Legislature(2003 - 2004)

04/21/2004 03:30 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 538-TOBACCO TAX; LICENSING; PENALTIES                                                                                      
                                                                                                                                
[Contains discussion pertaining to SB 368, the companion bill]                                                                  
                                                                                                                                
CHAIR ANDERSON announced  that the first order  of business would                                                               
be HOUSE  BILL NO. 538, "An  Act relating to taxes  on cigarettes                                                               
and  tobacco  products; relating  to  tax  stamps on  cigarettes;                                                               
relating to forfeiture of cigarettes  and of property used in the                                                               
manufacture,  transportation, or  sale  of unstamped  cigarettes;                                                               
relating to licenses  and licensees under the  Cigarette Tax Act;                                                               
and providing for  an effective date."  [HB 538  was sponsored by                                                               
the House  Rules Standing Committee  by request of  the governor;                                                               
before the committee was CSHB 538(W&M).]                                                                                        
                                                                                                                                
Number 0100                                                                                                                     
                                                                                                                                
JOEL GILBERTSON,  Commissioner, Department  of Health  and Social                                                               
Services, presented HB  538, a $1-a-pack increase  in the tobacco                                                               
tax that  is part of  the governor's fiscal package.   Increasing                                                               
tobacco-product  excise taxes  is an  effective tool  in reducing                                                               
tobacco  consumption   and  health  impacts,  he   told  members.                                                               
Calling tobacco  the number-one health  threat facing  the state,                                                               
he said it's  a leading cause of disability,  illness, and death.                                                               
Since  the tax  increase  in 1997,  when the  "$1  per pack"  was                                                               
implemented, five years  of data have shown a  30 percent decline                                                               
in   cigarette   consumption  in   Alaska.      He  lauded   this                                                               
accomplishment of the previous legislature  and the advocates who                                                               
worked for that increase.                                                                                                       
                                                                                                                                
COMMISSIONER GILBERTSON pointed out  that young people especially                                                               
stand to gain  from this legislation.  Increasing  the unit price                                                               
for  tobacco  products is  one  of  the  most effective  ways  to                                                               
prevent young Alaskans  from beginning to smoke,  he said, noting                                                               
that individuals usually  begin smoking at an  early age, thereby                                                               
starting a  lifelong addiction.  Highlighting  the sensitivity of                                                               
youths  to price  increases, he  predicted  a $1-a-pack  increase                                                               
will add  to the  50 percent  decline in  smoking by  youths seen                                                               
since  the 1995  Youth Risk  Behavior Survey,  which he  called a                                                               
statistically valid survey, and the 2003 survey completed year.                                                                 
                                                                                                                                
COMMISSIONER GILBERTSON reported that  in the last calendar year,                                                               
through stepped-up  enforcement of  the Synar program,  a decline                                                               
occurred  from 30.2  percent to  10 percent  in terms  of illegal                                                               
sales  to minors.   A  further 15  percent drop  in youth-smoking                                                               
rates  expected from  this legislation  would translate  to 1,800                                                               
lives saved from premature death due to tobacco consumption.                                                                    
                                                                                                                                
Number 0290                                                                                                                     
                                                                                                                                
COMMISSIONER  GILBERTSON said  increasing  the  price of  tobacco                                                               
products  is  an  effective  public health  and  policy  tool  to                                                               
increase the health of adult Alaskans  as well.  He predicted the                                                               
result that 3,500  adult smokers will finally choose  to quit and                                                               
avail themselves of  cessation services provided by  the State of                                                               
Alaska  and  in partnership  with  the  [Alaska] Tobacco  Control                                                               
Alliance (ATCA).   For every 3,500 smokers who quit,  he said, an                                                               
estimated 800 will be saved from smoking-related deaths.                                                                        
                                                                                                                                
COMMISSIONER   GILBERTSON  noted   that  vulnerable   populations                                                               
include infants  who are subjected  to in utero exposure  to high                                                               
nicotine levels;  he suggested that smoking  by expectant mothers                                                               
would be reduced significantly by  this legislation, resulting in                                                               
850 babies spared from such exposure in the next five years.                                                                    
                                                                                                                                
COMMISSIONER  GILBERTSON  also  predicted a  great  impact  among                                                               
Alaska  Natives,  who  experience  a  44  percent  smoking  rate.                                                               
Noting that the Alaska Native  Health Board and the Alaska Native                                                               
Tribal  Health  Consortium  support  this  legislation  for  that                                                               
reason,  he  reported  having worked  cooperatively  through  the                                                               
tribal organizations and the ATCA  to target programs towards the                                                               
Native community.  He remarked, "We  need to do more, and we will                                                               
do more  going into  the future, but  this legislation  will help                                                               
the Native population disproportionately,  ... another reason why                                                               
this is good legislation."                                                                                                      
                                                                                                                                
COMMISSIONER  GILBERTSON  cited a  1998  study  that showed  $133                                                               
million  in   tobacco-related  medical  expenditures   in  Alaska                                                               
because of tobacco  consumption, as well as $137  million in lost                                                               
productivity   just  from   deaths   -   not  including   breaks,                                                               
disability, or illness.   Noting the large  number of econometric                                                               
studies on  the relationship  between price  and tobacco  use, he                                                               
said, "We've  looked at the 17  largest, and in each  one of them                                                               
it  did show  a correlation  between increasing  cost of  tobacco                                                               
products and decreased  utilization.  We expect  that to continue                                                               
with this legislation."  He  informed members that Ms. Bales from                                                               
the Department  of Revenue would address  other aspects including                                                               
enforcement provisions and the fiscal note.                                                                                     
                                                                                                                                
Number 0466                                                                                                                     
                                                                                                                                
REPRESENTATIVE GATTO asked  whether this is a  revenue measure or                                                               
relates more  to the effects on  children, for example.   He said                                                               
he  thinks  this is  a  good  idea  and  could have  an  enormous                                                               
positive  effect on  unborn children  and in  helping to  protect                                                               
toddlers from  secondhand smoke,  which is sufficient  reason for                                                               
him to  support the bill.   However, he cautioned  about possible                                                               
unintended health consequences for  teenagers who give up smoking                                                               
and then may take up some other dangerous and bad habit.                                                                        
                                                                                                                                
COMMISSIONER  GILBERTSON replied  that  he hadn't  seen a  single                                                               
study suggesting that  a price-related decrease in  use by minors                                                               
has done  anything but improve  their health status,  although he                                                               
acknowledged there  could be  something he wasn't  aware of.   He                                                               
brought  attention to  a chart  that shows  a direct  correlation                                                               
between tobacco price  and consumption from 1990 to  2003, with a                                                               
health-status  increase  for  young   Alaskans  and  the  general                                                               
population.  He offered to provide further information as well.                                                                 
                                                                                                                                
