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Archive for Sunday, December 9, 2012

Up in smoke: What will state do about lost tobacco funds?

December 9, 2012

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— Programs serving approximately 200,000 children statewide are facing their own fiscal cliff, and it has nothing to do with budget talks between Congress and the White House.

“My anxiety is high,” said Rich Minder, collaborative projects coordinator of Success By 6 Coalition of Douglas County, which serves a number of groups helping children and families.

“The state of Kansas needs to decide whether or not we are going to make a commitment to children and families, and how are we going to do that,” Minder said.

Here is the problem. Kansas is among some 30 states in arbitration with Big Tobacco companies that are seeking to reduce payments promised to the states under a mammoth legal settlement from the 1990s.

Big Tobacco agreed to pay out billions of dollars to help offset the health costs of smoking. One of the conditions of the settlement was that the states would help ensure the companies’ market share.

Now Big Tobacco says the states, including Kansas, have failed to hold up their end of the deal, so they want to reduce payments to the states.

This year Kansas received $56 million as part of its annual share of the settlement. Next year, it could be as low as $12 million, officials have warned.

That means a number of programs and services that have over the past decade been built up on tobacco money could come crashing down.

“We don’t know what the tobacco settlement dollars will be yet,” said Jim Redmon, executive director of the Kansas Children’s Cabinet. “We don’t know what the arbitration is going to look like. The attorney general could comment on that."

Repeated messages left with the attorney general’s office were unanswered.

The Kansas Children’s Cabinet, which was set up to make recommendations on use of tobacco settlement funds, recently decided to whittle down its focus on programs to early-childhood development and came up with a $38 million list. Some programs left off its list may be picked up by other state agencies.

“The Children’s Cabinet seeks to build and support innovative delivery models for those children and families that are most at risk with a clear focus on ROI (return on investment) and accountability,” said Amanda Adkins, who is chair of the Children’s Cabinet.

“During our recent meeting, we made a decision to prioritize early-childhood programs and those that have met our accountability framework requirements. Governor Brownback is very supportive of our strategic plan and objectives,” she said.

That recommendation will now go to Brownback and the Legislature.

Shannon Cotsoradis, president and chief executive officer of Kansas Action for Children, however, said she fears some programs will lose funding under a $38 million recommendation, including mental health programs and those to assist families.

An endowment fund that was supposed to have been built up with a portion of tobacco funds has regularly been raided, to the tune of $140 million, by the Legislature to pay for other items in the state budget, Cotsoradis noted.

“This is really a problem of our own making,” she said.

Advocates say they are hoping if the arbitration reduces tobacco funding, Brownback and the Legislature will backfill those dollars from general tax revenue.

“My hope is that the governor will lead the way and you will see state general funds for those programs. It starts with the governor’s budget if the tobacco checks come in short,” Cotsoradis said.

She noted that the governor has repeatedly stated support of programs for children.

But state tax dollars are tight. With Brownback’s tax cuts to individuals and business owners kicking in, the state is facing a $328 million revenue shortfall next year, which will continue to grow, according to revenue forecasts.

The confluence of tax cuts and possible cuts in tobacco funds has Minder concerned.

“We have been carefully building systems that support young children, prevent child abuse and neglect, and enhance outcomes for children and families,” Minder said. “At some point, you have to make your decisions about what you’re actually going to do."

Comments

FalseFlag 1 year, 8 months ago

New Hot Contraband: Cigarettes

Smugglers are increasingly turning their attention from drugs and firearms to reselling cigarettes on the black market, taking advantage of increased cigarette taxes in some states — and making huge profits.

Since 2007, at least 27 states have raised their cigarette taxes to erase deficits or cover healthcare costs. In New York, the tax on cigarettes is $4.35 a pack, and an additional tax in New York City boosts the total to $5.85 a pack.

