Legislature(1999 - 2000)
01/26/2000 01:35 PM Senate HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 37-SMOKING CESSATION AND EDUCATION PROGRAMS
REPRESENTATIVE ROKEBERG said HB 37 is a small but important piece
of legislation. The bill adds a comprehensive smoking education
prevention and tobacco control program to a list of programs that
are authorized by the Department of Health & Social Services (DHSS)
to operate. HB 37 briefly outlines Center for Disease Control
(CDC) guidelines regarding program components that work to reduce
the number of smokers in the State. Smoking is the leading cause
of death in the State of Alaska; approximately 500 Alaskans die
from tobacco use each year. An estimated 110,000 Alaskans smoke
and poll results show that over 80 percent of those smokers want to
quit. The bill allocates funds from the Attorney General's
settlement with the major tobacco companies. The settlement amount
was estimated to be $669 million however, with adjustments, the
total projected income for next year could exceed $800 million.
REPRESENTATIVE ROKEBERG referred to a chart and said that in
December of 1998, a 45 cent surcharge was applied to every pack of
cigarettes sold. That surcharge is paid by the consumer. Sales
decreased from $70 million to $54 million in one month. The
Legislature appropriated $1.4 million of those funds collected last
year for smoking control programs. The balance of the money was
deposited into the general fund. This year, the Governor has
suggested that those funds be used for amortization of bond
indebtedness for schools. The funds from Alaska's tobacco tax are
currently allocated to schools.
REPRESENTATIVE ROKEBERG stated that HB 37 would use a small portion
of the money that comes out of smokers' pockets for prevention and
for a smoking control program for those people who want to quit.
HB 37 stipulates that a private contractor be used to run those
programs.
REPRESENTATIVE ROKEBERG referred to the $1.6 million fiscal note
from DHSS and said DHSS would like to see that allocation increased
to $3 million. Although Representative Rokeberg said he supports
a larger amount, he is concerned that a fiscal note of that size
could cause the death of the bill. He added that one section of
the bill prohibits the sale of loose cigarettes below 20; the other
section prohibits the sale of gray market cigarettes for export.
He prepared an amendment that exempts duty free shoppers from the
provisions of the bill.
CHAIRMAN MILLER informed committee members that two amendments
have been proposed, one by Representative Rokeberg and one by the
Department of Law (DOL).
REPRESENTATIVE ROKEBERG stated that the amendment by DOL is
technical and that he does not oppose it. He asked that Doug
Gardner of DOL speak to that amendment.
Number 492
SENATOR WILKEN asked if the 45 cent surcharge is a federal
surcharge.
REPRESENTATIVE ROKEBERG said no, it is a surcharge imposed by the
tobacco companies' to pay for the settlement. He noted that
surcharge is in addition to the 71 cent increase imposed by the
legislature through the enactment of an Alaska tax the year before.
SENATOR WILKEN asked if the amount of taxes collected dropped $16
million in one month after the new surcharge was applied but, after
six months, sales returned to the level they were at before the
surcharge was applied.
REPRESENTATIVE ROKEBERG said that is correct, and that there is a
lot of concern about leakage and contraband. He pointed out that
he bought a package of gray market cigarettes in a liquor store in
Juneau in September.
Number 1084
MS. CHRISTY MCINTIRE, Executive Director of the American Lung
Association of Alaska (ALAA), introduced Eric Meyers, the Director
of Tobacco Control Programs with the ALAA. MS. MCINTIRE said that
the ALAA supports HB 37 in its current format, and in particular
the provisions of the bill that call for a comprehensive tobacco
control program in Alaska.
MS. MCINTIRE highlighted the reasons this legislation is needed.
California and Massachusetts have had remarkable results with the
programs they have implemented. Alaska has the technology to
implement a comprehensive tobacco control cessation program.
California has been providing its citizens a tobacco control
program funded from dedicated tobacco tax dollars. California's
program has saved lives in and has saved money for the state. More
than 1.3 million Californians have quit smoking and smoking rates
among teens in California have remained at 12 to 14 percent while
other states' rates have increased. That program has also helped
pregnant women quit smoking, and study results show a cost savings
due to the delivery of healthier babies.