Number 0691                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG asked  what the administration's position                                                               
is on Section  16, page 4, which he'd added  in the House Special                                                               
Committee  on Ways  and  Means  to increase  money  going to  the                                                               
smoking education and cessation fund  by perhaps $4.2 million, to                                                               
fully fund  it to levels  recommended by the Centers  for Disease                                                               
Control and  Prevention (CDC).   He noted that he  had amendments                                                               
to clarify that language.                                                                                                       
                                                                                                                                
COMMISSIONER GILBERTSON  apologized that  he hadn't been  at that                                                               
hearing and  thus hadn't seen  the language as it  moved forward;                                                               
he  related his  preference  for getting  back to  Representative                                                               
Rokeberg with  a more official response  from the administration.                                                               
Noting that funds are appropriated  in the budget annually by the                                                               
legislature  for tobacco-control  programs, he  acknowledged that                                                               
Alaska and  some other  states fund  this at  a lower  level than                                                               
recommended  by  CDC,  but claimed  tremendous  success  for  the                                                               
program nonetheless.  He elaborated:                                                                                            
                                                                                                                                
     We've seen  precipitous declines in the  consumption of                                                                    
     tobacco products in  both adult and youth.   We've seen                                                                    
     good  access  to   cessation  services,  including  the                                                                    
     operation   of  a   toll-free  hotline   and  cessation                                                                    
     services, investments  in partnerships with  the tribal                                                                    
     health   consortium,   with  Southcentral   Foundation,                                                                    
     Native organizations.  I think we're succeeding.                                                                           
                                                                                                                                
COMMISSIONER  GILBERTSON   acknowledged  that  the   question  of                                                               
whether  more  dollars could  be  invested  and have  a  positive                                                               
impact on the community is a legitimate one.                                                                                    
                                                                                                                                
Number 0868                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG   returned  to   Representative  Gatto's                                                               
question  of whether  this is  a revenue  measure or  intended to                                                               
decrease tobacco use.   He submitted that the  history of tobacco                                                               
taxation in  Alaska is checkered,  and voiced concern  that under                                                               
the  master settlement  agreement, funded  by a  45-cent-per-pack                                                               
assessment  by  the smokers  themselves,  some  $668 million  was                                                               
provided, which may have been  adjusted over the years.  Relating                                                               
his understanding that  the initial grant was  an enormous amount                                                               
of money,  he said the  legislature saw  fit to take  80 percent,                                                               
"securitize it, and build roads with it."  He added:                                                                            
                                                                                                                                
     I  think  we  did  the   right  thing  because  of  the                                                                    
     discounted value of  the dollar and what we  got out of                                                                    
     it.   However,  we're  using some  $4  million of  that                                                                    
     money, basically,  to go towards  our smoking-cessation                                                                    
     program,  which was,  in fact,  part  of the  agreement                                                                    
     that was  made with  the tobacco  companies originally.                                                                    
     So we've been  short-funding that from the get  go.  We                                                                    
     had  a  tremendous  amount  of   debate  when  we  last                                                                    
     increased  this tax  by 71  cents.   And at  that time,                                                                    
     just to get  the legislature to buy into  it, we've got                                                                    
     to dedicate it to  ... the statehood constitutional ...                                                                    
     dedicated fund, to schools.                                                                                                
                                                                                                                                
REPRESENTATIVE  ROKEBERG reiterated  that he'd  like to  know the                                                               
administration's  position on  this, and  expressed hope  that it                                                               
would be a supportive one.                                                                                                      
                                                                                                                                
Number 0974                                                                                                                     
                                                                                                                                
COMMISSIONER GILBERTSON acknowledged  that this legislation would                                                               
generate much-needed revenue for the  state and the general fund,                                                               
but said the administration, and  the governor in particular, put                                                               
this  forward  after consulting  in  December  with the  [Alaska]                                                               
Tobacco  Control Alliance,  to improve  public health  and reduce                                                               
tobacco  consumption.   He said  he  believes the  administration                                                               
sees this as a win-win situation for the State of Alaska.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG  responded that he  was glad to  have the                                                               
governor on board,  but clarified that he himself  was asking, as                                                               
a  matter of  public policy,  to have  adequate funding  given to                                                               
those people  who need it, the  smokers who are paying  for this.                                                               
Citing  statistics that  show  more than  70  percent of  current                                                               
smokers wish to quit, he suggested  the need to provide a helping                                                               
hand and put this money where it's supposed to go.                                                                              
                                                                                                                                
COMMISSIONER   GILBERTSON  noted   that  the   master  settlement                                                               
agreement and  other funds  that came in  were largely  driven by                                                               
states'  responding  to  health  care  costs  of  tobacco-related                                                               
illnesses  associated with  the  Medicaid program;  that was  the                                                               
reason for the  litigation, and the State of  Alaska continues to                                                               
carry  a  large cost  in  its  Medicaid  program, well  over  $60                                                               
million  a year  associated with  tobacco-related illnesses.   He                                                               
added  that while  this administration  hasn't  proposed using  a                                                               
portion of  the 20  percent that  remains for  Medicaid services,                                                               
that's  what the  legislature  chose  to do  last  year with  the                                                               
(indisc.-coughing).   So  there are  multiple  purposes of  those                                                               
funds, he concluded.                                                                                                            
                                                                                                                                
Number 1126                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD remarked that he  believes it's OK to get                                                               
more money from this because of  all the money it costs the state                                                               
through Medicaid and other programs.   However, he said, it seems                                                               
if the  goal is to  have fewer young  people start to  smoke, the                                                               
best method is to raise the  age to 21.  He mentioned legislation                                                               
he'd been trying  to put forward for a couple  of years; spoke in                                                               
favor  of  putting a  [tax]  of  a dollar  a  pack,  or more,  on                                                               
cigarettes; and asked why the age shouldn't be raised to 21.                                                                    
                                                                                                                                
REPRESENTATIVE CRAWFORD  turned attention  to Section 7,  page 3,                                                               
lines 7-10, and observed that it  raises to three cartons a month                                                               
the amount of  cigarettes that can be brought to  Alaska from out                                                               
of state.  He  said this seems to be a  big loophole for Internet                                                               
sales and so forth.                                                                                                             
                                                                                                                                
REPRESENTATIVE ROKEBERG  pointed out that it's  an amendment he'd                                                               
made.    He said  he  could  explain  it after  the  commissioner                                                               
responded to the earlier concern.                                                                                               
                                                                                                                                
COMMISSIONER  GILBERTSON  offered  to  sit  down  and  talk  with                                                               
Representative  Crawford  about his  aforementioned  legislation,                                                               
saying he hadn't been aware of it.                                                                                              
                                                                                                                                
CHAIR ANDERSON  suggested the committee wouldn't  address that in                                                               
this bill unless there was an amendment.                                                                                        
                                                                                                                                
COMMISSIONER   GILBERTSON   opined   that  the   most   effective                                                               
intervention relating to tobacco  consumption nationwide has been                                                               
increasing  the  price of  the  product.    He  said this  is  an                                                               
effective public  health tool as  constructed.   He acknowledged,                                                               
however,  that raising  the age  also would  decrease consumption                                                               
among a certain  population.  As for the second  concern, he said                                                               
Johanna Bales of the Department of Revenue could address it.                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG offered to speak to it also.                                                                            
                                                                                                                                
