBINSON asked if there was any one direct tool available to use with young people. DR. FARLEY thought that was an area that required more attention. She has often wondered if there shouldn't be in-patient treatment programs for helping people to stop smoking. She commented that many researchers feel it is as addictive as heroin. One of the suggestions she makes to children who are smoking and have a lot of friends who are smoking is to look for some new friends. Some children have heeded that advice and gotten into an activity with a group of kids who are more athletic, musical or whatever. Number 2280 BOB BARTHOLOMEW, Deputy Director, Division of Income & Excise Audit, Department of Revenue, testified on the tax rate changes and the financial impacts. The current tobacco tax is collected primarily from the cigarette and tobacco wholesalers and is 29 cents for a pack of cigarettes, or 25 percent of the wholesale price. Those rates were implemented in 1989. The proposed legislation would raise the tax on a pack of cigarettes $1.00 to $1.29, and increase the tobacco products tax to 100 percent of the wholesale price. The FY 97 increase which would be effective October 1, would be a nine month period of increased taxes, and would raise $33.4 million. That is based on the current consumption rates, less an elasticity factor to show what happens to consumption when the price is raised. The department relied on a 1994 Surgeon General's report to calculate the elasticity. As Co-Chair Bunde had stated earlier, 5 cents of the current 29 cent tax goes into a school fund; the remainder of the tax plus all of the tobacco products tax goes into the general fund. TAPE 96-5, SIDE B Number 001 MR. BARTHOLOMEW said the department currently has a zero cost to implement. The program would be identical to what is in place with the current level of compliance being maintained. They will monitor the program and if other issues related to compliance arise, the department would need to examine that and address the appropriate measures that would need to be taken. At this time however, the compliance program that is in place currently will be continued. CO-CHAIR TOOHEY asked how much revenue was currently collected. MR. BARTHOLOMEW answered $17 million. CO-CHAIR TOOHEY pointed out that it would virtually double, and asked if there wouldn't be any added costs. MR. BARTHOLOMEW said currently, the department would not increase the amount of paperwork or the number of tax returns being filed, there would just be larger checks. For FY 98, which would be the first full year at the higher tax rate, the increase would be $44 million. Basically, it would more than double. Under HB 431, the cigarette tax would increase every three years. For example, on July 1, 1999, this bill would increase the rate again by 24 cents a pack; in 2002 it would be raised again by 24 cents a pack and so forth. With regard to the tobacco products tax, the rate change would be every two years which would be based on the consumer price index. He explained that was basically to keep from losing pace with inflation, as has happened in the past. Number 088 CO-CHAIR BUNDE asked Mr. Bartholomew what the department is projecting the total tax income to be for the first effective year if this bill became law. MR. BARTHOLOMEW said he would break it into two sections. The total revenue raised in FY 97, which would have nine months of an increase, would be $50 million. Current revenues are $17 million, so there would be a net increase of $33 million. In FY 98, the total tax raised would be $61.8 million, with a net increase of $44 million. CO-CHAIR BUNDE referred to the 5 cents of the current amount that goes into the schools and asked what percentage would be dedicated to schools under the proposed legislation, or would it remain at 5 cents. MR. BARTHOLOMEW replied under this legislation, the amount going into the school fund would remain as it is currently, and the increases would go into the general fund. CO-CHAIR TOOHEY inquired of the sponsor why the proposed legislation didn't start off at $1.00 per pack. CO-CHAIR BUNDE responded it does. CO-CHAIR TOOHEY asked if it goes to $1.25, $1.50 and so forth. MR. BARTHOLOMEW explained the current tax is 29 cents a pack. HB 431 raises the tax initially $1.00 to $1.29 a pack; then raises it 24 cents a pack every three years after that. Number 145 REPRESENTATIVE ROKEBERG referred to Section 4 which bases the amount of a tax change on the Anchorage Metropolitan Area, Bureau of Labor Statistics (BLS), Consumer Price Index (CPI) inflator and asked Mr. Bartholomew if the Anchorage Metropolitan statistics are published once or twice a year. MR. BARTHOLOMEW responded he would have to check with the Department of Labor on that. REPRESENTATIVE ROKEBERG said he thought it was once a year. He felt it was a very poor measure to use on any kind of a CPI clause where the statistics are only published once a year. His experience in the business world has been that utilization of the U.S. (indisc.) City Averages is much better because there is a monthly