MS. MCINTIRE explained in Massachusetts, tobacco tax dollars also
went to a tobacco control program. Between 1995 and 1999 the
smoking rate among high school students decreased by 15 percent
and, since 1992, overall cigarette consumption declined by 30
percent. Nationally, the rate decreased eight percent. Smoking
among pregnant women in Massachusetts has declined from 25 percent
to 13 percent. These programs have three key elements in common:
they are comprehensive, meaning multi-faceted with a lot of
different components; they are sustained over time; and they are
fully funded or well funded.
MR. ERIC MEYERS referred to a packet given to the committee and
noted the CDC has studied the state programs, reviewed existing
literature, and published state-specific guidelines for
comprehensive tobacco control programs. According to the CDC's
published guidelines for Alaska, the state should be spending $8.1
million to $16.5 million dollars per year on its program. The
Alaska Tobacco Control Alliance (ATCA) produced a plan for Alaska
based on the CDC guidelines. Alaska will receive $816 million
over 25 years from the tobacco industry settlement. That amount
will be adjusted for a couple of variables, including volume
reductions that result from declines in smoking. It will also be
adjusted upward as the result of an inflation adjustment factor.
Exactly what the revenue curve will consist of remains to be seen
but it will be a large amount.
MR. MEYER continued. The ATCA met after the legislative session to
decide how to use the $1.4 million, relative to the comprehensive
program that is outlined in the packet. It recognized that this
money was a first step toward creating a substantial program. ATCA
has been focusing on cessation, an aggressive public education-
counter marketing campaign, and improved data collection,
particularly among youth in Anchorage.
Number 1034
MS. MCINTIRE said that the ALAA issued an RFP in November of 1999
and received proposals from 22 organizations across the State to
provide cessation services to people in their areas. The proposals
equaled $1.1 million. The ALAA used a panel of experts to review
the proposals; four were funded. The Yukon-Kuskokwim Health Care
Corporation in Bethel was funded to put into place a significant
effort on cessation throughout its health care system. It will
offer both a counseling and pharmaceutical support system and check
for level of readiness among clients. A proposal from the
Anchorage Neighborhood Health Center was also funded. That program
serves uninsured and underinsured clients in Anchorage. The
program will focus on smoking cessation for pregnant women and
mothers with young children.
MR. MEYERS said a core feature of all successful state programs is
an aggressive counter marketing campaign. The average 14 year old
has seen about $20 billion worth of advertising before he or she
reaches the critical age when teenagers make the decision of
whether or not to smoke. The average age of new smokers is 14.5.
MR. MEYERS showed committee members a video containing some of the
television advertisements it has been using. The advertisements
are from California and Massachusetts and were obtained at a very
low cost.
Number 1514
MR. DOUG GARDNER, Assistant Attorney General, made the following
comments on the gray market portion of the bill. A number of
states have enacted legislation to prevent gray market cigarettes
from being sold in those particular states. Without such
legislation, Alaska will become a dumping ground for gray market
cigarettes. The gray market provision in HB 37 falls under AS
43.70.075, which is the statute that the Department of Commerce
uses to regulate business licenses and tobacco endorsements. The
bill would allow the Department of Commerce to regulate gray market
sales by those licensees but it would not regulate the importation
of gray market cigarettes by individuals. To close that loophole,
he drafted an amendment that picks up AS 43.50.010, the licensing
requirement that the Department of Revenue uses to regulate
individual sales. In addition, the amendment contains a reference
to subsection (I) which refers to the Commissioner of Revenue to
make the bill internally consistent.
ASSISTANT ATTORNEY GENERAL GARDNER said Representative Rokeberg's
amendment is not problematic to DOL from an enforcement standpoint
but, from a jurisdictional viewpoint, DOL does not view cigarettes
that are sold in a duty free enterprise as subject to Alaska law.
Those cigarettes are not imported into Alaska, they are brought in
by a bonded distributor and placed in a warehouse until they are
exported to other countries.
Number 1687
CHAIRMAN MILLER asked Mr. Gardner to define "gray market"
cigarettes.
ASSISTANT ATTORNEY GENERAL GARDNER explained that gray market
cigarettes are manufactured by American companies for sale in other
countries, such as Thailand. They may have a different formulation
and they lack any health warnings on the package. The cigarettes
go to San Diego, for example, sit in an export zone, and are re-
imported "around the fence" into the United States. They are very
cheap compared to other cigarettes that have health warnings and
other formulations. They should never have been re-imported to the
United States but they are for a variety of reasons, among them a
lack of ATF enforcement and loopholes in federal law.