Number 1293                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CRAWFORD related  that from  what he'd  read, the                                                               
most effective thing to keep people  from starting to smoke is to                                                               
delay it  until later in  life.  He  opined that raising  the age                                                               
has been shown to be as effective as raising the price.                                                                         
                                                                                                                                
COMMISSIONER GILBERTSON  agreed that raising the  initial age for                                                               
legally  purchasing tobacco  products does  decrease consumption.                                                               
Across  the "general  spread of  tobacco consumers,"  however, he                                                               
said  increasing  the price  of  tobacco  is the  most  effective                                                               
public health  intervention tool for decreasing  consumption.  He                                                               
said  that's why  the department  and "the  advocates" have  been                                                               
promoting this [legislation].                                                                                                   
                                                                                                                                
CHAIR ANDERSON  remarked that the  irony is  how many 19-  to 21-                                                               
year-olds smoke, which  might cut the fiscal note in  half if the                                                               
amendment passes.   He suggested it would be  interesting to hear                                                               
which the administration would support.                                                                                         
                                                                                                                                
Number 1361                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG responded  to Representative  Crawford's                                                               
earlier  question  [on  Section  7,  page 3,  lines  7-10].    He                                                               
clarified that it was intended  to allow only for actual personal                                                               
transportation by  someone flying in  to the state,  for example,                                                               
not  for Internet  sales or  anything  else.   He explained  that                                                               
under current law, a person is  a misdemeanant who brings in more                                                               
than five  packs of cigarettes.   He said bad laws  that can't be                                                               
enforced shouldn't be on the books.                                                                                             
                                                                                                                                
REPRESENTATIVE CRAWFORD asked, "If  you can't enforce five packs,                                                               
how can you  enforce three cartons?"  He questioned  having it on                                                               
the books at all.                                                                                                               
                                                                                                                                
REPRESENTATIVE  ROKEBERG   replied  that  there  has   to  be  an                                                               
amendment on the Internet sales only.   This is only for personal                                                               
interstate transportation.                                                                                                      
                                                                                                                                
REPRESENTATIVE CRAWFORD  replied that  it seems [there  are laws]                                                               
limiting interstate transportation of liquor.   He asked:  So why                                                               
not limit cigarettes?                                                                                                           
                                                                                                                                
REPRESENTATIVE ROKEBERG  answered, "We did.   We just  raised the                                                               
limit,  is all."   He  said  the difference  in what  constitutes                                                               
criminal activity  is the  amount:  five  packs of  cigarettes or                                                               
three cartons.                                                                                                                  
                                                                                                                                
CHAIR ANDERSON announced that there  would be more opportunity to                                                               
debate this at the next hearing.                                                                                                
                                                                                                                                
Number 1440                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG  referred to  Representative Crawford's                                                               
comments  about the  age  limit  and said  it's  not a  cessation                                                               
issue, but relates to not starting  [to smoke].  As to having the                                                               
revenue decrease, he remarked, "In the end, that's the ideal."                                                                  
                                                                                                                                
CHAIR ANDERSON set aside HB 538 temporarily.                                                                                    
                                                                                                                                
HB 538-TOBACCO TAX; LICENSING; PENALTIES                                                                                      
                                                                                                                                
[Contains discussion of SB 368, the companion bill]                                                                             
                                                                                                                                
CHAIR ANDERSON returned attention to  HOUSE BILL NO. 538, "An Act                                                               
relating to  taxes on cigarettes  and tobacco  products; relating                                                               
to  tax   stamps  on  cigarettes;   relating  to   forfeiture  of                                                               
cigarettes   and   of   property   used   in   the   manufacture,                                                               
transportation,  or sale  of  unstamped  cigarettes; relating  to                                                               
licenses  and   licensees  under  the  Cigarette   Tax  Act;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 1575                                                                                                                     
                                                                                                                                
JOHANNA BALES, Excise Audit Manager,  Tax Division, Department of                                                               
Revenue, noted that she is  the program manager for the cigarette                                                               
and  tobacco  products  excise  tax.   She  referred  to  written                                                               
testimony  she'd provided  and  informed members  that she  would                                                               
address  the  bill analysis  in  committee  packets.   Ms.  Bales                                                               
explained that this  bill raises the cigarette tax from  $1 to $2                                                               
a  pack,  and raises  the  other  tobacco  products tax  from  75                                                               
percent to 100 percent of the wholesale price.                                                                                  
                                                                                                                                
MS.  BALES said  this  also makes  technical  corrections to  the                                                               
Cigarette Tax Act and the "other  tobacco products tax" Act.  For                                                               
example,  there  was disparity  between  what  licensees pay  for                                                               
their  licenses; with  this legislation,  anyone who  brings this                                                               
product into  the state for resale  would pay a $50  license fee,                                                               
and thus those who  paid the lower fee of $25  would now pay $50.                                                               
However, an individual with a  license to bring cigarettes in for                                                               
personal consumption  would still pay $25.   Furthermore, because                                                               
of  the chance  for double  taxation, technical  corrections were                                                               
made to the  definitions of license types to  ensure that someone                                                               
who purchases from  a licensee doesn't have to pay  the tax; this                                                               
relates primarily to out-of-state licensees.                                                                                    
                                                                                                                                
MS.  BALES  reported that  there'd  been  brief discussion  about                                                               
Representative   Rokeberg's   amendment,  already   included   in                                                               
[CSHB 538(W&M)],   to  increase   the   limit  for   transporting                                                               
cigarettes  into the  state from  100 to  600 cigarettes.   Also,                                                               
there  are  proposed  changes in  the  misdemeanor  and  criminal                                                               
penalties; the  threshold is raised  so an individual  must bring                                                               
in a  higher amount  of cigarettes before  it justifies  a felony                                                               
provision versus a  misdemeanor.  She said the  Department of Law                                                               
had gone  through this,  and now  the Act  is in  compliance with                                                               
other felony provisions in statute.                                                                                             
                                                                                                                                
MS. BALES noted that another  section had been discussed briefly.                                                               
Mentioning 11.2 percent  of annual cigarette taxes  that would be                                                               
deposited into the  general fund, she said  the legislature would                                                               
be  directed  to appropriate  those  amounts  to the  tobacco-use                                                               
education and cessation  fund; it is estimated  this 11.2 percent                                                               
will amount to about $5.1 million a year.                                                                                       
                                                                                                                                
Number 1738                                                                                                                     
                                                                                                                                
MS.  BALES further  noted that  technical  corrections are  being                                                               
made  to  tax-stamp  legislation  passed  last  session.    If  a                                                               
licensee  purchases  tax stamps  but  those  stamps are  lost  in                                                               
transit,  the department  will replace  those,  provided it  gets                                                               
"adequate documentation from the  carrier" that those stamps have                                                               
been  lost.   She  said this  had  been a  big  problem for  some                                                               
licensees.                                                                                                                      
                                                                                                                                
