SB 210 INCREASE TOBACCO TAXES SB 234 INCREASE TOBACCO TAXES   TAPE 96-20, SIDE A Number 001 CHAIRMAN SHARP called the Senate State Affairs Committee to order at 3:31 p.m. and brought up SB 210 and SB 234 as the first order of business before the committee. The chairman called Senator Ellis to testify. Number 015 SENATOR JOHNNY ELLIS, prime sponsor of SB 210, read the sponsor statement for SB 210. Under this proposal, cigarettes would be taxed at a rate of $1.29 per pack through FY99. From FY00 through FY02, cigarettes would be taxed at $1.53 per pack. From FY03 through FY05, cigarettes would be taxed at a rate of $1.77 per pack. Thereafter, the increments increase progressively at the rate of $0.24 per pack at intervals of three years. The tax for smokeless tobacco will increase from 25% of the wholesale price to 100% of the wholesale price of those products. This bill differs from the Long-Range Financial Planning Commission's legislation in that it inflation-proofs the tax levied. Senator Ellis hopes that SB 210 and SB 234 will move on to the Finance Committee, and they will have a debate there about the financial aspects of the legislation. It is estimated that $43,000,000.00 will be raised in FY 97 by SB 210. SENATOR ELLIS stated there would be no additional paperwork for business people and no new forms or bureaucracy: the tax would continue to be collected at the wholesale level. The support for this bill is very strong among smokers. Many people have mentioned to him that this bill would be a help to them in quitting smoking. And maybe we can stop some children from starting smoking. Senator Ellis stated that the cost to government caused by smoking-related illness is enormous. Current taxation levels don't come close to paying for costs to government, so we cannot complain about the rising health-care costs to government, when cigarettes are responsible for much of those costs and are not recouped through taxation. He asked that the committee look favorably on SB 210. Number 115 SENATOR RANDY PHILLIPS asked Senator Ellis if he would be interested in dedicating part or all of the revenues from SB 210 to education or health. SENATOR ELLIS responded he is completely open to any suggestions, but there may be a constitutional problem with dedicated funds and tampering with the pre-statehood dedicated school tax fund. SENATOR RANDY PHILLIPS thinks it might require a constitutional amendment. Number 130 CHAIRMAN SHARP stated the committee would take public testimony on SB 210 and SB 234 and continue until the committee gets a quorum. At that time, the committee will set that legislation aside to adopt committee substitutes for SB 231 and SB 222. He called Dr. Palmer to testify. Number 145 DR. WILLIAM PALMER informed the committee that he just left his office, where he's dealing with a woman whose respiratory rate is greater than her heart rate. She's still smoking, of course. But it will kill her; there's not any question about that. He stated that when he came to Juneau in 1973, he was stepping into a corner of the operative suite, putting his hands behind his back and coughing uncontrollably. That's when he quit smoking. Part of the reason was he buried two women under 50 years of age who died on ventilators at Bartlett Memorial Hospital because they could not oxygenate themselves any longer. Neither of them died of cancer; they just died from one of those other "minor" problems that cigarette smokers get. DR. PALMER stated he is personally outraged at the cynicism in the United States at shipping tobacco overseas. The mendacity of the cigarette selling industry in this country is absolutely beyond the pale. He has people he is burying; having been here since 1973, these are no longer patients, in a community of this size, these are friends, relatives, and neighbors. Anything that can be done to redress what's been going on...he thinks this is a wonderful place from which to start. Dr. Palmer stated that he is the recipient of a moderate amount of funds from the state, and an awful lot of those funds are coming from the ravages of cigarette smoking. If health-care is going to be addressed at any level, this seems like a good place to start. Number 200 GLENN HACKNEY, American Cancer Society, former state senator, stated it is a switch being on the testifying end of things. He stated that the legislation before the committee might not be viewed as purely a tax bill, but as a health bill or preventive medicine. One of the costs of smoking is the 420,000 some lives that are lost each year to smoking-related illnesses. These statistics present a dilemma for the tobacco companies: their customers insist on dying, as Dr. Palmer pointed out. Somewhere there has to be a replenishment pool of customers. The unfortunate fact is that young people are the ideal market. Statistics show that one of the best preventive methods to keep young people from taking up smoking is the cost of the product. If young people can be kept from smoking until they reach about 19 years of age, they are liable not to start smoking. Mr. Hackney stated he started smoking at the age of twenty during wartime when the cigarettes were free. This bill would help kids not to smoke. There are about 50 or 60 kids who gather across from Lathrop High School to smoke. A good hard-headed approach would say, "Get some police officers up there and