Number 1749
CHAIRMAN MILLER asked if Amendment 1 allows DOL to seize gray
market cigarettes from individuals who purchase them for private
use.
ASSISTANT ATTORNEY GENERAL GARDNER replied neither the Department
of Revenue nor the Department of Commerce will be able to monitor
individuals for gray market cigarette purchases. Both Departments
would like to monitor Internet sales for individuals who buy large
quantities and then take the appropriate action. The amendment
will allow the Department of Revenue to collect taxes on the sale
of these cigarettes.
Number 1813
SENATOR ELTON clarified that the bill will apply to the new
Department of Community and Economic Development and he noted he
will make a technical amendment to the amendment to reflect that
correction.
REPRESENTATIVE ROKEBERG pointed out that he talked to the owner of
the duty free shop in Anchorage. That business holds a business
license endorsement therefore it would be subject to Section 1 of
CSHB 37(FIN). After speaking to counsel, he agreed duty free shops
should be exempted because the U.S. Bureau of Customs will
confiscate any cigarettes that a person brings into the country.
MR. GARDNER repeated that the State does not have jurisdiction over
duty-free cigarettes but he does not have any objection to the
amendment.
Number 1910
REPRESENTATIVE ROKEBERG explained that because of the business
license endorsement and the fact that the business sold export-only
cigarettes, the "black letter" law would be applicable. He said
that although it is a technical matter, he proposed the amendment
to make sure there is no question about it. The businesses keep
the endorsement because they can sell single packs of cigarettes to
an inbound passenger.
MR. GARDNER said that those cigarettes are being sold into Alaska,
the others are being sold out.
Number 1961
SENATOR PEARCE asked why the cost to cover one full-time position
in the DHSS fiscal note, dated 1/25/00, is $168,000.
MS. SUSAN MASON-BOUTERSE, Division of Public Health, DHSS, said
that line item covers partial funding for two positions that equals
one FTE. Partial funding is included for a chronic disease
epidemiologist.
SENATOR PEARCE asked what portion of the fiscal note funds the
chronic disease epidemiologist.
MS. MASON-BOUTERSE was not sure.
SENATOR PEARCE asked why DHSS will have to fund an epidemiologist
if DHSS's role in HB 37 is to watch over grants. She expressed
concern that $168,000 is a lot of money to partially fund two
positions and that DHSS is trying to pick up the cost of employees
from the settlement money.
REPRESENTATIVE ROKEBERG commented that he appreciates DHSS's desire
to have a greater smoking control program but he prefers a zero
fiscal note because of the fiscal realities facing the State.
SENATOR WILKEN asked whether a government program is necessary if
the money comes to the State and then goes directly to the American
Lung Association.
REPRESENTATIVE ROKEBERG said DHSS already has $200,000 in the
budget for positions. He believes that amount is more than
sufficient for contract oversight.
Number 2131
SENATOR WILKEN asked whether the ALAA could take on such a project.
MS. MCINTIRE commented that the ALAA took this project on knowing
it was a large project and the time frame was short. The ALAA
worked with DHSS to organize and negotiate a workable contract to
enable ALAA to "ramp up" quickly. She thought the ALAA board would
like the opportunity to operate this program for the State of
Alaska.
MR. MEYERS said this comprehensive program has multi-faceted
elements. Some of those elements are uniquely suited to government,
for example, enforcement. Some of the $200,000 is being "RSA'd" to
the Departments of Law and Community and Economic Development
because they have enforcement responsibilities for sales violations
by vendors. Other aspects of the Tobacco Control Program
administered by the State compliment the efforts of the ALAA. He
believes the government should, and must, continue to participate
in some elements of the program.
SENATOR WILKEN suggested discussing that issue in detail in the
next committee of referral.
SENATOR WILKEN moved to adopt Amendment #1. Hearing no objection,
CHAIRMAN MILLER announced Amendment #1 was adopted.
SENATOR ELTON moved to adopt Amendment #2 with a name change from
the Department of Commerce to the Department of Community &
Economic Development.