MS.  BALES  advised  that,   currently,  licensees  who  purchase                                                               
cigarette  tax stamps  on a  deferred-payment basis  must post  a                                                               
bond  equal  to  200  percent of  the  monthly  purchases,  which                                                               
results  in 100  percent  coverage, since  someone  can make  two                                                               
months'  purchases  before  having  to make  the  first  payment.                                                               
Language in  the bill  would allow licensees  who've been  in the                                                               
state for five years, who have  a physical presence, and who have                                                               
been  "a good  taxpayer" for  five years  to post  a 100  percent                                                               
bond.    Thus  the  Department  of  Revenue  would  basically  be                                                               
extending credit for "the other 100  percent" for a period of one                                                               
month.   That had been  an issue  with some of  the distributors,                                                               
she noted.                                                                                                                      
                                                                                                                                
MS. BALES  pointed out  that some  provisions allow  licensees to                                                               
maintain  some  unstamped inventory  in  the  state if  they  are                                                               
making sales  out of state  and they provide  information showing                                                               
that they are  properly licensed in those  other jurisdictions to                                                               
pay  taxes  in  those  jurisdictions.    Furthermore,  there  are                                                               
forfeiture provisions  in the bill  such that  if a person  has a                                                               
felony violation  in cigarette trafficking,  unstamped cigarettes                                                               
can be seized,  as well as assets used in  the commission of that                                                               
crime.                                                                                                                          
                                                                                                                                
Number 1837                                                                                                                     
                                                                                                                                
MS. BALES addressed a provision  relating to a floor-stock tax to                                                               
be paid on the effective date of the Act.  She explained:                                                                       
                                                                                                                                
     A  floor-stock tax  is the  difference between  ... the                                                                    
     tax rate  on the  effective date, which  is $2  a pack,                                                                    
     and the  current tax rate  of $1  a pack, and  that all                                                                    
     distributors  and retailers  would have  to pay  to the                                                                    
     department,   in   six   monthly   installments,   that                                                                    
     difference in revenue.                                                                                                     
                                                                                                                                
MS.  BALES  noted  that  committee  packets  contain  information                                                               
showing  that in  1997, when  there  was no  floor-stock tax,  an                                                               
estimated  $7   million  was  lost  in   cigarette-tax  revenues.                                                               
Furthermore, complaints  had been  received from consumers.   She                                                               
explained that consumers and  distributors, primarily the latter,                                                               
had  stockpiled.   But instead  of  passing those  savings on  to                                                               
consumers,  [the  distributors]   had  basically  pocketed  state                                                               
revenues.   She said  most other states  have a  floor-stock tax.                                                               
Noting that she'd  highlighted the finer points of  the bill, Ms.                                                               
Bales offered to answer questions.                                                                                              
                                                                                                                                
Number 1879                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  returned attention  to his  amendment on                                                               
page 4 [Section 16, added in  the House Special Committee on Ways                                                               
and Means].   He mentioned putting it into terms  of a percentage                                                               
of total proceeds and asked Ms.  Bales whether that would add the                                                               
needed clarification or whether she had other recommendations.                                                                  
                                                                                                                                
MS.  BALES   provided  her  understanding   that  the   way  that                                                               
allocation  was done,  it puts  more money  into the  tobacco-use                                                               
education and cessation fund than was intended.                                                                                 
                                                                                                                                
REPRESENTATIVE  ROKEBERG suggested  Ms. Bales  work with  him and                                                               
his staff,  saying there was a  draft.  He added,  "The intention                                                               
is to make that the accurate amount, and reflect that."                                                                         
                                                                                                                                
Number 1930                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG turned  attention to  language regarding                                                               
the personal transportation of 600  cigarettes.  He asked whether                                                               
Ms. Bales  recommended deleting the  preceding wording  about the                                                               
first 100 cigarettes.                                                                                                           
                                                                                                                                
MS.  BALES  affirmed  that.    She  specified  it's  on  page  3,                                                               
Section 7,  beginning  on  line  7  [and  also  in  Section  15].                                                               
Current  language says  the cigarette  tax doesn't  apply to  the                                                               
first  100  cigarettes imported  by  an  individual for  personal                                                               
consumption [during the calendar month].                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked whether  the implication  would be                                                               
"by any method."                                                                                                                
                                                                                                                                
Number 1983                                                                                                                     
                                                                                                                                
MS.  BALES  answered in  the  affirmative,  but noted  there  are                                                               
cigarette-shipping  restrictions that  someone importing  through                                                               
the mail would be in violation of.  She said:                                                                                   
                                                                                                                                
     So we would recommend  removing this sentence that says                                                                    
     "the  first   100  cigarettes"   and  leaving   in  the                                                                    
     amendment that  was offered by  Representative Rokeberg                                                                    
     [included  in   CSHB  538(W&M)]   of  "the   first  600                                                                
     cigarettes   personally  transported".     That   would                                                                
     alleviate any confusion of people  thinking, ... "I can                                                                    
     mail  in  100 cigarettes,  but  I  can also  personally                                                                    
     transport 600."   And really  what we're trying  to say                                                                    
     is  that ...  600 is  the maximum  amount that  you can                                                                    
     personally, ...  physically on your person,  carry into                                                                    
     the state.                                                                                                                 
                                                                                                                                
MS.  BALES  specified that  the  suggestion  was to  remove  that                                                               
language in Sections 7 and 15.                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG asked, then,  whether the thrust would be                                                               
to  allow   personal  transportation  of  a   limited  amount  of                                                               
cigarettes monthly,  but that any  other importation such  as via                                                               
the Internet would be strictly prohibited.                                                                                      
                                                                                                                                
MS. BALES affirmed that.                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG asked, "Is there an amount there?"                                                                      
                                                                                                                                
MS. BALES answered that it's zero under current statute.                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG, noting  that Representative Crawford had                                                               
expressed  concerns, said  he wanted  to make  sure there  was an                                                               
understanding.   He  requested confirmation  that the  department                                                               
doesn't object to the limit of 600 for personal importation.                                                                    
                                                                                                                                
Number 2040                                                                                                                     
                                                                                                                                
MS. BALES replied:                                                                                                              
                                                                                                                                
     We do not  object to that.  And the  main reason is our                                                                    
     focus  in the  past for  cigarette-tax enforcement  has                                                                    
     not been  on the  personal transportation  in someone's                                                                    
     luggage. ...  It would  be prohibitively  expensive and                                                                    
     invasive  for  us  to  go  to  the  airport  and  check                                                                    
     people's luggage.   Our  focus and  area of  concern is                                                                    
     with the Internet, and that  has been a big problem for                                                                    
     us.                                                                                                                        
                                                                                                                                
REPRESENTATIVE ROKEBERG  added, "Or  if there's other  methods of                                                               
major commercial-type importation of contraband."                                                                               
                                                                                                                                