round up those young rascals and haul them off to jail." It doesn't work like that. The trick is, that they don't get started. MR. HACKNEY stated that most of the people at this hearing are off the streets: they are not professional lobbyists, they're not professional speakers. He well remembers that lobbyists, like bikers, are everywhere. There was a gentleman by the name of Crawford who is a lobbyist for the major cigarette companies, and he made the statement that it was his job to stop any bill that had anything to do with preventing smoking. MR. HACKNEY stated that legislators have a chance to do something for their young constituents. He has heard people down here say, "We're not going to do anything as far as raising taxes, raising more money, until we get spending under control." Mr. Hackney suggested that the tobacco tax increase bills be advanced. He believes the bills have wide support in the senate. If the bill gets over to the House Rules Committee, and the spending cuts don't take place, let it die. If the cuts do take place, then pass it. You will be doing a favor to your constituents. SENATOR RANDY PHILLIPS asked Mr. Hackney about dedicating revenue raised by this legislation. Would he support something like that? MR. HACKNEY responded that it is a cumbersome and somewhat unnecessary process. He doesn't believe it needs to be done. He trusts the legislature to spend the money the right way. He doesn't thinks a dedicated fund is necessary. Number 298 STEVEN HAMILTON, Research Analyst, Governor's Advisory Board on Alcoholism & Drug Abuse, Department of Health & Social Services, stated that tobacco and tobacco products are gateway drugs, particularly for young people, and there is a positive correlation between demand and willingness to pay in price. For those reasons, the advisory board strongly supports SB 210. We support increased excise taxes on tobacco products in general, but like the built-in adjustment for inflation in SB 210. Mr. Hamilton's experience in running chemical dependency treatment centers is that in virtually every single case in which they saw adolescents who were addicted, they were smokers and they started with tobacco products. The advisory board strongly supports SB 210. Number 313 TERESA LYONS, Fairbanks District of the Alaska Nurses Association, testifying from Fairbanks, supports SB 210 and or SB 234. She supports the tobacco tax as a mechanism to influence use, particularly focusing on choices of Alaskan youth. Nicotine is considered an addictive substance that requires prescription by physician or nurse practitioner for the use of Nicorette gum or nicotine patches. These products are used by smokers attempting to wean themselves away from tobacco products. Allowing cigarettes to be available at minimal cost, while requiring prescriptions and costly medication of the same substance sends a confusing message to the youth of Alaska. We have three levels of influence available to us to limit smoking to young people: education, which is occurring; age limits, which are in place; and the cost of the product, which has not been utilized to its' fullest. The only avenue available for the government to affect the price of a product is the use of taxation. Ms. Lyons thinks that by not increasing the tobacco tax, we are sending a social and behavioral message. Legislators are being asked to use economic influence to send the right message. Please help to protect the health of our children and our youth: move these bills out of committee and support the passage of an increased tobacco tax. Number 350 LOIS IRVIN, testifying from Homer, supports SB 210 and SB 234. She also supports the house versions of these bills, which don't seem to be moving. Therefore, she certainly supports SB 210. She endorses what the previous speakers have said. Ms. Irvin thinks this legislation is very important. Number 360 FRANCES YOUNG, testifying from Ketchikan, informed the committee that she is the mother of eight children and involved with Alaskans for Drug-free Youth. She is also working with the Southeast Seven Circles Coalition, which is addressing the issue of drugs and how to reduce their use. She supports either SB 210 or SB 234. She thinks the inflation proofing in SB 210 is a good idea. She has been told by smoking adults that the cost increase would help them stop smoking. She stated she also concurs with Dr. Palmer and Glenn Hackney in that cost is a deterrent to smoking, especially for children. She urges the committee to resist the tobacco lobbyists and listen to the grass-roots people in the state. Ms. Young understands the problem with dedicating funds, but if there are increased state revenues, maybe some of it could be used for prevention of nicotine addiction. Funds are also need to start smoking cessation programs. It is such a hard thing to quit smoking, and somehow we need to help those people who want to quit. It would certainly help to have money for those types of programs. She thinks this tax would be very helpful in many ways. CHAIRMAN SHARP agreed with Ms. Young that it is very hard to quit smoking. He stated he smoked for 19 years and was up to over three packs a day. His wife had to put up with him for a few months after he quit. Number 393 DR. RODMAN WILSON, Executive Director, Alaska State Medical Association, stated all legislators will receive a copy of ASMA's