But the cigarette tax in Virginia is just 30 cents a pack, so smugglers can buy bulk quantities of smokes in Virginia and sell them in New York and other high-tax states at a huge profit — a racket known to police as “smurfing,” according to The Economist.

Other low-tax states include Louisiana (36 cents), Georgia (37 cents), and North Carolina (45 cents), while Rhode Island imposes a $3.46 tax, and Connecticut a $3.40 levy.

In New Jersey, which imposes a tax of $2.70 per pack, about 40 percent of all cigarettes are reportedly smuggled in from Virginia and other states.

The Bureau of Alcohol, Tobacco, Firearms and Explosives estimates that illegal cigarette sales cost local, state and federal governments nearly $10 billion a year.

Profits for the smugglers from cigarettes are better than from cocaine, heroin, marijuana or guns, according to the Virginia State Crime Commission, and penalties are far lighter than for drugs — five years in jail under federal law, compared to possible life in prison for heroin.

Virginia recently made it illegal to buy and possess, with intent to sell elsewhere, more than 5,000 cigarettes. But smugglers can easily fit 600 cartons — 120,000 cigarettes — in a car, which makes it easy for law enforcement to miss.

Interstate 95 earned the moniker “iron highway” when gun-running along the Atlantic Coast was at its peak, The Economist adds, but now “it is the new Tobacco Road.”

http://www.ice.gov/news/releases/1207/120724newark.htm

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OonlyBonly 1 year, 8 months ago

Been going on for years. Ain't ever gonna change.

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FalseFlag 1 year, 8 months ago

High taxes is creating the opportunity for smuggling.

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adastraperapathy 1 year, 8 months ago

You're right, we should probably just go back to the good ole' days before taxes and regulation and let the Tobacco companies market their products directly to children in schools.

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FalseFlag 1 year, 8 months ago

Your dry humor is lacking basic substance of relativity.

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Liberty275 1 year, 8 months ago

Legalize and tax marijuana. Do it for the children!!!

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FalseFlag 1 year, 8 months ago

Legalize and tax prostitution. Do it for the children!!!!

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weeslicket 1 year, 8 months ago

from the article: One of the conditions of the settlement was that the states would help ensure the companies’ market share. Now Big Tobacco says the states, including Kansas, have failed to hold up their end of the deal, so they want to reduce payments to the states.

the states would help "ensure" the companies' "market share". HUH ?

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skinny 1 year, 8 months ago

You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.

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adastraperapathy 1 year, 8 months ago

And how is this article about "legislating the wealthy out of freedom"?

You also cannot get sufficient tax revenue without taxing the wealthy.

So long as this country doesn't have living wages and benefits for the working poor, they aren't going to be able to afford all the things they need.

If the wealthy in charge of our economy paid their employees more, their employees would need government services less and they would pay more in taxes themselves.

You describe a problem that is of the wealthy's own making.

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adastraperapathy 1 year, 8 months ago

Well, this isn't about the county commission, but it is a good question.

Exactly how are the states supposed to ensure market share for the tobacco companies?

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dinglesmith 1 year, 8 months ago

What an easy question. Cut taxes of course! If there are none left to cut, I'm sure ALEC will come up with something really awesome.

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OonlyBonly 1 year, 8 months ago

And the REAL statement that identifys the problem here in Kansas and Washington DC is "An endowment fund that was supposed to have been built up with a portion of tobacco funds has regularly been raided, to the tune of $140 million, by the Legislature to pay for other items in the state budget, Cotsoradis noted."

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MyName 1 year, 8 months ago

It's not a problem with reading comprehension. The problem is the reader doesn't share your borderline OCD with Washington and Obama and therefore can't comprehend the latest conspiracy rant you've managed to waste electrons on.

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patkindle 1 year, 8 months ago

so is this big tobaccos fault? or can we just blame it on bush? ................... An endowment fund that was supposed to have been built up with a portion of tobacco funds has regularly been raided, to the tune of $140 million, by the Legislature to pay for other items in the state budget

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redfred 1 year, 8 months ago

Just like they have raided the state retirment fund.