MS. BALES concurred.                                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG  noted that  current statute  [limits it]                                                               
to  five packs  of cigarettes.   Since  importation of  six packs                                                               
would be  a class  A [misdemeanor under  the bill],  he remarked,                                                               
"Bad law."                                                                                                                      
                                                                                                                                
Number 2071                                                                                                                     
                                                                                                                                
REPRESENTATIVE CRAWFORD said  he'd rather have the  amount be one                                                               
carton and remove the "monthly" part.  He explained:                                                                            
                                                                                                                                
     If you don't have any  way of enforcing this, why would                                                                    
     you  put in  there "monthly"?  ... You  don't know  how                                                                    
     many trips  up and down you  made.  You could  still be                                                                    
     breaking the  law because  ... you  brought in  600 ...                                                                    
     cigarettes last  week.  So  it seems kind  of ambiguous                                                                    
     to  me just  to put  "monthly",  that you  must have  a                                                                    
     limit for  that time and  that time alone. ...  I would                                                                    
     think that three cartons of  cigarettes ... is a lot to                                                                    
     bring in, because ... you could make lots of trips.                                                                        
                                                                                                                                
REPRESENTATIVE  CRAWFORD   asked  for   an  explanation   if  the                                                               
foregoing is wrong.                                                                                                             
                                                                                                                                
REPRESENTATIVE  ROKEBERG suggested  the  average smoker  probably                                                               
smokes  a carton  a week.    Mentioning one  year in  jail and  a                                                               
$10,000 fine for someone who brings  in two weeks' worth, he said                                                               
it makes no sense.                                                                                                              
                                                                                                                                
CHAIR ANDERSON turned to public testimony, requesting that                                                                      
people limit testimony to two minutes in order to hear from as                                                                  
many as possible.                                                                                                               
                                                                                                                                
Number 2153                                                                                                                     
                                                                                                                                
ELIZABETH LUCAS, State President, AARP, noting that she is a                                                                    
volunteer, told the committee:                                                                                                  
                                                                                                                                
     AARP  is  entirely  in  support   of  House  Bill  538.                                                                    
     Research  tells  us   and  the  governor's  transmittal                                                                    
     letter clearly  states that a  higher tobacco  tax will                                                                    
     help prevent  our youth  from beginning  to smoke.   It                                                                    
     will also help some current smokers stop.                                                                                  
                                                                                                                                
     AARP  is the  largest organization  of grandparents  in                                                                    
     the world.   We  smile when we  see our  grandkids play                                                                    
     sports, and we  smile when they come  proudly home with                                                                    
     a good  report card.   We  enjoy our  grandkids.   I am                                                                    
     confident that no Alaskan  grandparent smiles when they                                                                    
     learn that  one of  their grandchildren has  started to                                                                    
     smoke.   Some  AARP  members smoke;  many AARP  members                                                                    
     used to  smoke and  know how difficult  it is  to quit.                                                                    
     If raising  the [cost  of a]  pack of  cigarettes helps                                                                    
     prevent any of Alaska's  grandchildren from starting to                                                                    
     smoke, we are strongly in favor of it.                                                                                     
                                                                                                                                
     We  were  concerned with  the  data  in the  governor's                                                                    
     transmittal letter indicating  that Alaska Natives, and                                                                    
     especially  Alaska Native  high school  students, smoke                                                                    
     at a  much higher rate than  the non-Native population.                                                                    
     We  strongly recommend  that some  of  the new  revenue                                                                    
     coming to  state government ... from  this tax increase                                                                    
     be used  to target cessation efforts  to Native smokers                                                                    
     and, in particular, to our Native youth.                                                                                   
                                                                                                                                
     House Bill 538  is good economic policy,  and it's good                                                                    
     health policy.   It  makes sense and  it's fair.   AARP                                                                    
     recommends a "yes" vote on House Bill 538.                                                                                 
                                                                                                                                
Number 2236                                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN  asked whether it would  be discriminatory to                                                               
give revenue to one group of Alaskans more than another.                                                                        
                                                                                                                                
MS. LUCAS  responded, "Targeting a  certain group brings  to mind                                                               
that they  have the most  ability to be  susceptible.  And  so if                                                               
that is true, then ... I would  think that ... the money would be                                                               
geared toward  them because they are  ... at a higher  risk."  In                                                               
response to  Chair Anderson, she said,  "If we could use  some of                                                               
this money to  actually work ... on the  cessation efforts toward                                                               
this particular group, I would think that that would be [good]."                                                                
                                                                                                                                
REPRESENTATIVE LYNN suggested it has shades of racial profiling.                                                                
                                                                                                                                
MS. LUCAS  replied that she doesn't  see it as such,  but sees it                                                               
as [assisting] someone who needs some help.                                                                                     
                                                                                                                                
Number 2318                                                                                                                     
                                                                                                                                
DOÑA  WILLIAMS, Teens  Against Tobacco  Use (TATU),  informed the                                                               
committee that she  is an active participant in  TATU and attends                                                               
Juneau-Douglas High School.  She  said since the recent $1-a-pack                                                               
tax, she  has seen  a lot  of high  school students  stop smoking                                                               
because  they don't  want  to  continue to  "raise  the money  to                                                               
support  their habits."   It  also deters  younger students  from                                                               
starting.   "Our  whole group  is in  support of  this Act,"  she                                                               
concluded.                                                                                                                      
                                                                                                                                
CHAIR ANDERSON  asked whether some  students also say  it doesn't                                                               
matter what the cost is, because they really like to smoke.                                                                     
                                                                                                                                
MS. WILLIAMS replied  that she's sure some students  do, but said                                                               
most of her friends have quit smoking, for example.                                                                             
                                                                                                                                
Number 2360                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  referred  to  Representative  Gatto's                                                               
earlier question with  regard to whether teens may  turn to other                                                               
things if the  price of cigarettes rises.  He  asked Ms. Williams                                                               
whether she has seen evidence of this.                                                                                          
                                                                                                                                
MS. WILLIAMS replied  that she couldn't say.   She indicated most                                                               
of  her friends  [who  smoked] were  actually more  acquaintances                                                               
because of their habit.                                                                                                         
                                                                                                                                
TAPE 04-46, SIDE B                                                                                                            
Number 2375                                                                                                                     
                                                                                                                                
REPRESENTATIVE LYNN thanked Ms. Williams for being a witness                                                                    
against this terrible habit.                                                                                                    
                                                                                                                                
Number 2360                                                                                                                     
                                                                                                                                
MICHELLE TOOHEY, Director of Public Advocacy, American Lung                                                                     
Association of Alaska, told members:                                                                                            
                                                                                                                                
