HomeMy WebLinkAbout05-01-2012 c5 reso supporting prop 29/counci lj acenda nEpont
C I T Y O F S A N L U I S O B I S P O
FROM :
J . Christine Dietrick, City Attorney
SUBJECT : RESOLUTION SUPPORTING PROPOSITION 29, THE CALIFORNI A
CANCER RESEARCH AC T
RECOMMENDATION
Adopt a resolution supporting California State Proposition 29, the California Cancer Research Act .
DISCUSSIO N
At the City Council meeting of April 10, 2012, the City Council directed staff to prepare a
resolution supporting State Proposition 29, the California Cancer Research Act . In short, th e
passage of this measure means : State excise taxes on cigarettes would increase by $1 per pack to a
total of $1 .87 per pack . These additional revenues would be dedicated to fund cancer and tobacco -
related disease research and tobacco prevention and cessation programs .
Attached hereto is a Resolution of the City Council supporting the California Cancer Research Ac t
and its goal to prevent, treat, and minimize tobacco use and its resulting social and economi c
impacts .
FISCAL IMPAC T
Approval of the recommendation has no fiscal impact .
ALTERNATIVE S
Council could decline to adopt the attached resolution or could modify the resolution .
ATTACHMEN T
1.Resolutio n
2.Legislative Analyst's Office Analysis
Meeting Date
May 1, 201 2
Item Number
C 5
t : council agenda reports 2012 2012-05-01 resolution supporting proposition 29 (dietrick) ecar-prop 29 support ca cancer research .docx
Attachment 1
RESOLUTION NO .
(2012 Series )
RESOLUTION OF THE CITY OF SAN LUIS OBISPO SUPPORTIN G
PROPOSITION 29, THE CALIFORNIA CANCER RESEARCH AC T
WHEREAS,the California Cancer Research Act is a state ballot measure which, i f
passed by voters in June 2012, would generate revenues with the goal to save lives by preventin g
104,000 premature smoking caused deaths ; and
WHEREAS,more than 332,000 California high school students are current smokers ,
more than 34,000 California youth start smoking every year, and 3,383,000 California adults ar e
current smokers, and
WHEREAS,the California Cancer Research Act would increase the state's tobacco ta x
by $1 per pack and, according to the Campaign for Tobacco-Free Kids, the $1 tax increase alon e
would prevent 228,000 children from becoming smokers in adulthood and would encourag e
more than 118,000 adult smokers in California to quit smoking ; and
WHEREAS,it is estimated that the California Cancer Research Act would provid e
nearly $600 million annually to fund research and make advances in the prevention, detection ,
treatment, causes and cures for cancer, lung disease, heart disease and stroke, and other tobacco -
related illnesses ; and
WHEREAS,it is estimated that the California Cancer Research Act would provide mor e
than $156 million annually to the state's existing tobacco control programs to prevent and reduc e
the use of tobacco, including school based programs to reduce youth smoking ; and
WHEREAS,the Legislative Analyst Office analysis of the California Cancer Researc h
Act determined that local governments collectively would likely experience an annual increase i n
sales tax revenues of approximately $10 million ; an d
WHEREAS,providing the funding needed to keep California's anti-smoking programs
strong can help keep children from smoking and give smokers the help they need to quit ; an d
WHEREAS,it is estimated that the California Cancer Research Act would provide $2 3
million annually for law enforcement efforts to reduce illegal sales of tobacco products t o
minors, and other anti-tobacco law enforcement ; an d
WHEREAS,it is estimated that the California Cancer Research Act will result in $5 .1
billion in long-term health savings from reduced smoking ; and
WHEREAS,cigarette smoking and other uses of tobacco remain the leading causes o f
cancer, heart disease and stroke, and lung disease in California ; and
WHEREAS,more than 36,000 adults die annually from smoking in California .
