HB 1 - CIGARETTE AND TOBACCO TAX HB 52 - INCREASE TOBACCO TAXES Number 0233 The first order of business to come before the House State Affairs Standing Committee was HB 1, "An Act relating to taxes on cigarettes and tobacco products; and providing for an effective date." And, HB 52, "An Act relating to taxes on cigarettes and tobacco products; and providing for an effective date." CHAIR JAMES called on Representative Con Bunde, sponsor of HB 1, to present the bill. REPRESENTATIVE CON BUNDE, Alaska State Legislature, expressed his sorrow for having to hear HB 1 and HB 52, or for any bill labeled "taxes." He stated, "Because then I would be bringing a bill to you that would say `user fee bill' and `economic barrier bill.' Because that's the purpose of the bill. We have a vehicle in an existing tobacco tax and that has become the vehicle for both your bill and my bill. And, that's the most expedient way to get to what I want, and that is an economic barrier to young people to begin to smoke and a user fee for those that are costing the state hundreds of thousands of dollars a year in medical expenses stemming from their addiction to nicotine." REPRESENTATIVE BUNDE explained he was initially hesitant to introduce HB 1 because he did not believe in a sin tax. He stated, "You need to convince me, educate me that this indeed--this approach to the use of tobacco will work and will serve as a economic barrier to young people beginning to smoke." His constituents and the research indeed were able to convince him. He cited in Canada the use of tobacco went down 4 percent for every 10 percent the price increased among the general population. The impact was even greater among young people whose income tended to be limited. He reiterated he was convinced a significant increase in the user fee would deter young people from beginning to smoke. The evidence also supported that most smokers started when they were teenagers. Teenagers believed that they were bullet proof. "The consequences of tobacco use are not visited on folks immediately. If you smoked today and next week developed oral cancer, probably not many people would begin to smoke. But, it takes 20 years. In my mother's case she began to smoke when she was 16, and the tobacco did not kill her until she was 50. It takes a while." Furthermore, teenagers were very susceptible to the media. He cited the effective campaign of the commercials during the Super Bowl Game. The advertisers did not spend $1 million or more to produce a commercial because they loved football or because they loved the audience, but because it was a very effective means to move a product. "And, the same with Phillip Morris and RJ Reynolds and the rest of them. They spend a great deal of money and they do it because it's effective and it recruits new smokers. And, the new smokers, as I said earlier, are virtually all young people." He further stated he knew that HB 1 would not stop everyone from smoking. "When people are seriously addicted, they will do what they need to do to feed their addiction." However, if this bill would stop a significant number of young people from starting to smoke then that would be wonderful. Number 0716 REPRESENTATIVE BUNDE further stated the use of tobacco products costs the state of Alaska hundreds of thousands of dollars each year in medical expenses. "I think that if any other activity was costing us that much money, we would ask the people engaged in the activity to try to help us finance the cost of this activity." House Bill 1 and House Bill 52 would not absolve the state from all of the cost, but they would move the state in the right direction. Number 0764 REPRESENTATIVE BUNDE briefly explained the difference between HB 1 and HB 52. According to HB 1 the money raised would go directly to the general fund to help manage the budget allowing the state to not tap into its savings account. He cited the figure projected would be about $40 million. REPRESENTATIVE BUNDE in conclusion stated he did not claim to have the only solution to this issue and was looking forward to hearing other opinions surrounding the concerns of where the money should go.  Number 0886 CHAIR JAMES announced her opinion had not changed regarding the issue of a tobacco tax from last year. The most basic and valid rationale was the extra medical expenses incurred as a result of the use of tobacco products. It was a wise idea to collect from the users to help pay for the medical expenses, she declared. She had always supported a tobacco tax provided that the funds could be dedicated to the construction of schools. She noted some people in the Interior of Alaska and the Fairbanks area felt that she was being disingenuous by stating she was personally opposed to this method of manipulating social behavior, yet she sponsored a bill to support the behavior. Chair James did not feel she was being disingenuous, but rather perfectly honest regarding her stance. She sponsored the bill because so many people in the state indicated that they wanted such a tax. Therefore, as a representative in a representative form of government, she felt obligated to bring forth this issue. She could not control what would happen to the bill after it left her fingers, but she was willing to bring it forward for everyone's consideration. CHAIR JAMES further stated her interest in the school fund stemmed back from the first year she was elected to the Alaska State Legislature in 1993. She cited as of December of 1996 the budget for school maintenance and construction needs was $620 million. In 1993 a big funding was given towards school construction some of which was in the form of bonds and the state was now paying for them. That figure did not even touch the surface of the needs for school construction in Alaska, she declared. That was the love she had for HB 52. She called it a win-win solution for the demands of those that wanted a tobacco tax and for the needs of the schools. She cited a school in her district, Tri-Valley, was