     I'm  honored  to  speak  today   in  support  of  House                                                                    
     Bill 538, increasing  the state  tobacco tax.   For the                                                                    
     American Lung Association of  Alaska, tobacco taxes are                                                                    
     strictly a public health issue.   Studies show that the                                                                    
     higher  cigarette taxes  are, the  more effective  they                                                                    
     are -  the most effective  way to reduce  smoking among                                                                    
     youth and  adults, and  Alaska's own  experience proves                                                                    
     the  point:     less  addiction,  less   disease,  less                                                                    
     suffering,  less  premature  death, lower  health  care                                                                    
     costs to private businesses and to government program.                                                                     
                                                                                                                                
     There  are few,  if any,  more important  measures that                                                                    
     could  be  identified  to document  success.    We  are                                                                    
     heartened  by your  willingness to  consider increasing                                                                    
     the  tobacco tax.   We  see it  as a  huge step  in the                                                                    
     fight against  tobacco addiction in our  state, a cause                                                                    
     the    American    Lung     Association    of    Alaska                                                                    
     enthusiastically supports.                                                                                                 
                                                                                                                                
Number 2318                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG observed  that three  municipalities, to                                                               
his knowledge  - Anchorage,  Fairbanks, and  Juneau -  have their                                                               
own  tobacco taxes  in Alaska.    He asked  whether Ms.  Toohey's                                                               
organization has  a position on restricting  additional municipal                                                               
taxation and leaving this as a state issue.                                                                                     
                                                                                                                                
MS. TOOHEY replied:                                                                                                             
                                                                                                                                
     Representative  Rokeberg, we  appreciate your  position                                                                    
     on disallowing municipalities to  increase the tax even                                                                    
     further.   But  in general  ... we  are opposed  to any                                                                    
     sort of  a preemption  on a local  level, not  only for                                                                    
     taxes  but  other   provisions  such  as,  potentially,                                                                    
     clean-indoor-air   ordinances   which  could   be   ...                                                                    
     preempted on a local level.                                                                                                
                                                                                                                                
Number 2265                                                                                                                     
                                                                                                                                
MICHAEL J. ELERDING, Owner, Northern Sales Company of Alaska,                                                                   
Inc., noted that he and his wife are owners of this small                                                                       
wholesale-distribution company in Southeast Alaska.  He said:                                                                   
                                                                                                                                
     We are partners with the  state, and we are the state's                                                                    
     tax-collection  arm.    Last   year  we  collected  and                                                                    
     remitted to  the state over  $4 million ...  in tobacco                                                                    
     excise tax.   And so it's  very important for us  to be                                                                    
     concerned when  the state is enacting  policy regarding                                                                    
     tobacco  laws and  tobacco taxes.    So it's  important                                                                    
     that ... we be involved and ... pay attention.                                                                             
                                                                                                                                
     I've prepared  ... testimony  with two  pages regarding                                                                    
     anticipated  and   other  amendments  that   have  been                                                                    
     offered  to this  bill.   I'll  be as  brief  as I  can                                                                    
     reviewing  those.    First,   I'd  like  to  thank  the                                                                    
     Department  of Revenue  and the  Department of  Law for                                                                    
     their working  late in  the night  last night  to draft                                                                    
     ...  what  we're  calling ...  fair-trade  legislation.                                                                    
     And basically,  the ... governor's  transmittal [letter                                                                    
     for  the bill]  indicates that  this is  not a  revenue                                                                    
     measure,  but  more  ...  a   health  measure;  it's  a                                                                    
     cessation measure that ... would stop smoking.                                                                             
                                                                                                                                
     That  being  the  case,  it's  inconsistent  for  state                                                                    
     policy   to  allow   retailers   and  other   wholesale                                                                    
     distributors  to  use  predatory pricing  practices  to                                                                    
     sell  cigarettes  at below  cost,  ...  or a  predatory                                                                    
     pricing  method.     And,  therefore,  we   support  an                                                                    
     amendment  which would  ban  the  practice of  allowing                                                                    
     distributors and retailers  from using predator pricing                                                                    
     ... schemes  to promote  the sale  of cigarettes.   The                                                                    
     amendment repeals  and reenacts the language  in Alaska                                                                    
     Statute  43.50.800 and  strengthens existing  state law                                                                    
     to that effect.                                                                                                            
                                                                                                                                
Number 2203                                                                                                                     
                                                                                                                                
MR. ELERDING addressed the tax on other tobacco products as                                                                     
follows:                                                                                                                        
                                                                                                                                
     The  Senate  today  introduced ...  an  amendment  that                                                                    
     would close  a loophole that allows  nonlicensed Alaska                                                                    
     distributors   to   sell   tobacco  products,   be   it                                                                    
     Copenhagen  and/or other  non-cigarette products,  into                                                                    
     the  state  without being  required  to  pay the  state                                                                    
     excise   tax.  ...   The  example   is  that   ...  [a]                                                                    
     manufacturer or a representative  in Florida can sell a                                                                    
     ... can of  Copenhagen or chew to  [an] Alaska consumer                                                                    
     for $10.  But if this  law passes, the excise tax would                                                                    
     be 100  percent, so  ... the  tax for  ... that  can of                                                                    
     chew ...  would also  be $10.   So, basically,  our ...                                                                    
     cost right  out of  the box would  be $20,  whereas the                                                                    
     competitor  who is  in Florida  doing business  through                                                                    
     mail order or Internet would have a cost of $10. ...                                                                       
                                                                                                                                
     Alaska businesses  are at  a distinct  ... disadvantage                                                                    
     because ...  we're paying the  tax; ...  the non-Alaska                                                                    
     business is  not required  to pay  the tax.  ... Alaska                                                                    
     businesses  lose  on  that,  the  state  loses  because                                                                    
     they're  not   collecting  the  excise  tax,   and  the                                                                    
     governor's  intention  of  trying  to  ...  reduce  ...                                                                    
     tobacco   consumption  is   lost   because  the   price                                                                    
     incentive  to reduce  consumption goes  out the  window                                                                    
     when  you  give somebody  a  $10  incentive, or  a  100                                                                    
     percent incentive,  for not paying the  tax to purchase                                                                    
     those products.                                                                                                            
                                                                                                                                
MR. ELERDING explained reasons for wanting to delete the entire                                                                 
floor tax:                                                                                                                      
                                                                                                                                
     The  Department  of  Revenue spoke  about  a  floor-tax                                                                    
     amendment.   We  support ...  the amendment  offered in                                                                    
     the [House Special Committee on  Ways and Means], which                                                                    
     would provide  for a six-month  phase-in of  paying ...                                                                    
     the floor tax.                                                                                                             
                                                                                                                                
     However, we  prefer that  the committee  delete Section                                                                    
     25 of  [HB 538],  which would  delete the  entire floor                                                                    
     tax.   And  the reason  for that  is there's  a lot  of                                                                    
     changes from this time ...  versus 1997, when the state                                                                    
     enacted  ...  the  increase  in  tax  from  $2.90  [per                                                                    
     carton] to $10.00.   And the first one is  that, due to                                                                    
     a higher frequency of  black-market and ... counterfeit                                                                    
     cigarettes, bootleggers  and others  ... have  made the                                                                    
     tobacco  companies  be much  more  strict  in terms  of                                                                    
     their  distribution  of tobacco  products.    So, as  a                                                                    
     result, we're on  allocation on a weekly  basis, and we                                                                    
     can't purchase  cigarettes just ...  at our  will; they                                                                    
     tell us  how much we  can buy and  when we can  buy it.                                                                    
     ... So there's a limitation on what we can buy.                                                                            
                                                                                                                                