Resolution No . (2012 Series )
Page 2
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Lui s
Obispo as follows :
SECTION 1 .The City of San Luis Obispo supports Proposition 29, the Californi a
Cancer Research Act of 2012, and its goals to reduce smoking, especially among children, an d
fund critical research to prevent and treat cancer, heart disease and stroke, lung disease and othe r
tobacco-related illnesses .
Upon motion of , seconded by , and o n
the following vote :
AYES :
NOES :
ABSENT :
The foregoing resolution was adopted this day of 2012 .
Mayor Jan Mar x
ATTEST :
Sheryll Schroeder, Interim City Cler k
/s/J . Christine Dietrick
J . Christine Dietric k
City Attorney
Attachment 2
Legislative Analyst's Offic e
2/16/2012 9 AM
FINA L
Proposition 2 9
Imposes Additional Tax on Cigarettes for Cancer Research .
Initiative Statute .
Summary of Legislative Analyst's Estimate of Net State and Local Governmen t
Fiscal Impac t
Fiscal Impact :Net increase in cigarette excise tax revenues of about $735 million annuall y
by 2013-14 for certain research and tobacco prevention and cessation programs . Other state
and local revenue increases amounting to tens of millions of dollars annually .
Yes/No Statemen t
A YES vote on this measure means : State excise taxes on cigarettes would increase by $1 pe r
pack to a total of $1 .87 per pack . These additional revenues would be dedicated to fund cance r
and tobacco-related disease research and tobacco prevention and cessation programs .
A NO vote on this measure means : State excise taxes on cigarettes would remain at th e
current level of 87 cents per pack and would continue to be used for existing purposes, includin g
childhood development programs and various health and tobacco prevention and cessatio n
programs .
BACKGROUN D
Tobacco Taxe s
Existing State Excise Taxes .Current state law imposes excise taxes on the distribution o f
cigarettes and other tobacco products, such as cigars and chewing tobacco . Tobacco excise taxe s
are paid by distributors who supply cigarettes and other tobacco products to retail stores . These
taxes are typically passed on to consumers as higher cigarette and other tobacco product prices .
The state's cigarette excise tax is currently 87 cents per pack . Figure 1 describes the differen t
components of the per-pack tax . As the figure shows, two voter-approved measures —
Proposition 99 in 1988 and Proposition 10 in 1998—are responsible for generating the vas t
majority of tobacco excise tax revenues . As Figure 1 indicates, total state revenues from existin g
excise taxes on cigarettes and other tobacco products were just over $900 million in 2010-11 .
Attachment 1
Legislative Analyst's Offic e
2/16/2012 9 AM
FINA L
Figure 1
Existing State Tobacco Excise Taxe s
(Dollars in Millions)
Revenues from existing excise taxes on other tobacco products support Propositions 10 an d
99 purposes . Under current law, any increase in cigarette taxes automatically triggers a n
equivalent increase in excise taxes on other tobacco products, with the revenues going to suppor t
Proposition 99 purposes .
Existing Federal Excise Tax .The federal government also imposes an excise tax o n
cigarettes and other tobacco products . In 2009, this tax was increased by 62 cents per pack (to a
total of $1 .01 per pack) to help fund the Children's Health Insurance Program, which provide s
subsidized health insurance coverage to children in low-income families .
Existing State and Local Sales and Use Taxes .Sales of cigarettes and other tobacc o
products are also subject to state and local sales and use taxes . These taxes are imposed on th e
retail price of a product, which includes excise taxes that have generally been passed along fro m
distributors . The average retail price of a pack of cigarettes in California currently is over $5 .
More than $400 million in annual revenues from sales and use taxes on cigarettes and othe r
tobacco products go to the state and local governments .
Current Health Research and Tobacco Cessation Activities
Across the country, substantial amounts of money are spent on research related to cancer an d
tobacco-related diseases, such as heart disease . For example, the federal National Institutes o f
Health provide several billion dollars annually for grants and research in these areas . Private
entities and nonprofits also provide funds for such research . In California, the University o f
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C5-5
State General Fund :initially enacted by the Legislature in 1959
tar general support of the state budget .
