Big Money Backers: Propositions 86 and 87

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(Sacramento, CA)
Wednesday, November 1, 2006

Prop. 86

Outside the Sacramento lobbying office for tobacco giant Phillip Morris, a man is driving a bright yellow steamroller, emblazoned with a “Yes on 86” sign.   Amid cheers, he crushes a giant pack of Marlboro cigarettes, about the size of a large filing cabinet. 

It’s one of many attacks in this political war over a proposed two-dollar-and-sixty-cent-per-pack tax on cigarettes.  Tobacco companies have contributed the bulk of the 50-million plus to defeat the measure.  Supporters of 86, largely hospitals, have raised about a quarter of that amount.  American Lung Association of California lobbyist Paul Knepprath says the battle lines are clear:

“We like to think of this as the white hat side of the equation.  You’ve got the American cancer society, the Heart Association and the American Lung Association on the one side, and who do you have on the other side?  You have cigarette companies.”

The stakes are high for both.  The state’s nonpartisan legislative analyst estimates the tax would generate more than 2 billion dollars a year to fund a laundry list of health programs.  The L-A-O also predicts the tax would reduce the amount of cigarettes sold in California.  By some estimates, by as many as 350 million packs a year.  Knepprath says the tax itself will keep some people from buying cigarettes:

“The California Department of Health services independent analysis of prop 86 says we’re going to prevent 700-thousand teens from ever starting to smoke, we’ll save 300-thousand lives from premature death due to smoking, and these things will happen if we took all the money and we dumped it into the ocean”

Of course that’s not the plan.  The bulk of the money would reimburse hospitals for emergency room care of the uninsured, and would pay for children’s health insurance.   All worthy goals, says Dr. LaDonna White with Golden State Medical Association.  But 86 is more than a tobacco tax.  There’s also a loophole that exempts hospitals from some anti-trust laws.  White says that could hurt patients:

“Hospitals could agree to limit competition among them, driving up prices and insurance premiums – agree to limit which hospitals provide which specialty medical services – like CT scans, and then raise prices without worrying about competition.”

Some law enforcement agencies are also opposed, citing concerns about increased cigarette smuggling. Then there are the smokers themselves:

“It just seems to me that that’s beyond reasonable.”

Tom smokes a half-a-pack-a-day.  He didn’t want to give his last name, because he admits he’ll change his buying habits if 86 passes:

“I’ll probably be going either online or to an Indian reservation or some other means.  I don’t know yet.  It could mean me buying less cigarettes – that’s a possibility
An answer that satisfies neither campaign.  
Prop. 87
You could say it’s Hollywood versus Big Oil…  Proposition 87 has turned into a ballot box battle topping well over 100-million dollars— with a heavy artillery ad campaign featuring celebrities like former President Bill Clinton. 
Former Vice-President Al Gore, and actors Julia Roberts and Robert Redford are also among those pushing for Proposition 87.  Movie producer Steven Bing has given around forty-million dollars…  Oil companies like Chevron are funding the opposition.
The measure itself would tax oil producers in California, the nation’s third largest oil-producing state.  The money raised—around four billion dollars over ten years-- would fund research and production incentives for alternative energy.  The overall goal is to reduce dependence on fossil fuels and foreign oil.  Yes on 87 spokeswoman Beth Willon calls it seed money to develop cleaner fuels.

“The technology is in place, the funding needs to be in place and the beauty of 87 is it provides four billion dollars to get things going then the private sector can jump in on this and take off with it.”
Opponents are donating seven-and-eight figure sums. Chevron alone has given around forty million to defeat the measure in part to fund ads like this one…

“There’s one ballot measure we’re all going to end up paying for, Proposition 87…”
Dorothy Rothrock with the California Manufacturers and Technology Association says it won’t address dependence on oil. 

 “This is not to say developing new energy alternatives is a bad idea we need to do it. But this adds a new bureaucracy—four billion dollars—and it taxes California oil and it’s going to drive up prices…”
That’s a major argument made by Prop 87 opponents. Supporters counter there’s a provision prohibiting price hikes because of the tax. But opponents say the tax would reduce in-state oil production leading to increased dependence on foreign oil, which costs more to transport and refine -- thus leading to higher prices at the pump.  For her part, the state’s non-partisan Legislative Analyst says a modest increase in the cost of oil products for Californians is possible.
Win or lose—the measure is being called a record-breaker—which will likely last only til the next election season.