baseline figure. He suggested someone look into that. Representative Rokeberg asked Mr. Bartholomew if the Governor had drafted a similar bill or if he had worked on any statistics of revenue measures in the Administration's program. MR. BARTHOLOMEW replied the division had done some work in support for the Long Range Financial Planning Commission (LRFPC). REPRESENTATIVE ROKEBERG asked if the LRFPC had a similar stair stepping mill rate increase. MR. BARTHOLOMEW thought the LRFPC bill recommended the same rate increases as this legislation recommends. REPRESENTATIVE ROKEBERG asked Co-Chair Bunde if that's correct. CO-CHAIR BUNDE replied yes. REPRESENTATIVE ROKEBERG asked what the rationale was for that. CO-CHAIR BUNDE said it was to prevent the erosion because of inflation as had been previously testified to. CO-CHAIR TOOHEY reminded committee members there were 13 people signed up to testify and called the next witness to come forward. Number 253 HARLAN KNUDSON, President, Alaska State Hospital & Nursing Home Association, testified he wanted to give four reasons for testifying before the committee. First, the Alaska State Hospital & Nursing Home Association was invited to join the other health care providers in working as a group to support HB 431. This group of health care providers see the effects of tobacco use every day in the hospitals and with their friends. The feeling amongst the group was that they were not being good citizens of the state if they didn't support this legislation on behalf of the hospital community. Second, is a personal reason. He had his last cigarette the day before he was diagnosed with prostate cancer. He has a scar to remind him that it is not a good idea to smoke. He personally is asking the committee to support this legislation. Third, this is not a vote for a tax increase; it is a vote for common sense, a vote for public health, and a vote he hopes the legislators will not walk away from. His final reason for testifying was because of the cost of health care. He said one of these days there is going to be good reliable data that will show just how much cancer costs. State medicare costs need to be looked at when we are talking about balancing the budget. He discussed the high incidence rate of cancer among the Native community and concluded that this legislation is a solid step toward good health care. Number 403 MIKE KORKILL, Member, Adolescent Health Advisory Committee, testified via teleconference from Fairbanks. The Adolescent Health Advisory Committee is made up of a group of Alaskans who have a united commitment to well-being and healthy lifestyles for Alaskan adolescents as well as individuals in the context of family (indisc.). They look at known routes to health problems and recommend approaches for improvement through community coordination and collaboration. They also seek to preserve the rights of all Alaskan adolescents to grow and develop in an environment of a physical, mental, social and spiritual being. He commented that a group of committee members assembled last week to review the House and Senate versions of this bill. He added there are studies which indicate that tobacco tax increases, specifically in Canada and California, reduced tobacco consumption by teens. It is the feeling of the advisory group that it is in the best interest of Alaskan teens to use the revenues generated from the tax to promote tobacco cessation programs around the state. The advisory committee very strongly supports this legislation. Number 545 JIM PLUMLEY testified via teleconference from Mat-Su as a private citizen and a former state employee who retired when he was diagnosed with leukemia in June 1993. He said he never liked being around smoke, but was around it constantly as an employee of the jail system. While receiving treatment at the University of Washington Hospital, he saw people hooked up to Ivs or had just received chemotherapy who were standing outside having a cigarette. He understands how addictive nicotine can be. He is in favor of raising the cigarette tax and is hopeful the state, through the increased tax can educate people more on the negative effects of tobacco. Number 614 PATTI TRUESDELL testified via teleconference from Soldotna that she was not testifying as a 20-year employee of the hospital, not as a Freedom From Smoking consultant, and not as the coordinator for the Tobacco (indisc.), but as a former nicotine addict. She spoke of prior experiences of tearing down the anti-smoking signs, and being one of those individuals standing outside smoking. As a former smoker and mother of four children, she is in favor of the tobacco tax increase. She is in favor of anything that will help reduce the number of children smoking, children starting to smoke, children buying tobacco products and children experimenting with tobacco. She is aware that a lot of children in the Soldotna area chew and smoke tobacco. She concluded by saying the legislature needs to do their job, and in turn the public will do theirs at the local level by making sure the laws are enforced, compliance