Proposition 99 : Enacted by the voters in 1988 for the purposes of
supporting tobacco education and prevention efforts .tobacco
related disease research programs . health care services fo r
low-mane persons, and environmental protection an d
recreational resources . Some Proposition 99 revenues are used
to support programs that also receive support from the stat e
General Fund,
Breast Cancer Fund : Enacted by the Legislature in 1993 for the
purposes of supporting breast cancer screening programs fo r
uninsured women and research related to breast cancer .
Proposition 10 : Enacted by the voters m 1998 for the purpose s
supporting early childhood development programs ,
Totals 87o
a Ari otsits for payments two Proposition 10 otiror fuses in order to makitr n Wa Pr
tba 10 renew busts
Total tnc4des excise lax menus hem oa*types at to
tsorlx*ss tur i a>1 tears ono Morons beam .
Does not total Sus to roi.rdkt5.
5905"
$96
298°
2
489b
Attachmen t
Legislative Analyst's Offic e
2/16/2012 9 A M
FINAL
California (UC) is one of the primary recipients of these research dollars . In addition, UC use s
some state funds for this purpose .
Tobacco prevention and cessation programs are currently conducted by public entities, healt h
insurers, and various other organizations . For example, approximately $50 million a year fro m
Proposition 99 revenues is used to fund tobacco prevention and cessation programs in California .
PROPOSA L
This measure increases excise taxes on the distribution of cigarettes and other tobacc o
products . It uses the additional revenues raised for research on cancer and tobacco-relate d
diseases (such as heart disease and emphysema), as well as for other specified purposes . The
major provisions of the measure are described below.
New State Tobacco Tax Revenue s
This measure increases—effective October 2012—the existing state excise tax on cigarette s
by $1 per pack . The total state excise tax, therefore, would be $1 .87 per pack . The measure als o
creates a one-time "floor tax" on the majority of cigarettes that are stored by businesses at th e
time the new excise tax is levied . Floor taxes are typically used to prevent businesses fro m
avoiding taxes by stockpiling products before a tax goes into effect .
Existing state law requires the Board of Equalization (BOE) to annually set a tax on othe r
tobacco products—such as cigars and chewing tobacco—at an amount equivalent to the tax o n
cigarettes . Accordingly, this measure would also result in a comparable increase in the excise ta x
on other tobacco products, with the revenues supporting Proposition 99 purposes .
How New Cigarette Tax Revenues Would Be Spen t
Revenues from the cigarette excise tax increase would be deposited in a new special fund ,
called the California Cancer Research Life Sciences Innovation Trust Fund . These revenue s
would be dedicated to the support of research on cancer and tobacco-related diseases, as well a s
for other specified purposes . After compensating existing tobacco tax program funds for an y
losses due to the imposition of the new tax (as described in the next section), the remainin g
money would be distributed among five funds :
•Hope 2010 Research Fund.Sixty percent of the funds would be used to provid e
grants and loans to support research on prevention, diagnosis, treatment, an d
potential cures for cancer and tobacco-related diseases . The measure states that al l
qualified researchers would have an equal opportunity to compete for thes e
research funds .
•Hope 2010 Facilities Fund .Fifteen percent would be used to provide grants an d
loans to build and lease facilities and provide capital equipment for research o n
cancer and tobacco-related diseases .
•Hope 2010 Tobacco Prevention and Cessation Fund.Twenty percent would b e
used for tobacco prevention and cessation programs administered by th e
California Department of Public Health (DPH) and the California Department o f
Education .
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Attachment 1
Legislative Analyst's Offic e
2/16/2012 9 AM
FINAL
•Hope 2010 Law Enforcement Fund.Three percent would be allocated to stat e
agencies to support law enforcement efforts to reduce cigarette smuggling ,
tobacco tax evasion, and illegal sales of tobacco to minors, and to otherwis e
improve enforcement of existing law .
