Tobacco tax has uncertain future

CHARLESTON, W.Va. — A bill to help the state pay long-term health insurance costs for retired workers faces an uncertain fate aftercigarettes packs the Senate Finance Committee voted the plan down Monday night.

Lawmakers have been struggling for over a year to find a way for West Virginia to deal with the $8 billion in long-term retiree health care costs, known as “other post-employment benefits,” or OPEB.

The Senate plan, spearheaded by Sen. Brooks McCabe, D-Kanawha, would have capped how much the state set aside for health insurance, a move that would force premiums to go up for retirees.

That plan wasn’t well received by union officials.

But the plan also relied on $50 million a year that would come from a hike in the state tobacco tax - the tax on cigarettes would have gone up a dollar to $1.55 a pack, and the tax on wholesale smokeless tobacco also would have seen an increase.

That annual $50 million would accumulate in a trust fund over the next 20 years, providing a $1 billion boost to shore up the system.

The tobacco tax hike received a chilly reception in both the House and Senate and now appears unlikely to happen at all.

Taxes are difficult to pass in an election year - several legislators are running for governor - and lobbyists have been arguing that the tax hike could cost jobs.

Despite that chilly reception, lawmakers were hopeful that the increase could pass in order to help tackle not just OPEB, but other health care issues.

Members of the finance committee proposed designating additional revenues from the tax increase to other programs, including $40 million annually to the state Medicaid fund — $6 million of which would be used to cover autism treatment programs.

“This state has a lot of public health issues, and a lot of those issues have to do with tobacco,” said Senator Ron Stollings, D-Boone, who is also a physician.

“If we can front load the system in some way, then we can save money down the road in some of our Medicaid numbers. This is the first time in a long time that we’ve got a funding stream for a lot of public health programs.”

The finance committee vote was 8-9. That leaves the possibility the issue could be reexamined as early as this morning, when the committee meets again. Sen. Donna Boley, R-Pleasants, said she “might” vote for the OPEB bill if the cigarette tax is taken out.

McCabe acknowledged that the cigarette tax was bitter pill to swallow. But he said it was necessary.

“In my opinion it was not a vote against OPEB, it was a vote against the funding source,” he said. “But I think it’s unfair to present something of this magnitude without a funding source, and from my perspective the tobacco tax makes sense.”

Without the cigarette tax revenue to help pay the liability, lawmakers may need to come up with further austerity measures-like raising premiums or cutting benefits-or find $50 million from elsewhere.

After Monday’s vote, McCabe said that acting Gov. Earl Ray Tomblin needs to step in and help find money, especially if that money isn’t going to come from a tobacco tax.

“At some point the governor is going to have to come forward,” McCabe said. “This has been a Senate initiative.”

Last year, Tomblin assigned McCabe to head up a task force to look at the OPEB problem.

When asked if Tomblin had been involved recently, McCabe said Tomblin was “aware of what we’re doing.

“It’s my understanding he’s not too excited about increasing the tobacco tax,” McCabe said.

Tomblin’s office did not immediately reply to an e-mail seeking reaction to McCabe’s comments.

The imperiled OPEB plan came as something of a surprise. When the current legislative session began, it was one of only a few big issues most people agreed would be worked on.

Former Gov. Joe Manchin held a series of meetings a year ago to come up with a plan for last year’s legislative session but lawmakers never reached an agreement. Tomblin then formed his own task force last year before he began to act as governor following Manchin’s departure.

Now, after the Senate spent the first weeks of the session fighting over who was in charge, time is running out. Likewise, the House has not revealed its own OPEB solution, though some House members have been working on some sort of plan.

“It’s going to get more difficult next year — it’s an election year for all of the House and half of the Senate,” McCabe said, “and each year the OPEB situation works itself into a deeper hole.”

Delegate Steve Kominar, D-Mingo, who has been working on an OPEB plan for the House, said he wasn’t ready to talk about his ideas but that the bill would not involve a tobacco tax hike.

“The cigarette tax won’t make it here, so we’re going to have to find other funding sources,” he said.

Even those who want an OPEB plan seem to agree the cigarette tax should not be part of it.

Boley said she voted against the bill because private citizens shouldn’t be asked to shoulder any more financial burden right now.

“I don’t think we should put all the OPEB on that guy’s back, the guy who works,” she said.

McCabe said he’s still committed to solving the problem, despite Monday’s setback.

“I look at this as a process,” he said. “It’s hard work, it’s not easy and we will continue.

“It’s not over yet — I’m still standing.”

By Ry Rivard, Jared Hunt
Daily Mail

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