Increased tax revenue from tobacco geared to fund new programs

JEFFERSON CITY, Mo. -- If voters endorse a $342 million boost in state excise taxes on tobacco products, lawmakers won't be able to count on that money to bail Missouri out of its budget problems, according to the state budget director.

However, the chairman of the Senate Appropriations Committee said at least some of the new revenue could be used for budget relief.

Proposition A, which is on the Nov. 5 ballot, would add 55 cents to the state tax on a pack of cigarettes, bringing the total tax to 73 cents. Taxes on other tobacco products would increase by 20 percent of the wholesale cost.

While a $342 million infusion into the state's general fund would help ease Missouri's financial crunch, the Proposition A revenue is strictly earmarked, mainly for health care.

State budget director Linda Luebbering said the measure was drafted carefully and lawmakers would have a tough time finding ways to use the money for other purposes.

Placing earmarks

While dedicated revenue has strict limitations on use, lawmakers in the past have used earmarked money to replace general revenue.

For example, when voters decided that gambling proceeds should go only for education, many intended for that money to be in addition to what education was already receiving. Instead, it was pumped into the education funding distribution formula, freeing up some general revenue that otherwise would have been needed for the formula.

But Luebbering said that shell game only works when you have general revenue to replace.

Under Proposition A, 28 percent of the revenue, nearly $95.8 million, would be spent on programs that at present receive no state support -- life sciences research, early childhood education grants and anti-smoking programs.

Another $99.2 million would be set aside for supplemental Medicaid payments to health-care providers. Medicaid does currently receive general revenue, but Luebbering said Proposition A money in this area would have to be additional, not replacement, spending.

"The way I read it, that's for new things we don't currently pay for," Luebbering said.

The remaining $147 million would be for an existing prescription drug plan for senior citizens and general health-care programs. Luebbering said lawmakers could conceivably raid that money but called that unlikely since natural growth on mandatory spending in those areas will eat up that amount and more, even if Proposition A fails.

Plugging holes

State Sen. John Russell, R-Lebanon, said some Proposition A revenue could go to plug holes in the budget.

"I'm not sure every dollar could be used that way, but it would provide some budget relief," said Russell, the Senate appropriations chairman.

Although he believes higher tobacco taxes could provide the state with some short-term help with the budget, Russell worries about the stability of that revenue stream over the long haul.

"The real possibility is with a higher tax, the less smoking there is and the less tobacco money coming into the state," Russell said.

As a result, the state could be creating new programs it might not be able to pay for in the future if more Missourians quit smoking, which supporters of the tax increase say is their goal. Collections from the state's current 17-cent excise tax have declined by nearly 11 percent since 1996.

Brad Ketcher, a spokesman for the pro-Proposition A group Citizens for a Healthy Missouri, said the measure would provide secure revenue for important health-care initiatives, particularly though benefiting needy Missourians.

"There are a number of important safeguards here to prevent the legislature from taking the money and running," Ketcher said.

mpowers@semissourian.com

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