Donnelly: Bipartisan Rage over Gov. Jerry Brown ‘Stealing’ Prop 56 Cigarette Tax Money

Gov. Jerry Brown is coming under increasing fire from all sides for ‘stealing’ $1.2 Billion of the cigarette tax money—raised from Proposition 56—and diverting it into the state’s General Fund.

Both Republican and Democrat representatives from California’s Congressional Delegation spoke out this week against Brown’s proposed budget—in hopes of convincing him to reverse the diversion of funds in the looming budget fight known to insiders as the “May Revise”.

This past Tuesday, Congressmen Raul Ruiz (D-Palm Desert)—who is a physician that represents the Palm Springs area—sent California’s Democrat governor a letter critical of Brown’s plan.

According to a local Palm Springs CBS affiliate (CBS 2), [t]he letter calls for money from the voter-approved Proposition 56 tobacco tax increase to be used for medical education programs, payments for health care services and treatment for Medi-Cal patients.”

Reportedly it is signed by 37 of the 53 California representatives, but multiple requests by Breitbart News for a comment or a copy of the congressman’s letter itself went unanswered.

“We are concerned that your FY 2017-2018 state budget redirects Prop 56 revenues away from Graduate Medical Education programs intended to address California’s physician shortages, as well as Medicaid payment increases intended to improve access to care for Medi-Cal patients,” the letter reportedly read, according to the CBS 2 story.

On Thursday, Republican Congressmen David Valadao (R-Hanford) and Jeff Denham (R-Turlock)—both from the Central Valley hard hit by the drought where a significant majority are dependent on MediCal— jointly released the following statement:

“At the cost of families in rural California, Governor Brown has prioritized access to healthcare for those living in urban areas and along the coast over those most in need in the Central Valley. If he truly cared about ensuring all Californians had access to healthcare, he would work to improve Medicaid reimbursement rates for the most prosperous state in the nation. Governor Brown worsened the problem when he went against the wish of California voters and stole the $1.2 billion from prop 56.”

The link provided in the joint press release—leads to a story on the California Medical Association (CMA) website entitled:  “Brown’s budget steals Prop. 56 revenue,” which excoriates Brown.

A quick review of the fine print in the official language of Proposition 56 reveals that Jerry Brown is pulling a fast one.  While the funding formula that allows Prop 56 money to be diverted to the General Fund is rather complex, it must first be authorized by the “Board” of the newly created trust fund dubbed the “California Healthcare, Research and Prevention Tobacco Tax Act of 2016 Fund”—and that cannot happen until the tax is at least a year old.  So, Jerry Brown is up to his same old tricks, playing smoke and mirrors with funds he has no control over.

There is a very limited pathway by which some funds may be transferred directly to the state’s General Fund—and it’s only in order to backfill a shortfall in tobacco taxes based on the falloff in cigarette sales due to the new, higher cigarette tax.  In that case, funds can be used to make up for lost revenue to the state and “affected local governments.”  Other than that, the money is rather tightly prescribed to replace funding shortfalls for breast cancer research and children’s health.

• 82% of remaining funds must be transferred to the newly-minted, “Healthcare Treatment Fund”—and from there to all the usual government programs including MediCal, unnamed “access to healthcare” programs and “geographical shortages of services” (which might be what Rep Ruiz dubs the “physician shortage”)
• 13% of remaining funds must be used for “the purpose of funding comprehensive tobacco prevention and control programs”
• 5% for overhead (unspecified)

The 82% portion will most likely be devoured by the perpetual MediCal shortfall, but it’s the 13% that is then divvied into so many different pies, it’s hard to know if it will make much of a difference.  All of the grants have some loose affiliation with research or prevention of tobacco-related maladies:

• 15% to Department of Education for prevention programs
• 5% to the UC system for medical research
• $30 Million to State Dept of Public Health (DPH) for dental disease prevention
• $48 Million to law-enforcement agencies to crack down on cigarette smuggling, which is sure to increase
• $30 Million to California Dept. of Justice (CA DOJ) to enforce laws related to illegal sales or smuggling of cigarettes
• Another $6 Million to DPH for joint use with L/E for existing kids program known as Stop Tobacco Access to Kids Enforcement (STAKE) Act
• $6 Million to Attorney General for cost of increased enforcement actions/prosecutions

Contrary to the assertions by the powerful medical lobby, CMA, who co-sponsored Prop 56, and who consider Brown’s raid on the revenue to be a betrayal of the intent of the measure, the devil’s always in the details.

When CMA President Ruth E. Haskins, M.D says,“The language of Prop. 56 was clear – the people voted overwhelmingly in support of improving payments for programs and providers to ensure that patients can see a doctor when and where they need one,” she may be right.

But she may be guilty of believing the slick sales pitches that her own organization put out promoting Prop 56, because nowhere in the fine print is there any sort of guarantee of higher reimbursement rates—there’s only vague language about addressing “geographical shortages” and “access to care”—and increasing funding to existing health and welfare programs like MediCal.

It has been said that “money is the mother’s milk of politics”—and there’s nothing like a virgin slush fund to draw out the jackals disguised as suitors.  If Brown raids the kitty, who will try to stop him?  State Controller Betty Yee hardly seems the type to take on the popular, scrappy governor, but who knows?  Between the cigarette and the “pot” money, one thing’s sure:

There will be no shortage of political posturing and hot air in the 2018 election cycle.

Tim Donnelly is a former California State Assemblyman and author who is doing a book tour for his new book: Patriot Not Politician: Win or Go Homeless. He ran for governor in 2014.

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