is checked, and that the schools are doing their part with education. Number 707 PEGGY MULLEN testified via teleconference from Soldotna as a former nicotine addict. She smoked for what she termed as an embarrassingly long time and quit 14 years ago. She experimented with tobacco as a teen-ager, but didn't really get involved with it until she was in college. As a shy person in her 20s, it made her feel braver, smarter, and more focused. She fell for the advertising that portrays cigarette smoking as beguiling and a very sexy sort of drug delivery system. In the later years of her addiction, she realized she was hurting not only herself, but the people she loved. She had a difficult time quitting; it took several tries over a period of several years. She finally quit after getting angry with her father who was a recovering stroke victim who drank and smoked for several years. When he started to smoke again, she got angry enough at him to cause her to quit smoking herself. She asked the committee to seriously consider using some of the increased tax revenues to promote an advertising campaign to keep children from starting to smoke. She mentioned that other states like California are beginning to see some success with a "smoking is not cool" advertising campaign. Number 832 VEVA BECKER, American Cancer Society, testified from Fairbanks that she is pleased the state of Alaska is taking a stand against tobacco. It is a great step forward. She has been a tobacco educator for youth and adults with the American Cancer Society for over 25 years. In past years, there was a decreased use of tobacco with the youth, but today more kids are smoking than ever, not only in Fairbanks but in all of the Interior. She commented that most of the smoking kids live with smoking parents. She spoke of the respiratory problems and lung cancer among people of all nationalities at a younger age. She expressed concern about the increased use of cigarettes and non-smoking tobacco among the Native population. She supports the tobacco tax increase because nothing else is working at this time. She would like to see cigarette machines outlawed because of the easy access for kids. Even though sales clerks have been educated about the sale of tobacco products, there is a lot of work that still needs to be done in that area. Tobacco advertising in all media forms hurts Alaska's youth. CO-CHAIR TOOHEY noted that written testimony from Kathleen Jones of Homer had been received and was included in committee member packets. Number 962 TOM DANIELS, Member, Board of Directors, Alaskan Chapter, American Cancer Society, testified from Anchorage via teleconference. He stated the American Cancer Society is the largest voluntary community-based health organization in the world. In Alaska, there are more than 4,000 volunteers performing the vital work of the cancer society. People from all walks of life here in Alaska share their special talents and time to help fight cancer. He said he was testifying before the HESS Committee in support of HB 431. He knows the word taxes conjures up a very negative feeling among many people, but there is a growing movement to use taxes to accomplish a positive result - to protect children from tobacco addiction. One of the American Cancer Society's goals for the year 2000 is to reduce smoking by Alaskan youth. As a private organization, they provide public education concerning the dangers of smoking, but they cannot do the job alone. He told committee members that as elected representatives of the people of Alaska, they could help with this important task by passing this tax; thereby providing a powerful incentive to reduce smoking. He pointed out this is not just another tax. It is a strong public health measure. He concluded with a quote from former Surgeon General, C. Everett Koop, "A cigarette tax is different because it helps almost everyone. Smokers would benefit because it would help them to quit. Non-smokers would benefit because the air they breathe would have less harmful smoke. Children would benefit because fewer kids would get hooked on cigarettes. The only real losers would be the tobacco industry." He strongly urged committee members to support the increase in taxes on tobacco. Number 1083 JENNY MURRAY, Tobacco Policy Coordinator, American Lung Association of Alaska, testified via teleconference from Anchorage regarding a survey that was conducted on behalf of the American Cancer Society to help them assess the level of support among Alaskans for tobacco taxes. The survey was conducted statewide to assess the support for an increase of $1.00 a pack. Based on surveys done in the Lower 48 and in Anchorage in 1994, they expected to see strong support in the neighborhood of 60 to 65 percent, but it was even better than that. In a statewide sample, 74 percent of Alaskans favored increasing Alaska's tobacco taxes by $1.00 per pack. Because the publicity of the tobacco tax proposal has been mostly in the context of addressing the state's fiscal gap, the survey began with questions about the whole issue. For