Number 2093                                                                                                                     
                                                                                                                                
MR. ELERDING continued:                                                                                                         
                                                                                                                                
     Secondly, part of  the problem last time  was there was                                                                    
     about  a six-month  or eight-month  phase-in lead  time                                                                    
     between  when   the  law  was  enacted   and  when  the                                                                    
     effective date of that measure  came in, which provided                                                                    
     plenty of time for people  like myself ... to stockpile                                                                    
     some cigarettes.                                                                                                           
                                                                                                                                
     And  finally, the  state  has more  than  a modicum  of                                                                    
     control about  ... how this  tax is  collected, because                                                                    
     right now  ... the mechanism  for the state  to collect                                                                    
     the tax  is through  the sale  of the  stamp. ...  If I                                                                    
     were to  try and stockpile  ... stamps, I'd have  to go                                                                    
     to  the  state window  to  purchase  those stamps;  the                                                                    
     state would know  ... and be able to  monitor what kind                                                                    
     of stockpiling effort takes place. ...                                                                                     
                                                                                                                                
     If you take a look at  what happened ... the last time,                                                                    
     if I  had not  stockpiled some  cigarettes ...  I would                                                                    
     have  a  very difficult  time  being  in the  cigarette                                                                    
     business because  one-third ...  of the amount  that we                                                                    
     stockpiled  went  to  paying for  increased  costs  and                                                                    
     additional carrying  costs of our inventory;  the other                                                                    
     part went for increased  costs of carrying our accounts                                                                    
     receivable;  and, ...  for the  first time  since 1960,                                                                    
     ... our  buildings in  Sitka and  in Juneau  had break-                                                                    
     ins, ... and the targets  of those break-ins were theft                                                                    
     of  cigarette  products, so  we  had  to implement  new                                                                    
     security  measures  and  we also  had  to  have  higher                                                                    
     insurance. ...                                                                                                             
                                                                                                                                
     So, basically,  our position  as a  tobacco distributor                                                                    
     is that this is a one-time  opportunity for us to get a                                                                    
     little  "bump" in  capital ...  to cover  the increased                                                                    
     costs  of carrying  cigarettes,  as a  result of  state                                                                    
     action,   which  is   increasing   ...   the  cost   of                                                                    
     cigarettes, again, because of the tax.                                                                                     
                                                                                                                                
Number 2052                                                                                                                     
                                                                                                                                
MR. ELERDING discussed concerns about Representative Rokeberg's                                                                 
previous amendment and reasons for wanting an exemption in the                                                                  
neighborhood of 200 cigarettes.  He said:                                                                                       
                                                                                                                                
     The last measure  I'd like to speak to  is the personal                                                                    
     exemption.   Representative Rokeberg had  ... submitted                                                                    
     an  amendment to  increase the  exemption from  ... 100                                                                    
     cigarettes to 600 cigarettes.   Our concern is that ...                                                                    
     that's  a pretty  substantial increase.   And,  really,                                                                    
     our  other concern  is that  ... the  transportation of                                                                    
     the cigarettes  ... in the amendment  indicates that it                                                                    
     must be transported by the consumer on his person.                                                                         
                                                                                                                                
     Our  concern is  that  there could  be  a more  liberal                                                                    
     interpretation of  that, which would broaden  the scope                                                                    
     of that,  thereby allowing the  consumers ...  to bring                                                                    
     in,   through   other  transportation   methods,   more                                                                    
     product.    And,  really,  the  whole  intent  of  this                                                                    
     legislation  is to  make  sure that  the  state ...  is                                                                    
     increasing   the   cost   of   cigarettes   to   reduce                                                                    
     consumption.                                                                                                               
                                                                                                                                
     By  increasing the  exemption,  ... you're  eliminating                                                                    
     that  incentive  to  have those  people  stop  smoking.                                                                    
     Basically,  you've said,  "We're  going  to allow  this                                                                    
     exemption, ...  which will take away  the incentive for                                                                    
     them to  stop smoking." ...  We want to make  sure that                                                                    
     the  language is  tight.   And I've  heard comments  on                                                                    
     that today,  which makes  me feel  better, but  we also                                                                    
     feel  ... [an]  exemption  in the  neighborhood of  200                                                                    
     cigarettes, which  is one  carton of  cigarettes, would                                                                    
     be  much   more  reasonable  ...  and   equitable,  and                                                                    
     something that we could support.                                                                                           
                                                                                                                                
CHAIR ANDERSON  informed Mr. Elerding that  there'd be discussion                                                               
of  the  amendment at  the  next  hearing; he  mentioned  minimum                                                               
pricing  and  Section  25  and suggested  that  Mr.  Elerding  be                                                               
available to answer questions then.                                                                                             
                                                                                                                                
Number 1960                                                                                                                     
                                                                                                                                
DAN BOONE, Homer, testified in support of HB 538.  He told                                                                      
members:                                                                                                                        
                                                                                                                                
     I  believe this  tax is  supported by  approximately 80                                                                    
     percent of  Alaskans.  It will  raise approximately $35                                                                    
     million  annually.    It  will  reduce  the  number  of                                                                    
     cigarettes sold  and the  number of  smokers.   It will                                                                    
     also  reduce   the  number  of  teenagers   that  start                                                                    
     smoking.   And, in the  long run, it will  reduce state                                                                    
     Medicaid expenses.                                                                                                         
                                                                                                                                
     I fail to  see a problem with this  proposal other than                                                                    
     it is  called a tax.   It  probably should be  called a                                                                    
     user  fee.    Currently,  the State  of  Alaska  has  a                                                                    
     Medicaid  burden   for  tobacco-related   illnesses  in                                                                    
     excess of  $130 million annually.   The current tobacco                                                                    
     tax  brings  in about  $45  million,  with another  $25                                                                    
     million  coming from  the master  settlement agreement,                                                                    
     for a total of $70 million.                                                                                                
                                                                                                                                
     Even with the  estimated $35-million user-fee increase,                                                                    
     the State of Alaska  will still be subsidizing Medicaid                                                                    
     for tobacco-related illnesses by  more than $25 million                                                                    
     a year.  For a state  with a looming fiscal problem, it                                                                    
     would only  seem prudent  to eliminate  all unnecessary                                                                    
     expenses  or   collect  appropriate  fees   from  those                                                                    
     incurring the expenses.                                                                                                    
                                                                                                                                