built for 165 students and had grown to 300 students. The school was in need of more bathroom facilities due to the increase. Its request was far down on the list due to life, health and safety issues that needed immediate repairs. Therefore, she stated, the validity of putting the money into a dedicated fund for school construction and maintenance held a lot of weight. "And, as long as I feel like I can get that little positive thing, I'm willing to support and pass the tobacco tax at $1 a pack." Number 1159 CHAIR JAMES further explained both bills implemented a $1 tax increase on the effective date. In three years the tax would increase an additional 24 cents, and in three more years another 24 cents. She reiterated the only difference between the two bills was that HB 52 dedicated the money to a pre-statehood dedicated fund. Number 1188 CHAIR JAMES explained there was dispute surrounding HB 52 regarding the constitutionality of dedicating money into the pre-statehood education fund. The attorney general wrote a legal opinion in 1959 or 1960 that indicated if there was a change made to the tax levy of a dedicated fund the grandfather rights were lost. There was evidence, however, in the minutes of the Alaska State Constitutional Convention, whereby, Mr. White, Chair, Finance and Taxation Committee, indicated that was not the committee's intention. The committee believed that as long as the tax was not eliminated, the grandfather rights remained intact. Therefore, an increase or decrease, the kind of tax, or the use of the fund would not affect the ability to dedicate the funds. She pointed out that this could be challenged in court. There was evidence, however, in other court cases where committee intentions swayed the ruling. Therefore, she felt comfortable that the bill would have a chance of moving forward. Number 1280 CHAIR JAMES further stated she had received a lot of support regarding this issue and was looking forward to hearing the rest of the testimony. Number 1318 REPRESENTATIVE KIM ELTON wondered what would happen during the course of a court appeal to the taxes collected. He specifically asked, if the tax would go into the general fund, for example, or be suspended? CHAIR JAMES called on Jack Chenoweth, Legislative Affairs Agency, to come forward and address the question of Representative Elton. CHAIR JAMES stated she understood that the tax would not go away if the issue was lost in court. Number 1359 JACK CHENOWETH, Attorney, Legislative Legal Counsel, Legislative Legal and Research Services, Legislative Affairs Agency, stated the tax would continue to be collected according to the language in HB 52. An alternative was drafted in the event the court ruled that raising the levy would destroy the dedication of the funds. The alternative indicated the funds would go to the general fund as in Representative Bunde's bill. He did not know if the court would enjoin the collection of the taxes while it sorted through the constitutionality of the dedication. He believed the courts would let the taxes go forward to the dedicated fund and if it ruled against the dedication then at that point the funds would go to the general fund as the alternative directed. Number 1433 REPRESENTATIVE IVAN IVAN asked Mr. Chenoweth to compare the levies in HB 1 and HB 52, and to comment on the two bills in general. Number 1449 MR. CHENOWETH replied the rates of levy and the date that the levies would change were identical in both bills. He explained in 1959 or 1960 the attorney general indicated that if the rate of a levy in a dedicated tax was changed the dedication would be lost. As a result, whenever the legislature changed the rate of a cigarette tax, the tax went to a different source of authority, AS Sec. 43.50.190, "Additional tax levy on cigarettes," where that component of the tax was at 12 mills. House Bill 1 increased the levy to 50 mills immediately and then to 24 mills at three year intervals thereafter. House Bill 52 increased the original levy in AS Sec. 43.50.090, "Tax imposed," which had not changed since statehood, by 50 mills and then by 24 mills at three year intervals thereafter. The rates of levy were the same in both bills. It was just a question of where the money would go-to the general fund or to the school fund. Furthermore, the tax on tobacco products, those products other than cigarettes, also increased in both bills by the same rate and were indexed to increase every two years. Number 1550 REPRESENTATIVE MARK HODGINS stated the mills were usually dedicated according to an assessment. He asked Mr. Chenoweth what the assessment was in this case? Number 1562 MR. CHENOWETH replied the tax was per cigarette. Currently, 2.5 mills were dedicated and 12 mills were un-dedicated for a total of a 14.5 mills per cigarette, or a 29 cent tax per package of cigarettes. The two bills would increase the tax from $1 to $1.29 per package of cigarettes. Number 1593 REPRESENTATIVE HODGINS asked Mr. Chenoweth when it would be possible to ascertain a new ruling from the attorney general regarding the dedication of the tax? Number 1605 CHAIR JAMES replied she understood that the attorney general would maintain his current opinion. The attorney general would probably not file for a court case. There was no way to determine, however, if anybody would file for a court case. Number 1636 REPRESENTATIVE HODGINS asked Chair James why she did not impose a maximum tax right now compared to the incremental increases imposed in the bills? He stated, "If we're going to do a deterrent to people smoking, why not do a deterrent to people smoking?" Number 1659 CHAIR JAMES replied that the testimony the committee was about to hear would answer his question. She further mentioned that a bill could be changed, and if that was the desire of Representative Hodgins, he could make a motion to support his desire. Number 1695 REPRESENTATIVE AL VEZEY asked Mr. Chenoweth to confirm his understanding that the bill would increase the