example, the survey revealed that 74 percent of Alaskans had heard about the budget gap. The second question on the survey was "Alaska's state budget is about $500 million larger than the revenues it will take in this year. Most of this revenue is from oil and gas taxes. People have different views about how to deal with this fiscal gap. Do you think the fiscal gap can be closed with a mix of spending cuts and new revenue sources?" Only 16 percent of the individuals who responded felt that spending cuts alone would be enough to close the budget gap. On the other hand, 72 percent indicated it would take a mix of spending cuts and new revenue sources. MS. MURRAY further stated that questions were then asked to determine which of the measures proposed by the Long Range Financial Planning Commission to close the fiscal gap were most popular among Alaskans. The survey results indicated that tobacco taxes were far and away the most popular method of reducing the budget gap. Another question asked was, "If it was proven that a large cigarette price increase prevents or reduces smoking among children and teen-agers, would you favor or oppose raising the state tax by $1.00 per pack?" Eighty-six percent of those individuals polled indicated they would favor the tax increase. She concluded that of course, we are all aware that tobacco taxes do reduce smoking by kids. The public message is clear that Alaskans support tobacco taxes, they understand that new revenue is needed to balance the state budget, and believe in protecting kids from tobacco. She strongly urged the committee to support HB 431. Number 1242 ANNE MARIE HOLEN testified via teleconference from Anchorage on behalf of the Alaska Native Health Board and its statewide membership in support of HB 431. She said the increase in tobacco taxes is the number one state legislative priority for the Alaska Native Health Board this session. Alaska Natives account for over 23 percent of the smoking-related deaths in the state, even though they make up only 16.5 percent of the population. No one expects higher taxes to be a panacea for the tobacco problem in rural Alaska, but the research clearly indicates that it will help. She pointed out that tobacco is not just a Native problem in Alaska. A recent Center for Disease Control report reveals that smoking rates among the white population in Alaska are also above the national average. The tobacco epidemic is a serious problem in Alaska; Native and non-Native, smokers and non-smokers, kids and adults. The Alaska Native Health Board strongly urges the committee's support for HB 431. Number 1311 MICHAEL LIVINGSTON testified via teleconference and urged the committee to pass HB 431 as an effective tool to combat Alaska's epidemic of teen-age tobacco smokers. During his 16 years as a police officer in Alaska, he has seen the number of teen smokers skyrocket. He commented on having seen as many as 300 students at local high schools standing outside smoking cigarettes on their lunch break. If we allow the youth to hang around and get addicted to a legal substance such as tobacco, it becomes easier for them to get addicted to other illegal substances such as alcohol, marijuana and harder drugs. There are areas around the high schools known as smoking pits or smoking tunnels that are hot spots for criminal activity, including weapons offenses, felony assaults and attempted homicides. On the other end of the spectrum, Mr. Livingston as a police officer, has had to respond to deaths caused by tobacco consumption. Alaska's law enforcement code of ethics states that his fundamental duty as a police officer is to safeguard lives, to protect the innocent against deception and the weak against oppression. He has attempted to fulfill his duty by issuing citations to minors for possession of tobacco. However, one police officer issuing one ticket and thousands of teen smokers is like the little Dutch boy holding his finger in the dye. He asked committee members to please stop the flood of Alaska children walking into an early death, to safeguard lives and protect the innocent against deception by passing HB 431. Number 1417 CO-CHAIR TOOHEY asked Mr. Livingston if there are laws currently on the books that are strong enough, but are not being enforced. She was aware of the laws that prohibit the sale of tobacco products to children under the age of 19 and the restrictions on cigarette machines, but wanted to know if there were other things that could be done, as a legislative body, to prevent the sale of cigarettes to children. MR. LIVINGSTON responded that hundreds of citations have been issued to minors for the possession of tobacco. He has questioned about 150 minors himself to determine where they get the tobacco from. Their response is they walk into a store and buy it; these are 14- and 15-year-olds walking into stores in Anchorage buying tobacco with no problem. While the police have issued hundreds of citations to minors, they have not issued one citation to a business in Anchorage for the sale of tobacco to minors that Mr. Livingston is aware