Apparently Philip Morris felt comfortable enough with Napolitano’s reassurance that Proposition 200 did not change the tobacco tax that no documented tobacco industry involvement in the MSA propositions occurred. RJ Reynolds representatives spoke with Arizona’s Attorney General Janet Napolitano in early October 2000, finding her “strictly ‘unofficial’ and ‘off the record’ reaction” to the tobacco industry attorneys’ argument that Proposition 200 did not increase the tobacco tax reassuring.This opinion led RJ Reynolds counsel Henery Stokes to report to Philip MacDonnell: “It was the consensus of the conference call group that the industry should stay out of the Initiatives. In the discussion I stated I would recommend to RJ Reynolds that we stay out of the campaigns. I stated that if we did anything further it might undermine our legal position. There was general agreement.”There were immediate efforts to divert the money to the General Fund, which were prevented with the help of former U.S. Senator Barry Goldwater.As a compromise to get some money appropriated to tobacco control, the resulting enabling legislation for Proposition 200, HB 2275, the Tobacco and Health Care Act , passed in 1995 capping expenditures for tobacco control in FY1996 at $10 million and FY1997 at $15 million.While revenues deposited into the Health Education Account for these two years were $27 million and $28.9 million respectively, the capped funds accrued a $30.9 million reserve in the account until they became available in FY1998 for subsequent allocation. After July 1, 1997 , TEPP was free to use the full account accrual of annual income and the accumulated reserves, limited only by TEPP’s capacity to create and develop programs. Not only did failing to appropriate all of the money voters allocated to TEPP mean the program would be smaller and less effective,plant racks for vertical growing but it also created a situation that invited future diversion of the funds away from tobacco control.
In a 2006 interview, Kevin DeMenna, long time lobbyist for the ALA, AHA, and ACS, noted that the pressure not to allocate all the TEPP funds and create the reserve came from Senate Majority Whip Jan Brewer “at the request of the tobacco companies.”DeMenna explained, “If you know anything about state budgeteers, [creating a fund reserve is] like painting a target on your forehead. In order to finally get that money loosened up [from protobacco legislators to create the TEPP program], we had to give a little to get.”HB 2275 also was amended by pro-tobacco legislators to prohibit the health voluntary groups involved in Proposition 200 from receiving any TEPP funds by specifying with which agencies TEPP could contract. This move retaliated against the voluntary health organizations for their role in bypassing the Legislature’s authority by going to voters with Proposition 200.These health groups, which had the most practical knowledge of tobacco control, were barred from participating in TEPP’s formation process and service provider network. Joel Meister, who during the time directed TEPP’s parent Center for Prevention and Health Promotion, concluded that when the Legislature selected permissible recipients of state contracts the purpose of specifying agencies achieved “intentionally excluding all other private, nonprofit agencies,” such as the health voluntaries.91TEPP’s ADHS infrastructure was poorly prepared to deal with this financial blow. At the same time TEPP had already been weakened by a six-month period without an Office Chief and a rocky transition to a new media contractor. These concurrent disruptions aggravated the severe budget cuts’ effect on the program, undoing much of the program’s infrastructure up to that point. The Arizona Department of Health Services was “complicit” with the budget cuts, according to health lobbyist Kevin DeMenna in a 2006 interview; “they had other priorities” than protecting the TEPP funds.These cuts had a discernable effect on smoking: Smoking prevalence increased after the cuts , and per capita cigarette consumption fell at a slower rate .
A confluence of four factors contributed to the diversion of Health Education Account funds. First, in April 2001, seven months before the proposed initial diversions, a $250 million budget shortfall and “slumping economy” confronted Arizona, even prior to the recession Arizona faced in the wake of the September 11, 2001, terrorist attacks in New York City and Washington D.C.,particularly because Arizona’s economy relies heavily on tourism. Second, at the time of Governor Hull’s first proposal to cut TEPP funding on November 5, 2001, the unspent Health Education Account reserve totaled $31 million, which the governor and Legislature viewed as money available for other purposes. Third, Proposition 204 created a need for additional money because the available funds from the MSA were not adequate to finance AHCCCS at 100% of the federal poverty level. Fourth and finally, the fact that Proposition 204 rather than Proposition 200 went into effect resulted in the Health Education Account remaining “unprotected” by the 1998 Voter Protection Act. On November 5, 2001, Governor Hull announced her plan to balance Arizona’s budget in light of an anticipated $1.5 billion deficit over two years. Part of her proposal included eliminating the entire TEPP program by using its reserve fund and yearly revenue to fund AHCCCS programs for indigent healthcare.The Legislature also had its own designs for the TEPP funds. A week earlier, Speaker of the House Jim Weiers had promised $4.3 million of the TEPP funds to trauma centers in southern Arizona. While Weiers’ plan was unsuccessful, this proposed diversion of TEPP funds unleashed legislators to drain TEPP finances for pet projects. Within weeks, the Arizona State Legislature transferred, in separate expenditure allocations, $27.8 million from the Health Education Account to the AHCCCS, nearly emptying the Account’s reserve and proposed to take $5 million per year from the Health Education Account for the AHCCCS. As soon as the health groups realized in November 2001 that the Governor and Legislature were planning to dismantle TEPP, they scrambled to voter-protect the funds as soon as possible. But the next election, in November 2002, was too late to stop the funds diversion of money from TEPP. The initial proposed diversion of TEPP funds to medical services would have reduced TEPP’s budget for FY 2002 and FY 2003 to a third of its previous budget. To this end, Hull supported HB 2019, which would have transferred $40 million for FY2002 and $18 million for FY 2003 from the Health Education Account to AHCCCS to provide the medical services Proposition 204 required.The ACS, ALA, and AHA actively opposed these diversions, both by making public statements and working through their lobbyist Kevin DeMenna. As a result of this resistance, the Senate amended the bill so the originally proposed $58 million diversion over two years was reduced to $32.8 million over two years. The first diversion came in HB 2019, which, after amendments,wholesale indoor plant grow rack appropriated $15 million from the Health Education Account to the “medical services stabilization fund” and was signed by the governor on December 19, 2001. , Carolyn Allen , James Weiers , et al.
