Thursday, January 29, 2009
Cigarette tax increase snuffed out in House subcommittee
The tax increase, a key piece of Gov. Tim Kaine's solution for the budget deficit, remains alive in the Senate.
Related
roanoke.com/politics
RICHMOND -- A House of Delegates subcommittee on Wednesday rejected a cigarette tax increase proposed by Gov. Tim Kaine, delivering a blow to a major piece of the administration's plan to balance the state budget and minimize cuts to the Medicaid program.
By a vote of 8-2, a House Finance subcommittee voted to kill legislation (House Bill 2389) that would double the state's cigarette tax to 60 cents per pack and dedicate the revenue to a health care fund that supports the Medicaid program.
Kaine already has proposed about $400 million in Medicaid cuts to help balance a $2.9 billion shortfall in the state's two-year budget. He said the cigarette tax would generate more than $150 million annually, enabling the state to avoid deeper cuts that could force some poor, elderly and disabled Virginians out of the Medicaid program.
Kaine's proposal remains alive in the Senate, but today's House subcommittee vote spells trouble for a controversial piece of the governor's budget-balancing plan.
"It's unfortunate they made this decision without proposing an alternative solution," Kaine spokesman Gordon Hickey said. "It is still alive in the Senate. If this stands, the House is going to have to find $150 million more in Medicaid cuts, and that will certainly harm Virginia's most vulnerable residents. This is a major part of the governor's budget proposal. We have yet to see how the House will make up for that."
Some committee members questioned the connection between the cigarette tax proposal and Medicaid funding, and suggested that Kaine could avoid deeper Medicaid cuts by reducing spending in other areas of the state budget. Some lawmakers also have noted that a federal stimulus package moving through Congress likely will contain a boost in Medicaid funding to assist states.
"Why is it that the shortfall happens to fall under this narrow area of Medicaid?" said Del. Bob Marshall, R-Prince William County. "Why did the budget just end up shorting Medicaid and nothing else?"
Kaine has said the cigarette tax revenue would help defray Medicaid costs tied to smoking-related illnesses. Supporters of the bill said they also expect demands on the Medicaid program to increase as the economy worsens.
"I'm concerned about the potential effects on the providers of Medicaid in a time of economic downturn, which means we're going to have more utilization of the Medicaid program," said Del. Bob Brink, D-Arlington, the bill's sponsor.
Chris Bailey, the senior vice president of the Virginia Hospital & Healthcare Association, said health care cuts would be "catastrophic" without revenue from the cigarette tax increase. The association last week released data indicating that more than 11,000 health care jobs throughout the state could be terminated without the additional revenue.
But lobbyists for the tobacco industry and for wholesalers, retailers and convenience stores argued against the tax increase, saying it would create hardships for their industries. They noted that legislation moving through Congress would increase the federal excise tax on tobacco by 61 cents a pack, making the state increase more difficult to absorb.
R.J. Reynolds lobbyist Steve Pearson said the tax increase would accelerate the decline in tobacco usage and questioned whether it could generate sustained revenue to support Medicaid.
"What you're doing here is tying a declining tax base to a particular cost source, in this case Medicaid, and it's going to create the need to go back to the well again and again and again," Pearson said.
Brink said attitudes about the tax increase could change if an identical bill (Senate Bill 947) passes the Senate and is sent to the House. By then, lawmakers could have updated revenue numbers that will provide a clearer picture of the potential Medicaid shortfall.
"What I'm hoping is that by the time it comes over here, the real need to maintain our lean Medicaid program will be even more clear," Brink said.