mills to 86 by the year 2006. Number 1711 MR. CHENOWETH replied, "Yes." REPRESENTATIVE VEZEY further asked Mr. Chenoweth to confirm his understanding that the bill would then double in 21 years. MR. CHENOWETH replied, "Approximately, yes." REPRESENTATIVE VEZEY further asked Mr. Chenoweth if this tax would approximately escalate at an average rate of 4 mills per year? MR. CHENOWETH replied, "Yes, that's correct." Number 1732 KAREN PERDUE, Commissioner, Department of Health and Social Services, was the next person to testify before the House State Affairs Standing Committee. She declared the department's support of HB 1 and HB 52, and stated she was here today to discuss the health implications of the bills and not the revenue implications. The department supported the $1 tax increase for health reasons. According to the National Institutes of Health, she explained, the use of tobacco products was the nations deadliest addiction. In 1964 the surgeon general issued the first report that indicated smoking was harmful. In 1988 the surgeon general issued a report that indicated nicotine was an addictive agent and demonstrated that most tobacco users found it difficult to quit. Number 1844 MS. PERDUE continued by asking the question, "Why now? What's the fuss? What's the issue here?" The health community was coming forth now because of the alarming statistics. The rate of smoking and the use of tobacco for young kids was growing in the state. The state should be compelled to do something aggressively about this issue because it knew what the results would be. She stated the department believed in aggressive measures, education and enforcement as a three-part strategy where the price was an important factor as well. Ms. Perdue explained Pat Carr, Department of Health and Social Services, was her to explain the findings in the handout titled, "Tobacco Tax Bill Analysis- Presentation to the 20th Alaska Legislature," to the committee members. Number 1889 PAT CARR, Health Program Manager, Community Health and Emergency, Medical Services, Division of Public Health, Department of Health and Social Services, was the next person to testify. She explained the analysis before the committee members highlighted the department's major concerns regarding the use of tobacco in Alaska and the efficacy of taxation as a strategy. MS. CARR referred to page 2 and explained tobacco usage was the number one cause of preventable death and disease in the United States causing over 419,000 deaths per year. And, 23 percent of the deaths of Alaskans 35 years of age or older in 1991 were attributed to smoking. MS. CARR referred to page 3 and explained the 419,000 deaths caused by smoking in the United States were more than deaths caused by fires, illegal drugs, homicides, Acquired Immune Deficiency Syndrome (AIDS), suicides, motor vehicular accidents and alcohol combined. MS. CARR referred to page 4 and explained in Alaska cigarette smoking contributed to over 1,400 deaths. This was more than deaths caused by fires, firearms, aircraft crashes, AIDS, falls, motor vehicular accidents and alcohol combined. MS. CARR referred to page 5 and explained 83 percent of adult smokers reported that they started smoking before the age of 20. She called nicotine addiction a pediatric disease. Twenty-one percent of Alaskan high school students reported that they regularly smoked in the last month. Twenty-five percent of Alaskan middle school students reported smoking at least one cigarette in the last month. This meant that there was a problem among very young children. MS. CARR referred to page 6 and explained 64 percent of Alaskan tobacco merchants complied with tobacco restriction laws in 1996. Therefore, 36 percent of Alaskan vendors did not comply. She explained the federal government mandated an 80 percent compliance rate by the year 2000 under the Synar Amendment or else, Alaska would loose 40 percent of its substance abuse block grant. The study further founded that tobacco vendors refused to sell to 14-15 year olds 71 percent of the time, while 16-17 year olds were refused 58 percent of the time. MS. CARR referred to page 7 and explained there was a special concern among Alaska Natives in the state. The findings suggested that Alaska Natives had some of the highest rates of tobacco use in the world, at 47 percent for men and 39 percent for women. Alaska Natives accounted for 23 percent of smoking related deaths while they accounted for 17 percent of the state's population. MS. CARR referred to page 8 and explained Alaska Natives also had the highest cancer mortality rate of any indian health service area. The lung cancer death rate among Alaska Native women was three times the national average, and tobacco use among Alaska Native youth was higher than non-native youth. MS. CARR referred to page 9 and explained the table illustrated the comparison of tobacco use between United States high school student, Alaska and Alaska Natives. MS. CARR referred to page 10 and explained 41 percent of Alaska Native boys and 32 percent of Alaska Native girls were using smokeless tobacco products weekly. And, among the boys, 45 percent started using tobacco before the age of 8. MS. CARR referred to page 11 and explained the direct medical costs for smoking related illnesses for Alaskans aged 35 years or older in 1993 was $96.5 million. Twenty-three million dollars of the direct medical care costs for smoking related illness was paid by Medicaid in Alaska. Meanwhile, the state collected only $15.6 million in cigarette tax revenues in 1993 illustrating the disparity between the users and the health care costs. MS. CARR referred to page 12 and explained the state of Alaska had taxed tobacco since its territorial days, when a 5 cents per pack tax was levied on cigarettes to help fund school construction. The current tax level of 29 cents per pack had been in place since 1989. In 1989 Alaska ranked 17th among the 50 states and the District of Columbia in the amount of tobacco