•Hope 2010 Committee Account .Two percent would be deposited into an accoun t
that would be used to pay the costs of administering the measure, most of whic h
would likely be reimbursing BOE for tax collection costs .
Backfill of Existing Tobacco Tax Programs .This measure requires the transfer of som e
revenues from the trust fund to "backfill," or offset, all revenue losses that are likely to occur t o
existing state cigarette and tobacco taxes that directly result from the imposition of the additiona l
tax . These revenue losses would occur mainly because an increase in the price of cigarettes an d
other tobacco products generally reduces consumption and results in more sales for which taxe s
are not collected, such as Internet purchases and purchases of out-of-state products . This, in turn ,
would reduce the amount of revenues collected through the existing state excise taxes describe d
above . The amount of backfill payments needed to offset any loss of funding in these area s
would be determined by BOE .
Committee Established to Administer Trust Fun d
The trust fund would be overseen by a newly created Cancer Research Citizen's Oversigh t
Committee . The committee would be composed of the following nine members :
•Four members appointed by the Governor, three of whom are directors of one o f
the ten designated cancer centers in California .
•Two members appointed by the Director of DPH, at least one of whom has bee n
treated for a tobacco-related illness .
•Three chancellors from UC campuses that are members of the California Institut e
for Quantitative Biosciences Research . (Currently, three UC campuses—Sant a
Cruz, Berkeley, and San Francisco—are institute members .)
Authority Granted to the Committee .The measure authorizes the committee to administe r
the trust fund . The funds would have to be expended solely for the purposes described in the act .
The funds would be allocated by the committee . Thus, they would not be subject to appropriatio n
by the Legislature . Furthermore, these funds could not be loaned to other state funds .
The measure gives the committee the authority to :
•Develop short- and long-term financial plans .
•Establish a process for soliciting, reviewing, and awarding grants and loans fo r
researchers and facilities .
•Appoint a chief executive officer and other employees .
•Establish policies regarding intellectual property rights arising from researc h
funded by this measure .
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Attachment z
Legislative Analyst's Offic e
2/16/2012 9 A M
FINA L
Other Major Provision s
Transfers Permitted From Facilities Fund .In the event the committee determines that there
is a surplus in the Hope 2010 Facilities Fund, the measure would authorize the committee t o
transfer the surplus money to the Hope 2010 Research Fund, the Hope 2010 Tobacco Preventio n
and Cessation Fund, or the Hope 2010 Law Enforcement Fund .
Accountability Measures .The measure requires the committee to issue an annual report t o
the public that includes information on its administrative expenses, the number and amount o f
grants provided, and a summary of research accomplishments . The committee would also b e
required to have an independent financial audit each year . The measure includes conflict-of-
interest provisions that govern the conduct of committee members, and includes specific crimina l
penalties for anyone convicted for the misuse of trust fund monies .
FISCAL EFFECT S
This measure would have a number of fiscal effects on state and local governments . The
major impacts are discussed below.
Impacts on State and Local Revenue s
Revenues Would Be Affected by Consumer Response .Our revenue estimates assume that
the proposed excise tax increase would be passed along to consumers . In other words, we assum e
that the retail prices of cigarettes and other tobacco products would be raised to include th e
excise tax increase . This would result in various consumer responses . The price increase woul d
result in consumers reducing the quantity of taxable tobacco products they consume . Consumer s
could also change the way they acquire tobacco products so that fewer transactions are taxed ,
such as through Internet purchases or purchases of out-of-state products . While we believe a
reasonable projection of consumer response is incorporated into our revenue estimates, they ar e
still subject to some uncertainty .
New Cigarette Excise Tax Revenues .We estimate that the increase in cigarette excise taxes
required by this measure would raise about $615 million in 2012-13 (partial-year effect) an d
about $810 million in 2013-14 (the first full-year impact). Our estimate of the allocation of ne w
cigarette excise tax revenues in 2013-14 is shown in Figure 2 . After backfilling losses in existing
tobacco excise tax revenue (described in more detail below), the new cigarette excise tax woul d
generate an estimated $735 million in net revenue in 2013-14 for the purposes described in th e
measure . The cigarette excise tax increase would generate somewhat lower amounts of revenu e
each year thereafter, based on our projections of continued declining cigarette consumption .