of. When he goes into a store in his police uniform, surprisingly the transaction does not occur. One way for a police officer to put a stop to the illegal sale of tobacco to minors would be for the police officer to use youngsters to buy the tobacco. When the sale is completed, the police officer could then issue a citation to the business for the illegal sale. He has asked permission from his police department more than once, but it is illegal for him to do that. The reason being that he would be allowing a minor to possess tobacco. Until an exception is made in Alaska as has been made in many other states, he is forbidden from doing what he would like to do. CO-CHAIR TOOHEY said it was a shame that police officers' hands are tied, and will look at other available options. CO-CHAIR BUNDE remarked there will be another bill that will address that problem. REPRESENTATIVE ROBINSON thought these sting operations were being carried out in Juneau through the Seven Circles. She added the main idea at this point is not to go after the businesses, but to educate businesses on what is happening so they will make the necessary changes. CO-CHAIR TOOHEY asked Luke Whitehead to present his testimony. The Anchorage Legislative Information Office advised that Mr. Whitehead had written testimony that would be submitted to the HESS Committee. Number 1575 JUDITH MULLER, Executive Director, Alaska Health Fair; also Chairman, Alaska Tobacco Control Alliance, testified via teleconference. She said the Alaska Health Fair works with villages across the state organizing and planning their grassroots health education event. There isn't one community in Alaska where tobacco isn't a big concern. For that reason, Alaska Health Fair supports the taxation as a way to deal with the tobacco problem. She said the Alaska Tobacco Control Alliance consists of 220 organizations and agencies who share a strong commitment to reducing the use of tobacco. The 220 organizations and agencies represent an organized mass of literally tens of thousands of Alaskans, including people from every urban community of the state, most of the Native health corporations, professional health organizations and nonprofit agencies. This group works daily to reduce the use of tobacco in Alaska. A recent resolution put forth by the Alliance last month calls upon the legislature to enact a significantly higher state excise tax on all forms of tobacco and to ensure that this higher tax rate is regularly increased to keep pace with inflation. They agree that taxation is a good way to reduce the use of tobacco and strongly support this legislation. Number 1680 DELISA CULPEPPER, Alaska Public Health Association, testified via teleconference from Anchorage and strongly urged the committee to support this legislation. She said public health professionals across the state are working, like the Alaska Tobacco Control Alliance, to protect kids from tobacco. She referred to a prevention initiative and said while we have to work on behavioral aspects with individuals, an environment that allows children to have financial access to cigarettes is a poor environment to try to prevent them from beginning to use tobacco. Financial strategies are important and the Alaska Public Health Association believes they can work well. Number 1730 DR. RODMAN WILSON, Acting Executive Director, Alaska State Medical Association, testified from Anchorage. He said the Alaska State Medical Association strongly supports HB 431. During the mid-80s when he was working in the Municipality of Anchorage Health Department, he studied all deaths in Anchorage. He analyzed the contribution of tobacco to those deaths and calculated that 713, or 21 percent, of the 3,435 deaths were caused by tobacco. He mentioned the state Department of Health, Section of Epidemiology did a similar study statewide for the period of 1992 to 1994 and came up with a similar result of 20 percent. Dr. Wilson said this is an opportunity for the legislature to do something significant with respect to the health hazards of cigarettes and other forms of tobacco. In conclusion, Dr. Wilson said in the next century when somebody writes the social and commercial history of the United States, one of the blackest pages is going to be that when we began to know by mid-century how dangerous tobacco was, we did so little about it. Number 1901 RUTH PARRIOTT, Representative, Tobacco Tax Policy Project, American Cancer Society, also testified on behalf of the full coalition of heart, lung and Native health boards. She said a number of years ago, the American Cancer Society was wondering what they were doing talking about increasing taxes and how they found themselves in that position. All of the collective research led them to one inevitable conclusion: It is their mission to reduce the suffering that results from cancer. Research indicates the single most effective way to do that is to prevent children from starting in the first place and the single most effective way of doing that is to apply economic disincentives. She noted the fiscal and tax policy debates