tax levied. Currently, Alaska was ranked 28th among the states. MS. CARR referred to page 13 and explained that tobacco taxation had been gradually reducing as a portion of the total cost of the retail price of a cigarette. MS. CARR referred to page 14 and explained that for every 10 percent increase in tobacco prices, youth tobacco consumption would fall by at least 10 percent. And, for every 10 percent increase in tobacco prices, general consumption would fall by 4 percent. At the current teenage smoking rates, approximately 18,000 Alaskans under the age of 18 would die prematurely of a tobacco related illness. Therefore, there was indeed a potential to save Alaskan lives. MS. CARR referred to page 15 and explained a $1 per pack tax increase would reduce youth smoking in Alaska by an estimated 32 percent. The tobacco tax would prevent 5,700 premature deaths under the age of 18. MS. CARR referred to page 16 and explained the tobacco tax rate comparison among the major industrialized nations where the United States was the lowest at 57 cents per package of cigarettes. MS. CARR referred to page 17 and explained that the groundwork was in place to support a tobacco tax. There was broad public support. A survey indicated 75 percent of Alaskans supported the $1 per pack tax. This figure included 75 percent conservatives, 75 percent moderates, 73 percent liberals, and 55 percent smokers. MS. CARR referred to page 18 and explained the tax was also supported by C. Everett Koop, M.D., former Surgeon General. It was also supported by the Alaska Tobacco Control Alliance including the Alaska Native Health Board, the American Cancer Society, and the American Heart Association. Number 2218 REPRESENTATIVE FRED DYSON commented he understood that the health effects from cigarettes were far more dangerous than other forms of tobacco use. He asked Ms. Carr to qualify his statement. Number 2238 MS. CARR replied there was more evidence on the effects of cigarette smoking. However, there was evidence to support a significant rate of oral cancer and addiction, for example, from smokeless tobacco. Number 2247 REPRESENTATIVE DYSON asked Ms. Carr if this was also true for cigar and pipe tobacco? Number 2251 MS. CARR replied it was also true in terms of oral cancer and addiction. Number 2263 REPRESENTATIVE DYSON commented it appeared that the rates of lung cancer and emphysema were significantly different for non-cigarette smoking compared to cigarette smoking. He asked Ms. Carr if that was true? Number 2272 MS. CARR replied she could not answer that directly in terms of the exact comparison between cigarette and pipe tobacco smoking. An increase in the harmful effects would be expected for the respiratory tract, however. Number 2285 REPRESENTATIVE DYSON asked Ms. Carr if there was any other health problem besides oral cancer that was associated with non-smoking tobacco use? Number 2298 MS. CARR replied oral cancer was certainly the most significant. There was also an association between the use of nicotine and cardiovascular diseases. Number 2309 REPRESENTATIVE HODGINS asked how much would the state have to raise the tobacco tax to get people to quit totally? Number 2324 MS. CARR replied the department did not have a projection to support an ultimate price. Number 2339 REPRESENTATIVE HODGINS asked Ms. Carr if anybody had done a study on the consequences of outlawing tobacco entirely? Number 2349 MS. CARR replied it was not a strategy that the department advocated because there were backlashes as the outlaw on alcohol supported. REPRESENTATIVE HODGINS commented outlawing drugs did not work either. Number 2362 CHAIR JAMES stated that violent crimes increased during the push to counter the drug traffic. Therefore, she was concerned about the unintended consequences of her bill. Chair James further believed that the use of drugs was a symptom and not a cause. It was important to look at why a person started to smoke. She asked Ms. Carr, if the state were to address the causes of smoking among the youths, where would it start? Number 2432 MS. CARR responded the department currently followed multiple strategies. It was trying to address the effectiveness of taxation on the increase of the price. The issue of how the youth were able to obtain tobacco products was also a concern. The issue of advertising and the glamorization of tobacco use were also concerns that needed to be considered. There was not just one answer. The department would like to continue the discussion on taxation and would be glad to provide information on other strategies to address the root causes of tobacco use. Number 2467 CHAIR JAMES stated she did not want to detract from the issue of a tobacco tax. The evidence clearly indicated that this approach was accomplishable. She asked Ms. Carr what the department was going to do to watch and measure the replaced behavior when cigarettes became too expensive? TAPE 97-2, SIDE B Number 0022 MS. CARR replied the positive substitution of a negative behavior and risk taking behavior were certainly concerns of the department. She cited peer counselling and adult role modelling as examples that the department could use as positive substitutions. Number 0053 CHAIR JAMES reiterated she did not want to make a big issue out of this. She just wanted to make the point that there would be useful statistics as a result of the tax, and she hoped that the health care professionals would utilize those statistics. Number 0071 REPRESENTATIVE HODGINS stated in about 20 years the tax would be $2.50 and the cost of a carton of cigarettes would be $25. He wondered when bootlegging would become an issue. Number 0105 CHAIR JAMES responded that the testimony over the next few days would answer Representative Hodgins' question. Number 0117 REPRESENTATIVE IVAN asked Commissioner Perdue, what was the department's position on HB 1 and HB 52, surrounding the issue of the proceeds? Number 0135 COMMISSIONER PERDUE replied that the Governor was open to a