CHAIRMAN MILLER objected to Amendment #2 for the following reason.
The right to privacy is strong in Alaska, and whether he favors the
use of tobacco or not, tobacco is a legal drug. He opposes
allowing DOL to go after individuals who buy illegal cigarettes but
do not re-sell them. Because Amendment 2 conflicts with Alaska's
privacy right, he is opposed to it.
Number 2280
SENATOR ELTON said the amendment does not add any new functions to
any State agency in dealing with gray market products. The
amendment does add conforming language that cites the appropriate
statute to acknowledge that the Department of Revenue has a role.
CHAIRMAN MILLER indicated he believes Amendment #2 allows the DOL
to confiscate gray market cigarettes from a third party who
purchased them for private use.
MR. GARDNER clarified that the purpose of the amendment is to make
the law consistent, not to make anything new. Gray market
cigarettes are considerably different than cigarettes made for the
United States' market and they could be far more hazardous. If it
is the intention of the Legislature to prevent the importation of
gray market cigarettes into Alaska, the law should prohibit
distributors and individuals from being able to import them. DOL's
sole intent in proposing the amendment was to close the loophole in
statute and require consistent treatment of both the individual
licensee who is importing the illegal cigarettes and distributors.
The amendment does not create any additional police enforcement but
it will provide a deterrent.
TAPE 00-02, SIDE B
Number 000
CHAIRMAN MILLER agreed that DOL should go after the sellers, but he
expressed concern that the amendment steps into a gray area
regarding the individual's right to privacy in Alaska's
constitution.
MR. GARDNER said that if the amendment was in effect, DOL would
have more of an ability to persuade Internet sellers to not direct
those kinds of sales to Alaska. The amendment would give the state
another tool with which to deter sellers.
CHAIRMAN MILLER remarked he appreciates what Mr. Gardner is trying
to do but he believes the amendment goes too far.
Number 2328
SENATOR WILKEN asked if the amendment will only affect a person who
orders gray market cigarettes over the Internet and then gives or
sells them to another.
REPRESENTATIVE ROKEBERG said the bill only applies to gray market
cigarettes.
SENATOR WILKEN asked whether he would be considered a wholesaler or
dealer only if he sold or gave the cigarettes away.
MR. GARDNER explained that anyone who imports anything must have a
license and should report the taxes to the Department of Revenue.
If a person imports 50 cartons of gray market cigarettes for
personal use, the Department of Revenue would be suspect of that
kind of volume. If that person sold the cigarettes to friends,
under the current draft of the bill, that person would be
considered a distributor of the product who should be licensed.
Without the amendment, the person could use the gray market
cigarettes for personal use but taxes would have to be paid on
those cigarettes.
CHAIRMAN MILLER said with this amendment, DOL could technically
confiscate those cigarettes.
REPRESENTATIVE ROKEBERG commented that the amendment adds the
Department of Revenue to the confiscation and seizure provision on
page 2 of the bill and it only applies to gray market cigarettes.
The people taking advantage of the Internet gray market cigarettes
are evading federal taxes and there has to be some enforcement
provision.
Number 2147
CHAIRMAN MILLER said that he has no problem doing that to a seller,
but he repeated it oversteps the bounds of Alaska's privacy right
for individuals.
SENATOR ELTON indicated that Chairman Miller's concern is not with
the amendment, but with the bill itself.
REPRESENTATIVE ROKEBERG asked Mr. Gardner about the amendment.
CHAIRMAN MILLER asked if a consumer buys gray market cigarettes
over the Internet and pays taxes to the State of Alaska, whether
the bill or the amendment will give the department the ability to
seize those cigarettes from the person who purchased them for
personal use.
MR. GARDNER said no, not as the bill is now. It is the re-seller
with a business license that the bill targets. DOL wants to
prevent the shuffle of gray market cigarettes from retail to
individuals who might buy them over the Internet.
Number 2035
CHAIRMAN MILLER removed his objection to Amendment #2. He
expressed concern that the issue of privacy raised in the amendment
remains, but he noted the next committee of referral will look at
that issue extensively.
CHAIRMAN MILLER announced that hearing no objection to Amendment
SENATOR WILKEN moved SCSHB 37(HES) with individual recommendations
and attached fiscal notes. Without objection, it was so ordered.
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