     Tobacco  is a  legal product,  and people  do have  the                                                                    
     right to  choose.   But if they  choose to  smoke, they                                                                    
     should  also   be  willing  to  accept   the  financial                                                                    
     responsibility  for the  consequences  of that  choice.                                                                    
     Therefore,  I strongly  urge you  to  support and  pass                                                                    
     House Bill 538.                                                                                                            
                                                                                                                                
Number 1879                                                                                                                     
                                                                                                                                
DARWIN  BIWER, Anchorage  Cabaret  Hotel  Restaurant &  Retailers                                                               
Association  (CHARR), testified  in  opposition to  HB  538.   He                                                               
voiced concern that  raising the tax on  cigarettes an additional                                                               
dollar  will make  them a  unique item.   Although  not a  smoker                                                               
himself, he cautioned that teenagers  will go to the schools with                                                               
a carton of  cigarettes stolen from a relative,  for example, and                                                               
kids will buy these cigarettes because they seem special.                                                                       
                                                                                                                                
MR.  BIWER emphasized  that education  is  the only  way to  keep                                                               
people from starting to smoke or  to get them to stop.  Referring                                                               
to   Representative  Rokeberg's   comments   about  the   tobacco                                                               
settlement, he said 80 percent  [of that settlement money] hadn't                                                               
gone  where it  was supposed  to -  towards education  that would                                                               
provide a better means to deter smoking.                                                                                        
                                                                                                                                
Number 1767                                                                                                                     
                                                                                                                                
EMILY  E.   NENON,  Alaska  Advocacy  Manager,   American  Cancer                                                               
Society,  referred  members  to  a  letter  she'd  submitted  [in                                                               
support of  HB 538] and read  from the  second-to-last paragraph,                                                               
"By  increasing   the  state's   tobacco  tax,  with   its  known                                                               
correlation to reducing  youth smoking, we are  taking a critical                                                               
step in  stemming the  tide of  rising health  care costs  to the                                                               
state and needless death and disability in our communities."                                                                    
                                                                                                                                
Number 1725                                                                                                                     
                                                                                                                                
VERA JAMES,  Alaska Native Health Board  (ANHB), informed members                                                               
that she was  speaking for ANHB as a whole;  now representing 229                                                               
federally recognized tribal communities  within Alaskan, ANHB was                                                               
established in 1968 as a  nonprofit organization and advocates on                                                               
health  care  issues that  may  impact  Native people  and  their                                                               
culture.   Noting  that  ANHB had  sent a  letter  in support  of                                                               
HB 538  for   reasons  given  in  recent   testimony  by  others,                                                               
Ms. James also pointed out that  44 percent of Alaska Native high                                                               
school students  continue to  smoke, even  though tobacco  use by                                                               
high school students nationwide is declining.                                                                                   
                                                                                                                                
Number 1670                                                                                                                     
                                                                                                                                
BOYD McFAIL, Anchorage, spoke on  his own behalf, saying he feels                                                               
this  tax increase  isn't  a good  way  to go.    He agreed  with                                                               
[Mr. Biwer]  that  education  is  the  way  to  stop  teens  from                                                               
starting to smoke cigarettes.  He  also asked that there be a tax                                                               
exemption on  premium cigars and  pipe tobacco  [sold exclusively                                                               
in tobacco  shops].   He remarked, "You  don't see  teenagers out                                                               
there smoking cigars  or pipes, and if you do  see a teenager out                                                               
there  smoking a  pipe, it's  most likely  that the  product that                                                               
they're smoking is not a tobacco product."                                                                                      
                                                                                                                                
MR. McFAIL pointed out that  that premium cigars sold exclusively                                                               
in tobacco  shops had  been able to  generate state  revenue, and                                                               
said  he'd  sent information  about  revenue  from one  store  to                                                               
Representative Dahlstrom's  office the  previous night;  he noted                                                               
that until  1999, this one store  had paid almost $26,000  to the                                                               
state for sales of cigars or pipe tobacco.  He explained:                                                                       
                                                                                                                                
     After that tax  went into effect, the  revenue that was                                                                    
     generated  for the  state went  down.   The popularity,                                                                    
     though,  of smoking  the cigars  and pipes  did not  go                                                                    
     down.  The only thing  that happened was people started                                                                    
     to  import  their  stuff ...  from  other  ...  tobacco                                                                    
     stores outside of the state.                                                                                               
                                                                                                                                
MR. McFAIL  predicted that if  the previous trend  had continued,                                                               
this one  shop would now pay  an estimated $60,000 in  revenue to                                                               
the  state this  year.   Saying  cigars and  pipe tobacco  aren't                                                               
smoked in the  same way [as cigarettes] and  don't have chemicals                                                               
added,  as happens  with cigarettes,  chewing tobacco,  or snuff,                                                               
Mr.  McFail  again  requested  an  exemption  [from  the  tax  in                                                               
Section 17] for  premium cigars or pipe  tobacco sold exclusively                                                               
in tobacco shops.                                                                                                               
                                                                                                                                
Number 1513                                                                                                                     
                                                                                                                                
PATRICIA SENNER, Family  Nurse Practitioner, Anchorage, testified                                                               
in  support of  HB 538,  noting  that she  works with  teenagers.                                                               
[Ms. Senner  had also sent a  letter of support on  behalf of the                                                               
Alaska Nurses Association.]   She explained that  her interest in                                                               
this bill is to increase the  price of cigarettes in an effort to                                                               
discourage their  use by young people.   She also spoke  in favor                                                               
of  dedicating  a portion  of  the  proceeds  from this  tax  for                                                               
continued anti-smoking campaigns  and smoking-cessation programs.                                                               
She said:                                                                                                                       
                                                                                                                                
     I  feel a  two-pronged  approach is  very important  in                                                                    
     reducing smoking.   Unfortunately,  a large  portion of                                                                    
     the homeless  youth I  work with smoke.   Many  of them                                                                    
     started at a  very young age because  their parents let                                                                    
     them  have  access  to   cigarettes.    Though  current                                                                    
     programs haven't  stopped these youths from  smoking, I                                                                    
     know that  it has  greatly decreased  their consumption                                                                    
     rates.                                                                                                                     
                                                                                                                                
     One  of the  most common  requests for  services at  my                                                                    
     clinic   is  for   assistance   in  quitting   smoking.                                                                    
     Medicaid - and,  I'm sure, private insurance  as well -                                                                    
     does not pay  for nicotine patches, which  is about $50                                                                    
     for a  three-week set  of patches.   It'd  be extremely                                                                    
     helpful to these poor youth  to have access to products                                                                    
     and programs that could help  them improve their health                                                                    
     and their lives.                                                                                                           
                                                                                                                                
MS. SENNER  noted that a  lot of  these kids also  use marijuana;                                                               
she suggested  it would  be nice  if there were  some way  to tax                                                               
that as well.  Ms. Senner requested passage of this bill.                                                                       
                                                                                                                                
CHAIR ANDERSON closed public testimony  and noted that amendments                                                               
would be addressed at the next hearing.  [HB 538 was held over.]                                                                

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