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adastraperapathy 1 year, 8 months ago

Who is in charge of the state legislature? Who has been in charge of the state legislature for decades?

Oh yeah, the Kansas GOP. (That Amanda Adkins used to be in charge of)

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speedy47 1 year, 8 months ago

What will the state do? Nothing our children are just SOL.

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adastraperapathy 1 year, 8 months ago

And so it begins.

The state would have more than enough money to pay for the Children's Cabinet request of $38 million (i.e. ~$8 per tax-paying Kansan) if the Governor and the far right hadn't pushed through the irresponsible tax cut of 2012.

Do they really expect informed people to believe the Governor cares about poor kids?

I haven't see him fighting for poor kids at all over his career.

I have seen him fall over backwards to please his wealthy donors though.

Poor kids are more like a useful prop for him to put on display while he is making life harder for their parents.

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optimist 1 year, 8 months ago

I think they are a useful prop for the far left. Every time anyone proposes cutting spending the left immediately drags a bunch of low income kids in front of a camera and cries that the kids will be hurt.

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MyName 1 year, 8 months ago

No, this money is related to the settlement states got for not taking the tobacco companies to court and wiping them out because the lied, misled, and deceived smokers over the fact that smoking causes cancer and other health problems.

The taxes themselves are to try to encourage smokers to pay for all the additional health costs they bring to the system. Or to quit, if they can. Maybe smokers are quitting enough for Big Tobacco to notice a difference in the bottom line, but I bet it has as much to do with the economy as the tax rate.

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jhawkinsf 1 year, 8 months ago

Whether it's cigarettes or some other product, this just goes to show that when you make taxes too high, you'll encourage a black market to emerge. Legalize pot and tax it too high, and you'll continue to have a black market. Raise income taxes too high, and wealth will be moved off shore. We in Lawrence already see it when people go shopping in Missouri to escape certain taxes.

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Centerville 1 year, 8 months ago

Correction: "The Bureau of Alcohol, Tobacco, Firearms and Explosives estimates that illegal cigarette sales cost local, state and federal governments nearly $10 billion a year." should read "The ATFE estimates that illegal sales save consumers nearly $10 billion a year."

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BOULEVARDWHEAT 1 year, 8 months ago

I quit smoking years ago. Those kids are on their own.

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obamasocks 1 year, 8 months ago

Oh great, just what our kids need. Next thing you know the government will stop taking kick backs from all the crack and meth dealers, and then where will medicare be? How can we expect to fund the state if we don't get the income from tobacco, alcohol and gambling taxes and kick backs?

Ever feel like these people are paying the state for "indulgences"?

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optimist 1 year, 8 months ago

This was so obvious. I remember some of us common sense individuals said when the tobacco windfall was extorted from tobacco companies the day would come when the money would dry up either through smokers dying off or quitting due to the cost of cigarettes, specifically because of these taxes. Now that the money is beginning to dry up and the tax money was spent on things other than the actual healthcare costs associated with smoking the government and all of those organizations benefiting from the money are now going to come to all of us to keep the money flowing.

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WIpatriot 1 year, 8 months ago

W. Kip Viscusi, an economist and professor at Harvard Law School wrote: "In the late 1990s more than 40 state attorneys general sued the major tobacco companies for the excessive medical costs imposed on the states by smoking. In November 1998 this litigation was concluded with the companies agreeing to pay approximately $9 billion a year, to be adjusted for inflation, in damages and lawyers' fees. The deal was incredibly corrupt; had it been made in any other industry it would surely have been declared illegal. And the tobacco companies were not the only bad guys in this story. The trial lawyers, the politicians, and even the public health officials and antismoking advocates who believed that any means were appropriate to achieve their desired ends of massive fees, political victories, and higher cigarette prices were the ones who most abused the system." http://www01.entrepreneur.com/tradejournals/article/97737411.html

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