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Attachment 1
Legislative Analyst's Offic e
2/16/2012 9 AM
FINA L
Figure 2
How Estimated Revenue From New Cigarette Ta x
Would Be Allocate d
(Dollars in Millions )
Effects on Existing Tobacco Excise Tax Revenues .The decline in consumption of cigarette s
and other tobacco products caused by this measure would reduce revenues from the existin g
excise taxes that go to support Propositions 99 and 10 purposes, the General Fund, and the Breas t
Cancer Fund . The measure provides for the backfill of these losses from revenues raised by th e
new excise tax . We estimate that the amount of backfill funding needed to comply with thi s
requirement would be about $75 million annually, as shown in Figure 2 .
As noted earlier, this measure would have an additional fiscal effect on excise taxes which g o
to support Proposition 99 purposes . Under current law, any cigarette tax increase triggers a n
automatic corresponding increase in the taxes on other tobacco products, with the additiona l
revenues going to support Proposition 99 purposes . We estimate that the higher tax on othe r
tobacco products would result in a full-year Proposition 99 revenue gain of about $50 million ,
beginning in 2013-14 .
Effects on State and Local Sales and Use Tax Revenues .Sales and use taxes are levied on a
variety of products, including the retail price of tobacco products . The retail price usuall y
includes the cost of all excise taxes . The higher retail price of tobacco products resulting fro m
the new excise tax, therefore, would increase state and local revenue from the sales and use ta x
on tobacco products . This effect would be offset somewhat by several factors, including lowe r
spending on other products subject to sales and use taxes . On net, we estimate an increase i n
revenue of about $10 million to $20 million annually .
Effects on Excise Tax Collection .As discussed above, the measure would deposit 3 percen t
of revenues from the new cigarette tax into a Law Enforcement Fund to support state la w
enforcement efforts . These funds would be used to support increased enforcement efforts t o
reduce tax evasion, counterfeiting, smuggling, and the unlicensed sales of cigarettes and othe r
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Estimated revenue from new cigarette tax $81 0
Less backfill to Proposition 99,-7554
Proposition 10, General Fund, and Breas t
Cancer Fund
Estimated Net Revenue $73 5
Allocation of estimated net revenu e
Research Fund 60%$44 1
Facilities Fund 15 11 0
Tobacco Prevention and Cessation Fund 20 14 7
Law Enforcement Fund 3 2 2
Committee Account 2 15
s LAO estimate . Backbit amounts would be determined by the Board of Equaltzatiort
Attacnment z
Legislative Analyst's Offic e
2/16/2012 9 A M
FINA L
tobacco products . The funds would also be used to support efforts to reduce sales of tobacc o
products to minors . These activities would have an unknown net impact on the amount o f
revenues collected through excise taxes .
Impact on State and Local Government Health Care Cost s
The state and local governments in California incur costs for providing (1) health care fo r
low-income and uninsured persons and (2) health insurance coverage for state and loca l
government employees and retirees . Consequently, changes in state law such as those made b y
this measure that affect the health of the general population—and low-income and uninsure d
persons and public employees in particular—would affect publicly funded health care costs .
For example, as discussed above, this measure would result in a decrease in the consumptio n
of tobacco products . The use of tobacco products has been linked to various adverse healt h
effects by federal health authorities and numerous scientific studies . Thus, this measure woul d
reduce state and local government health care spending on tobacco-related diseases over the lon g
term . This measure would have other fiscal effects that offset these cost savings . For example ,
the state and local governments would incur future costs for the provision of health care an d
social services that otherwise would not have occurred as a result of individuals who avoi d
tobacco-related diseases living longer . Thus, the net fiscal impact of this measure on state an d
local government costs is unknown .
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