variety of discussions regarding education and health funding. The Governor had not settled on one particular area. She deferred the question to the Department of Law for further details surrounding the constitutionality of the dedication of the funds raised earlier. Number 0154 CHAIR JAMES replied that she would be surprised if anybody in the Administration took a favorable approach to the dedication of the funds in light of the opinion of the attorney general. She did not expect the Administration to oppose the issue flat out, nor did she expect the Administration to support it either. It was a time to agree to disagree. Number 0182 COMMISSIONER PERDUE stated it was always a matter of weighing legal risk. The Administration, therefore, would like to hear more discussion in the committee. Number 0196 CHAIR JAMES replied she did not fear a legal risk. At times, a court decision was needed for guidance, and maybe this issue was one of those times. It should have been decided a long time ago, she said, before the state lost its use of the dedicated highway taxes. Number 0228 COMMISSIONER PERDUE reported to Representative Dyson that the department would provide information to him on the harmful effects of other uses of tobacco products that he addressed earlier. CHAIR JAMES opened the meeting up to testimony from the teleconference network. Number 0361 MICHAEL CARROLL, M.D., J Michael Carroll, PC, was the first person to testify via teleconference in Fairbanks. He stated lung cancer over the past 20 years had been the leading cause of cancer death in Fairbanks. Over the last 20 years, there were two years when every patient with lung cancer died. Death usually occurred within 6 to 18 months. The survival rate for lung cancer was only around 10 percent both nationally and locally, in comparison to breast cancer which had a 75 percent five year survival rate, colon cancer which had a 65 percent five year survival rate, and prostate cancer which had 70 percent five year survival rate. A 10 percent five year survival rate was dismal. And, tobacco related cancers were the most preventable types of cancer. "If we can just make a 1 percent or a 2 percent or a 3 percent impact on the frequency of death, we're going to make an immense savings as far as lives, as far as state dollars, as far as suffering." More lives would be saved then the state's crime prevention programs or highway safety programs, for example. He strongly urged the committee members to pass the bill. Number 0489 GLENN HACKNEY was the next person to testify via teleconference in Fairbanks. He declared it was a big disappointment to see this same issue pass the Senate last year and not even get a floor vote in the House. He asked the committee members to consider the following key facts: "Tobacco use kills. Tobacco is an addictive substance." There were kids in Fairbanks that went outside in freezing temperatures to smoke. "Those kids are addicted to tobacco use," he declared. Furthermore, "It is a health issue. Not primarily a tax issue. The aim is to keep Alaskan kids from starting to smoke and statistically this approach works." Furthermore, "This issue concerns your constituents, your fellow Alaskans-part of the family. Not a (indisc.) from the tobacco industry." Tobacco use cost, it did not pay. He stated HB 1 was a clean bill, while HB 52 was a magnet for a court challenge. The legislature had the authority to allocate money from the tax to education out of the general fund. He concluded by stating, "Please keep it simple." Number 0654 PHIL MILTON, Principal, Palmer Middle School, was the next person to testify via teleconference in Mat-Su. He stated as a principal at a middle school for a number of years he had watched kids use tobacco products and had seen the detrimental effects of those products. We have support programs in our school to educate kids about the use of tobacco products. He believed smoking was a possible gateway to the use of other drugs. He had also observed that the use of tobacco products interfered in extra curricular activities and performance in physical education classes. He declared he was a supporter of children, and agreed with the earlier comments made by Representative Bunde. He supported any means that would require children to think about the use of tobacco products even if it was a $1 per pack increase in the cigarette tax to make them think about the use or to prevent the use. He reiterated he supported children and whether or not he supported a tax was not the issue. It was mainly the support of children. Number 0775 PAUL SHERRY, Deputy Director, Alaska Native Health Board, was the next person to testify via teleconference in Anchorage. The board represented 20 different Alaska Native owned health care provider agencies including 6 hospitals and a large number of community health centers and practitioner services. The board supported the tobacco tax in both bills. The board was concerned about the quality of life of its residents and the increasing problems of death and disability related to the use of tobacco. It was also concerned about the medical cost associated with the treatment of these diseases as a result of misuse. He commented the statistics for Alaska Natives were frightening. Forty-three percent of Alaska Native teenagers were frequent smokers compared to 21 percent of the rest of Alaskans. The board was convinced that an increase in the tax would reduce the consumption of tobacco products among the youth. He announced this issue was one of the highest priorities for the board. The board looked at the tobacco tax as one part of a larger strategy that was needed to address the problem. He cited the board was also looking at controlling access to the products, promoting a tobacco free environment in the communities, and providing quit smoking programs for addicts. In conclusion, he declared that the board adamantly opposed a reduction in the tobacco tax. It did not have a position, however, on the dedication