currently taking place and said there are some individuals who believe that tobacco is a matter of free choice and shouldn't be used in fiscal policy debates and other state legislation to influence behavior and choices of individuals. She said a part of us buys into that. Like many Americans, we believe the ultimate responsibility for protecting our children takes place in the homes where parents share their lessons with children, and in the support of community-based schools and churches. In support of that, the American Cancer Society has been providing all of the information and support to those institutions for decades. However, when those children walk outside the doors and are bombarded by a $6 billion a year advertising campaign from the tobacco industry which tells the kids that smoking is cool, then it becomes time to change that larger environment in any way we can. MS. PARRIOTT stated the tobacco industry will tell you this is bad fiscal policy. She told committee members that a Washington, D.C. firm has been hired by the industry to tell you that your Department of Revenue doesn't know what they are talking about; they've apparently over-estimated the revenues that will be gained. However, in doing so, apparently the Surgeon General doesn't know what he is talking about either because the department relied on 30 years of economic data from the Surgeon General's Office to determine a price elasticity. She urged committee members to listen to the arguments made by the industry as the debate unfolds. The first thing they will tell you is that it won't generate this much revenue because the department is over-estimating. The second thing will be that this doesn't work. She said the industry's own charts indicate there is a -.4 elasticity; that means every time tobacco prices are raised by 10 percent, 4 percent of sales are going to drop off. That's what the industry is worried about, no matter what they tell you. By taking this health measure, fewer cigarettes will be sold in the state of Alaska. That means the tobacco industry will make less money in the state. Ms. Parriott concluded by saying we acknowledge that, but we believe the health of Alaskans is more paramount than the profits of the tobacco industry. CO-CHAIR TOOHEY asked if there was any further public testimony. Hearing none, public testimony was closed. CO-CHAIR BUNDE asked to make a closing statement. He, like probably a lot of other people, wished this proposed tax would not raise a nickel. But that is unrealistic. TAPE 96-6, SIDE A Number 007 CO-CHAIR BUNDE continued that one of his favorite musicians, Willie Nelson, said that he has tried them all, referring to illegal substances, and the toughest of all to quit was cigarettes. He said that no legislator ever looks lightly at taxing the citizens and no constituency is anxious to be taxed. The surveys however, indicate the public feel this is an appropriate measure and he simply would like for the legislature to put aside their concerns about taxation and look at it as an economic barrier to young people. Number 101 CO-CHAIR BUNDE made a motion to pass HB 431 from the HESS Committee with accompanying fiscal notes and individual recommendations. Number 117 REPRESENTATIVE ROBINSON thanked the sponsor for what she perceived to be one of the most important aspects of this bill; the public education that will take place. She would like to perhaps have another opportunity to discuss other things that could be done to get more public education. One of the areas she is personally concerned about is the area of finding a smoke free environment for people who are trying to move away from an addiction. For example, AA meetings that are non-smoking, counselors who don't smoke in counseling sessions, etc. She commented she is not out to ban smoking because she doesn't think it works; but she is working toward public education and trying to get people to make that decision for themself. She would also like the committee to consider putting some of the beginning revenues into the Children's Trust. She recognized that a fund couldn't be dedicated, but felt they could make a strong statement that a portion of this money should be appropriated into the Children's Trust. CO-CHAIR TOOHEY pointed out that as a person who started smoking at the age of either 14 or 15, she ended up smoking three packs of cigarettes a day and loved every cigarette she smoked. She quit 13 years ago. For those people who testified before the committee who stated it was difficult to quit, she said it is not difficult to quit; a person only needs to make up their mind that they are going to stop. It's like any other addiction, you can stop. Her advice is to have someone who has also quit help you get through the first few days. It can be done, so don't be discouraged by people saying it's impossible to quit. Number 371 CO-CHAIR TOOHEY asked if there was any objection to the motion to pass HB 431 out of committee. Hearing none, HB 431 passed out of the House HESS Committee with accompanying fiscal notes and individual recommendations.