The second transfer from the Health Education Account occurred when SB 1007 , Timothy Bee , Randall Gnant , Jack Brown , et al. appropriated $2.8 million from the Health Education Account to the AHCCCS, and became law without the signature of the governor on December 21, 2001. The last segment of this transfer came late in the fiscal year. HB 2004 transferred $10 million from the Health Education Account to AHCCCS March 21, 2002, and was signed by the governor. In addition to diverting money from TEPP to fund AHCCCS coverage, pro-tobacco legislators sought to divert an additional $5 million a year for five years from the Health Education Account to a new project called the Translational Genomics Research Institute . The statewide public private TGen was created by a group of business, science, and government leaders in February 2002 and operates with a $90 million budget from the Flinn Foundation, the Arizona State government, and businesses. This $5 million a year would be about 30% of TGen’s overall operating budget, and was promoted as a goodwill gesture on the part of the Legislature to demonstrate Arizona’s governmental commitment to the Institute. The majority of TGen’s $90 million funding came from grants and private foundations . This bill, HB2711, did not take TEPP funds and apply them to the state’s fiscal crisis as was often the rationalization for TEPP’s funding diversions,but instead appropriated them for new biotech development. The bill was sponsored by some of the legislators with the lowest policy scores, including Robert Blendu , Jake Flake , Linda Gray Barbara Leff , Cheryl Chase , and Laura Knaperek . The bill, written at the same time as Proposition 303 to voter-protect the Health Education Account was being voted on by the Legislature, stated that if Arizona voters approved Proposition 303 prohibiting future legislative appropriations of TEPP funds, then TGen’s $5 million a year would instead come from the Health Research Account that funded tobacco disease-related research.Displacing the diversion from TEPP to the Health Research Account occurred because the voluntary health organizations and the Legislature agreed the Health Research Account would not be reenacted along with the rest of Proposition 200’s language, and therefore, the Health Research Account would not be voter-protected. HB 2711was approved in May 2002 and signed by Governor Hull, extracting the $5 million from TEPP for FY2003 even though the Legislature had already referred Proposition 303 to the November ballot.On November 15, 2001, ten days after Hull announced her intention to divert the Health Education Accounts funds, Arizona Attorney General Janet Napolitano held a press conference with the previous Attorney General, Grant Woods, decrying Hull’s proposed diversions.Napolitano said Hull’s actions were “short-sighted,” would hurt children, and ignored the will of the voters who approved the Health Education Account.Woods expressed his disappointment in Hull, calling her diversion “a theft from the voters and from the children of Arizona.”
Disagreeing with Hull’s attack on the funds, Napolitano said she intended to lead an initiative to increase the excise tax on cigarettes from 58 cents at the time to somewhere between 70 cents and $1.08 to generate new revenue for TEPP while voter-protecting the Health Education Account from further diversions.While Napolitano and Woods’ defensive efforts did not stop the raid on TEPP’s finances, their opposition to Hull’s plan not only animated the voluntary health organizations to take their own initiative to save as much of TEPP’s funds as possible, but also planted the seed for Proposition 303.The health voluntaries and Arizona tobacco control advocates felt their “hands were tied” during the raid on TEPP because they were unable to preserve TEPP’s funding, even if they did reduce the proposed diversions.But the voluntary health organizations knew a piecemeal approach to defend TEPP from the Legislature was not going to effectively safeguard the program in the long run. Determined to protect TEPP, tobacco control advocates went back to the ballot to voter-protect the Health Education Account by reenacting it. Proposition 303, which would voter-protect TEPP and raise Arizona’s tobacco tax 60 cents, ultimately involved the AzHHA providing most of the campaign funding and the Legislature referring the measure to the ballot. Proposition 303 was predicated on each party’s “enlightened” self-interest: Voter-protecting the Health Education Account would not only free up tobacco control advocates to focus on other activities such as passing clean indoor air ordinances, but it would also create a Chronic Disease Fund, ultimately providing several million dollars a year for disease detection and prevention, allowing the health voluntaries to be major recipients of these funds as contracted service providers. The AzHHA, which helped lobby the Legislature to refer Preposition 303 and got Arizona hospitals to contribute more than half of the overall funds to run the campaign, would reap a huge return on their investment, receiving roughly $30 million a year in hospital reimbursements for unpaid services. The Legislature also gained by referring the measure to the ballot rather than allowing the health voluntaries to decide where the tax increase would go: the Legislature used the majority of Proposition 303’s tobacco tax increase, $100 million a year, to relieve their fiscal obligation to use general fund money to fulfill the requirements of the 2000 Proposition 204 mandate to fund AHCCCS at 100% the federal poverty level.