of the funds from the tax. Number 0939 ANNE HARRISON was the next person to testify via teleconference in Fairbanks. She declared she was 100 percent in support of a tobacco tax in Alaska. She arrived at this support after 31 years as a nurse practitioner and the abundantly clear body of research. She reiterated her support of the tobacco tax, and stated, "The sooner the better." Number 0973 ANNE MARIE HOLEN, Manager Tobacco Control Program, Alaska Native Health Board, was the next person to testify in Juneau. She announced she was also active with the Alaska Tobacco Control Alliance and the Citizens to Protect Kids from Tobacco, the coalition spearheading the campaign to raise state tobacco taxes. The tobacco industry called people like us zealots "because we get a little upset over the needless suffering and death caused by their products." We also got upset over the tobacco industry's tactics used to get kids addicted. And, because the industry continued to deny that their products caused death and suffering despite what medical research indicated as well as what their own internal documents show us. She referred the committee members to a recent letter produced by the "Alaska Smokers Rights." The letter was addressed to an individual Alaskan rather than "Dear Smoker." It framed the issues as the "anti-smoking zealots" versus reasonable fair minded Alaskans. And, it urged the recipient to send a public opinion message in opposition to the tax. It also included points to make in their correspondence. Where was this group getting the money to do this? she asked. The organization was not engaged in a grass roots campaign but in an "astro turf" campaign. She declared, "The money comes from Phillip Morris or RJ Reynolds or the Tobacco Institute." Therefore, the "Alaska Smokers Rights" was a front group for the tobacco industry. They could not be traced. They had no phone number or local address. The organizations that supported the tax used similar tactics as well, but there were important distinctions beside the fact that the tobacco companies had almost unlimited money to spend. The three primary difference were: the origins of the campaign - Alaska versus Winston-Salem, North Carolina; the motives behind the organizations - to protect lives and prevent addiction versus to promote addictions; and, finally, the use of information - factual versus misinformation. The Alaska Smokers Rights indicated that the tax increase would promote incentives for smuggling. She argued the only border country was Canada where the price of tobacco products would still be much higher even after the passage of the tobacco tax. The "Alaska Smokers Rights" also indicated that a tobacco tax would not stop the youth from smoking "as any parent could tell you that," she stated. The vast majority of the parents in Alaska supported the tobacco tax as a way to help them prevent their children from becoming victims of the tobacco industry. I think, she stated, the biggest most cynical lie of all was reflected in the name of this front group, "Alaska Smokers Rights." Remember, it was the tobacco industry that was behind this effort. And, one of the points used by "Alaska Smokers Rights" was that anti-smoking zealots were attacking the personal freedom of choice to smoke. Ms. Holen argued that another name for a drug addiction was drug dependence, and dependence was the opposite of freedom. Furthermore, because of the delay in the effects of tobacco products, it allowed the tobacco industry to continue to use the personal freedom argument despite the fact that most smokers wanted to quit but could not because they were addicted to nicotine, and that addiction started when they were kids. Furthermore, she declared, "The truth is that the tobacco industry doesn't give a darn about protecting personal freedom. All they care about is protecting their profits at the expense of personal freedom." She urged the committee members to pass the bills from the committee as soon as possible. Number 1318 ROMIE DESCHAMPS was the next person to testify via teleconference in Mat-Su. He explained he had been a pharmacist by trade for over 30 years and had lived in Alaska for about 24 years. He had also been president of the American Cancer Society in the past. He stated 90 percent of new smokers were teenagers or children that replaced the smokers who either quit or died prematurely from smoking related diseases. These children were encouraged to start smoking from friends and family members who smoked themselves, tobacco advertising and promotions, and the easy availability of tobacco products. Furthermore, he explained the risk of becoming addicted to nicotine was between 1:2 and 1:3, while the risk of becoming dependent on alcohol was 1:9, and the risk for crack cocaine was 1:4. In conclusion, he stated that if nothing was done to deter smoking, 70 percent of the health care dollars would be directly contributed to tobacco related illness by the year 2015. Number 1577 NATHAN BAILY, Representative, Tobacco Alliance of the Peninsula, was the next person to testify via teleconference in Kenai. He announced he was also testifying as an ex-smoker. He declared his support of the prior testimony of Anne Marie Holen regarding the price of cigarettes in Canada versus Alaska. This also answered the question of Representative Hodgins regarding bootlegging. He also agreed that the current campaign against the tobacco tax was being financed by the tobacco industry. He had received a call from Phillip Morris urging him to contact his representatives to prevent the passage of the bills. He announced the tobacco industry would spend any amount of money necessary to prevent the tax. He cited in Oregon last year the industry spent over $2 million to prevent the tobacco tax from passing. He asked everyone to keep that in mind when they heard information that contradicted common sense. Research indicated that the rate of teenage smokers declined when a tax was imposed