quarterly Journal, Alaska Medicine. This issue will be totally devoted to cigarettes. He hopes legislators will have a chance to look at the journal. The association supports raising the tax on tobacco and would support either SB 210 or SB 234, although SB 210 looks a little bit better to him. Dr. Wilson stated when he was the Public Health Director in the City of Anchorage in the mid- eighties, he studied the contribution of tobacco toward deaths in Anchorage and found, conservatively estimated, that 20% of all deaths in Anchorage were directly attributable to tobacco. The state epidemiologist, John Middaugh, did a similar study from 1991- 1993 and came up with a 19% figure. It's an enormous burden to society, not just in terms of mortality, but also morbidity. We are very much in favor of raising taxes. Raising taxes sharply won't solve the problem with youngsters taking up the habit, but it is a powerful, powerful tool, and we urge you to pass this legislation. ASMA's interest in this legislation has nothing to do with solving the fiscal crisis in Alaska: we want it done for its' own sake. In this country in this century alone, upwards of 30,000,000 people will have died by the year 2000 from tobacco. It is a shame on our culture and society that when we began to know by mid-century how terrible tobacco is, that we haven't done more than we've done. Here is your chance to do a little bit toward this awful problem in Alaska. Number 433 DR. PETER MJOS, testifying from Anchorage, stated he serves on the State Board of the American Heart Association. Dr. Mjos stated that disease, disability, disfigurement, and death are the true and only legacy of tobacco. If you disagree with that, then we should all go home. If you agree with that, then you must agree that something must be done. In his practice, he has seen disease across all generations, extending even from before conception and certainly unto death. What we are discussing is major public health legislation: this is not a tax issue, and should not be construed as one. To construe this as a tax issue would be merely a "smoke screen". Children start smoking; adults do not start smoking. Most surveys conducted in this country have used as a demonstration figure $2.00 per pack of cigarettes. Across all demographic lines, there has been overwhelming support, with one exception: smokers. Experience in Canada and New Zealand has shown that to raise the price of tobacco products markedly diminishes the number of youngsters who will start smoking. Dr. Mjos mentioned the Ligget-Myers Corporation's multi-million dollar settlement with states, which is occurring at this time. There are enormous state and federal expenditures involved in tobacco-related illness. To increase this tax will diminish the number of smokers and the amount of disease. Number 470 GENEVIEVE GAGNE-HAWES stated that in her health class, one of the kids was talking about how stupid suicide was, and he couldn't see why anyone would kill themself. But that kid smokes. He is slowly killing himself with tobacco. Adults don't start smoking; kids start smoking, and kids get addicted. Recent surveys show the number of kids smoking is growing. Ms. Gagne-Hawes stated that money is behind the sale and purchase of tobacco. The more something costs, the less likely teenagers will be to spend money on it. A $1.00 a pack increase will bring down the number of youth smokers in Alaska by 32%. 74% of all Alaskans support this tax. If kids want tobacco, they should have to pay more for it than they are right now. Because in the long run, it's costing them their lives. Number 505 JUSTINE MUENCH, President, Juneau District of the Alaska Nurses Association, stated that the last twenty years of her career have been in coronary care units, intensive care units, and a cardiac and pulmonary rehabilitation center. Every day she works with people whose primary risk factor for being in a rehabilitation center is that they have smoked. Ms. Muench contended that smoking is the only one, true preventable risk factor for cardio-vascular disease. The other top two, high blood pressure and high cholesterol level, have genetic predisposition. Smoking does not; it is a choice. The public health toll for this habit is enormous. She stated that the patients she sees every day all started smoking in their teens. She sees very few patients with cardio-vascular disease who have never smoked. All of the pulmonary patients have smoked, and some of them still smoke, even with their oxygen in hand. They have all stated to her, "If only I had known as a teenager; if only my parents hadn't smoked; or if it was not so cheap and readily available." Ms. Muench stated she is referring to people with cardio-vascular disease who are in their thirties and forties. It used to be that most of her patients were all older than her. Half of the patients she works with now are younger than her: they are 29, 30, and 35. MS. MUENCH stated this is not a tax issue, as has been said several times; nor is it a discriminatory issue. This is a health issue. We all pay for smoking addiction with loved ones who have died or become very ill. We pay with higher health-care costs and higher insurance premiums. Smoking is no longer an individual behavior that only affects the person who is smoking: it affects their family members and coworkers, the health-care