contrary to the arguments of the tobacco industry. In conclusion, he stated he admired the efforts of HB 52 and Representative James, however, the Tobacco Alliance of the Peninsula, supported HB 1 to keep the focus on the issue of anti-smoking and not on the constitutionality of dedicating the funds. Number 1787 SYLVIA SULLIVAN, President, Alaskans for a Just Society, was the next to testify via teleconference in Valdez. She asked Chair James if these two bill were considered the Governor's bills? CHAIR JAMES replied, "No." These bills were introduced by Representative Bunde and James. The Governor's bill was not on the table. Number 1831 MS. SULLIVAN asked Chair James if Mr. Chenoweth was still present in the audience? CHAIR JAMES replied Jack Chenoweth had left. Number 1844 MS. SULLIVAN referred to AS, Title 24, Sec. 24.08.030, "Appropriation bills," and read, "Bills for appropriation shall be confined to appropriations and shall include the amount involved and the purpose, method, manner, and other related conditions of payment." Ms. Sullivan remarked neither HB 1 nor HB 52 stated a purpose. They only talked about the taxes that would be raised. She explained the Alaskans for a Just Society was formed because of the fraud being perpetrated upon Alaskans by the Administration and last years legislators. She agreed with the prior testimony regarding the health issues. However, that did not have anything to do with the two bills, she said. The people were blind if they were going to ask for a tax not knowing where the money would go. Furthermore, she announced she started smoking as a teenager because her parents both smoked. It was easy to access cigarettes. The parents had a great deal of influence. She stated she would like the money to go towards helping the parents stop smoking. In conclusion, she called the two bills fraudulent because the Administration was paying for the stock of the Phillip Morris Company through the Permanent Fund. So, on one hand, the Governor was concerned about the health of Alaskan children, while on the other hand, he was taking money from Alaskans to ensure that Phillip Morris was still alive to continue to supply tobacco. Number 2114 ROBERT TOLLISON, Professor of Economics, George Mason University, was the next person to testify via the telephone in Virginia. He announced he was testifying today on behalf of the tobacco industry. He explained he had written extensively about the issues in HB 1. He called HB 1 extremely ill-advised. The bill had draconian implications for the poorest of Alaskans. He also believed that the revenue estimates were extensively static. The tobacco tax would drive purchases onto the military bases. He asked, "Why give ordinary citizens incentive to go onto a military base and buy low cost tobacco products and then bring them off base and resell them?" It also gave the potential criminals among the citizens equally bad incentive to smuggle tobacco products. He cited the country of Canada had a tremendous problem with smuggling and had to back off from its draconian taxes. He said Alaska was flirting with the same type of experiences. Finally, an excise tax would not have an affect on what the young people did compared to friends and family. Number 2443 DELISA CULPEPPER, President, Alaska Public Health Association, was the next to testify via teleconference in Anchorage. She explained that the Tobacco Institute was not a prevention institution, but rather an institution founded by the tobacco industry to help fight tobacco prevention efforts across the nation. TAPE 97-3, SIDE A Number 0001 MS. CULPEPPER further stated that pricing strategies were the most effective prevention methods available. It would not stop everyone, but it would stop a lot of people, she declared. Any life saved was worthwhile. This was an issue that effected the health of the public, therefore, the user fees were justifiable. The Alaska Public Health Association supported the tobacco tax and would encourage the committee members to move the bill quickly through. Number 0100 DEB LESSMEIR, Physician, SEARHC Medical/Dental Clinic, was the next person to testify before the committee in Juneau. She believed that this tax was one of the biggest ways to help combat smoking. That was why she was here today. As a physician, she was able to calculate about 5,000 conversation with both children and adults that she had over the years regarding smoking. She announced last year that the community of doctors overwhelmingly supported the bill. Nicotine was a strong addiction, therefore, prevention methods were really important and the best way to address this issue. She discovered that most people did not want to smoke, that did not mean, however, that they wanted to quit. There was a difference. The conversations that she had with teenagers were that they did not intend to be a smoker for a number of years. They usually started due to peer pressure, curiosity, and rebellion, for example. Based on her experience most smokers started when they were young and most adults did not want to smoke. Therefore, prevention was the only answer, it was a vote of compassion. Number 0508 BARBARA COHEA, Health Education Coordinator, Manilaq Association, was the next person to testify via teleconference in Kotzebue. She explained she was old enough to remember the commercials from the tobacco industries in the 1950's when they advertized smoking was good for a person. We now know that was a lie. She also remembered when the first surgeon general in the 1960's announced that smoking was a grievous health problem. But, the tobacco industry continued to sell cigarettes by saying that report contained faulty science performed by anti-smoking zealots. We now know that was a lie as well. In the 1970's and the 1980's subsequent reports documented the deleterious effects of passive second hand smoke. The tobacco industry continued to sell cigarettes insisting that second hand smoke was not dangerous. We now know that was a lie. The tobacco industry also stated they did not target young people, yet it continued to use cartoon characters to sell cigarettes. She asked the committee members, "When was the last time anybody bought anything because Joe Cool looked neat, or because Mickey Mouse endorsed it?" The last time that happened for me, it was a Mini Mouse lunch box and I was 12." It was obvious who the cartoon charters were aimed at, and once again the tobacco industry lied. Now, the industry was trying to tell us that a tobacco tax would not effect the young. She asked, "If the tax will have no affect, why is the tobacco industry fighting it so vigorously?" She did not believe the tobacco industry was altruistic and she did not support testimony from it addressing the personal freedom of Alaskans and its argument that money was being taken from the pockets of poor Alaskans. She remarked, "How stupid do they think I am?" The industry was not worthy of being trusted because they had spent the past 50 years lying. She urged everyone to do the social and moral thing by putting the health of Alaskan children before the profits of the tobacco industry. Number 0825 LYNDA ADAMS was the next person to testify via teleconference in Ketchikan. She had served as a community volunteer and executive director of a drug prevention program for 15 years before retiring one and a half years ago. She had also completed numerous training, workshops and conferences on tobacco prevention. The research indicated that an increase in a tobacco tax would affect consumption and use. Her work in this field also supported the need to recognize the potential for addiction using these products. She supported the tax for a number of reasons. The reasons she indicated were: the majority of Alaskans were asking for this tax, it would reduce spending on programs to help those with addictions, and it would provide a savings for the health care system, thereby reducing state spending. Number 0960 PETE SNITZER was the next person to testify via teleconference in Anchorage. Mr. Snitzer said if the state continued to increase taxes there would not be any more money to collect. If a tax really prevented smoking then nobody would be smoking in Canada and Europe. He called this issue a "political football." The state only wanted more money. Why not increase the cigar and pipe smokers? he asked. They were the most solid citizens in the state. He reiterated the tax was a means to raise money. The state was not interested in the children, nor was it a means to stop smoking or else, there would not be any smoking in Canada and Europe. Number 1059 CATHY FLAVIN, Health Educator, Bristol Bay Area Health Corporation, was the next person to testify via teleconference in Dillingham. She announced she was also testifying on behalf of herself. The Bristol Bay Area Health Corporation strongly supported the bills. It would help protect the health of Alaskans and future generations. Tobacco use was a large problem in Dillingham and throughout the Bristol Bay region. Increasing the tobacco tax would help reduce the early experimentation and curb the early addiction. There were many people in rural Alaska that supported the increase in the tobacco tax because it would help protect the health of Alaskan and the future generations. Number 1181 STEVE DONALDSON was the next person to testify via teleconference in Cordova. Mr. Donaldson declared his support of the $1 increase in the tobacco tax. He stated he had already lost family members due to the use of tobacco products. He knew a lot of young users and believed it was a drug. He was, therefore, in support of the increase. Number 1220 MIKE ELERDING, President, Northern Sales Company of Alaska, was the next person to testify via teleconference in Ketchikan. He explained Northern Sales Company of Alaska was a tobacco wholesaler. As a parent, he saluted the efforts to restrict access to tobacco products to teenagers and school children. Nationally, Alaska ranked 27th in the taxation of cigarettes based on a per carton state excise tax. The proposed legislation would give Alaska the distinction of being the state with the highest excise tax in the country by 50 percent. It would be 403 percent higher then the national average. The proposed tax increase for Alaska would be a 344 percent increase. A 344 percent increase did not sound reasonable even on a product like tobacco. This was going to create a black market for tobacco products, and the state would not be able to collect any money from a black market. The Northern Sales Company of Alaska was a good company, employing 82 people throughout Southeast Alaska, of which 34 percent of its revenues were generated through tobacco products. This tax would hurt its business. The company was not opposed to a reasonable tax increase, but it did not support raising the tax to a level that would create a black market competition. There were a lot of tax exempt markets in Alaska now - the military bases and the indian smoke shops. There was already a price disparity. California and Michigan found that when they raised their tobacco taxes, military sales jumped dramatically. He suggested, to control under age smoking, get the parents involved by spending quality time with their kids. Taxation was not going to control adolescent behavior. He called it naive and ill-conceived. He referred to a petition that contained over 100 signature and explained he would forward it to the committee members for review. Number 1366 JUDITH NELSON, Dental Hygienist, Yukon-Kuskokwin Health Corporation, was the next person to testify via teleconference in Bethel. As a dental hygienist, she treated the effects of tobacco related products. As a consumer, she was exposed to the tobacco advertisements that graphically depicted tobacco use as cool and sexy. These advertisements were aimed at young people. She declared her support of the tobacco tax increase and hoped that it would discourage the tobacco use among young people.