system, and employee work habits. The State of Alaska has within its' power one means to stop the alarming rates of smoking in this state. She does not believe that a tax alone will be enough, but it is time to have a more equitable system for paying for this addiction. It makes sense to offer a disincentive to smoke, along with continuing existing education and role-model programs, rather than a punitive system or penalties for underage smokers. This would seem to her to be a burden to an already overburdened judicial and police system. She urged support of increasing taxation on tobacco products in the hopes that fewer people will start smoking, more will quit, we will have a healthier state, and perhaps she can retire earlier than anticipated. Number 548 GLENN RAY, Manager - Health Promotion Program, Community Health & Emergency Medical Services, Division of Public Health, Department of Health & Social Services, stated he wanted to address an earlier statement that this tax would not cure the problem. That is true, but he wants to frame that within what is happening nationally. In every one of the fifty states, there is a tobacco prevention and control program. That program is funded with federal dollars. In addition to that, ten programs are funded through the Robert Wood Johnson Foundation; those ten programs are administered by the American Medical Association. Alaska is a recipient of two of those grants: the Robert Wood Johnson Foundation and the CDC Foundation. In all those programs, there are four strategic areas: youth access, media advocacy, clean indoor air, and pricing. It is in the pricing area that taxation is important. Taxation is the public's way of increasing the price of tobacco. It is clear from the experiences in California, Massachusetts, Canada, and other smaller locations that when there is an increase in the price of tobacco, there is a decrease in youth consumption. That is significant to the long-range reduction of tobacco use. Number 565 ANNE MARIE HOLEN, Citizens to Protect Kids from Tobacco Coalition, testifying from Anchorage, stated the coalition is a statewide coalition of organizations and individuals who support the proposed legislation to increase state tobacco taxes. The coalition includes the American Cancer Society, the Lung Association, the Heart Association, the Alaska Native Health Board, the State Medical Association, the State Public Health Association, the Association of Alaska School Boards, and so many other organizations that if she listed them all she would use up her three minutes. Citizens to Protect Kids from Tobacco Coalition strongly urged the committee to support the proposed legislation for all the reasons mentioned in previous testimony. But more than that, the coalition urged committee members to take a more active role in educating their colleagues, both in the senate and in the house about the importance of this legislation. This is not the time for posturing about "no new taxes". The public overwhelmingly supports this legislation, including most smokers in Alaska. MS. HOLEN stated that smoking is the leading cause of death in Alaska, and our children are becoming addicted to nicotine in record numbers. The health and economic impacts of tobacco use on society are enormous. We have seen news stories for the last several days about how one legislator in particular thinks tobacco taxes are unfair. Ms. Holen asked, "Is it fair that non-smokers in this country pay 75% of all government expenditures for smoking- related health care?" In Alaska, smoking creates a drain on the economy of almost $300,000,000.00 per year. We all feel that impact, whether we're aware of it or not. TAPE 96-20, SIDE B MS. HOLEN stated there is no good reason to oppose a tobacco tax increase, and every reason to support it. Number 585 ERIK MYERS, testifying from Anchorage, stated there is a strong case to be made for increasing taxes on tobacco products. He thinks it is the right of adults to make informed choices, but a fourteen-year-old, seduced by multi-billion dollar media campaigns are not making informed choices. Committee members have heard the statistics: adults don't start smoking, kids start smoking. The facts are not in dispute: it is abundantly clear that significant tax increases will save lives. There are very few opportunities public officials have to take an action that will save lives. If you take action and support this measure, there will be a significant number of lives saved as a result of that action. Failure to take action on this measure, which has been endorsed by Republican administrations on the national level, by the Hickel administration in the past, and with other multi-partisan support, perpetuates the ongoing predation by the tobacco industry on children. He hopes the legislature will move promptly on this legislation. Number 550 ANNETTE MARLEY, Alaska Native Health Board, supports SB 210, SB 234, and HB 431. Ms. Marley works for the Trampling Tobacco Project at the Alaska Native Health Board. She sees these bills as the most essential health measure that could be taken to reduce the ravaging results of tobacco use on Alaskans' health. Ms. Marley gave a brief history of tobacco use by Alaska Natives. She stated that more than one-third of Alaska Native deaths are attributable to tobacco use. This loss of life is in part due to the artificially low price of tobacco. It is believed that with a dollar increase on each pack of cigarettes, 32% of Alaskan teens who smoke will be spared a tobacco-related death. She asked legislators to not continue to allow kids' lives to be traded in for tobacco. She, and 74% of Alaskans urge legislators to vote for SB 210 and SB 234. Number 523 EMILY LARSON, American Cancer Society, stated that in her years as a volunteer, she has seen a lot of unnecessary suffering. In the past four years, she has lost two siblings from lung disease. It is a deadly disease, and we need to get serious about doing something about this. She sees this as a health issue, with any money being raised simply a bonus. She asked legislators to consider the legislation. Number 508 DIANA KUHNS, Executive Vice-President, American Cancer Society, stated the American Cancer Society conducted a poll last January. That poll found that 75% of the respondents of the poll stated they support tobacco taxes. Of respondents who were smokers, 55% support the tax. So the society is present in support of SB 210. Each day, over 3,000 children become regular smokers. If we look into the future, 30 of these 3,000 children will be murdered, 60 will die in car accidents, and 750 will be killed by tobacco. She stated that legislators' support of SB 210 would be greatly appreciated. CHAIRMAN SHARP entered into the record written testimony from Ms. McCabe dated 3/14/96: Dear Senator Sharp: This is to ask your support of legislation increasing tobacco taxes. I view this legislation more as a health measure - a significant step towards disease prevention - than as a form of taxation and revenue. Increasing the cost of cigarettes will help discourage young people from starting to smoke, and will protect those who are most vulnerable to a proven health hazard. Increased taxation in this case is fully justified. Smoking creates major social costs, and the revenue generated by the increase would at least begin to cover those costs. Sincerely, Janet W. McCabe. Number 485 BENJAMIN S. STEELE supports increasing tobacco taxes. He stated he is an ex-smoker, and it has been quite hard quitting. Mr. Steele stated his father smoked until he had a heart attack. He thinks these bills are one of the best things they can do for the state, and for his family. Number 475 CURT BODENMENDER informed the committee he started smoking as a child, not unlike the majority - 90% - who start before the age of 19. He started smoking at the age of 14 because of the image he wanted to create and because of the easy availability. It was inexpensive: one pack cost about the same as two cans of pop. It did not take long before he became dependant on tobacco, and soon he needed to smoke to feel normal and get along in every-day situations. MR. BODENMENDER stated once he began smoking, it took him about three years to decide to quit, then seven more years to actually quit. So he wasn't surprised to hear that 70% of smokers want to quit, but only 2.5% quit within any given year. He can't recall exactly how many times he's tried to quit, but in the last year, it's been at least five times. Mr. Bodenmender stated he quit again seven weeks ago. He quit because he doesn't want to be controlled by a substance and wants to be at his full capacity, and because he doesn't want to die prematurely. He did not quit because he stopped craving tobacco. The physical and psychological urges are still there. His situation is not unique, and he is sure that every ex-smoker wishes there was something that would have kept them from starting, and that is why he is testifying in favor of increasing tobacco taxes. He believes this tax will greatly decrease the number of people who have to go through the pain of quitting, or worse, the hopelessness of not quitting. He believes this will drastically cut the number of kids who start using tobacco, and subsequently the number of adults who daily battle their simultaneous craving for tobacco and the grave need to stop. Number 433 STACY GOADE, Staff, Seven Circles Coalition, stated that some people think if more education occurs, they can stop cigarette smoking. She doesn't see that happening. There are many education and smoking cessation programs, but they are still seeing increases in the number of smoking youth. We would like to reduce youth access to tobacco products in the stores. We would like to advocate for tobacco tax increases. We want to educate youth about tobacco advertising: it's extremely powerful. The network also believes that this tax legislation is of a health benefit, not so much a tax, but a disincentive to use of tobacco. It isn't really a tax, because we pay higher taxes in the long run for health-care costs related to tobacco illness and death. As elected officials, you can view this as a win-win-win solution. The Alaska Federation of Natives (AFN) passed a resolution in support of increasing the tobacco tax. Nearly twice the number of Alaska Native men and women are dying from smoking cigarettes, compared to their counterparts in this state. She thinks that a tax would reduce use throughout the state. CHAIRMAN SHARP stated the committee appreciates the broad range and diversity of testimony that has been given today. He stated he looks forward to progress on these bills. The chairman stated the committee would move on to the next item on the agenda.