Senate Finance Committee members voted Wednesday to increase the governor's proposed state cigarette tax increase from 45 cents to $1 a pack — over concerns the higher amount will be even tougher to pass in the House of Delegates.
“I've proposed a $1 increase probably every year I've been here in the Legislature, and it hasn't gone anywhere, and it's not going anywhere this year,” Senate Majority Leader Mitch Carmichael, R-Jackson, said, arguing against the higher tax.
“We can achieve a small victory by getting a 45-cent increase,” he added.
However, Sen. Roman Prezioso, D-Marion, said the additional money would provide a long-term fix to funding problems for Public Employees Insurance Agency health coverage for public employees and retirees.
“Let's make a concerted effort to fix the PEIA problem,” he said, offering the amendment to the bill [SB 420] for the $1 increase, which would raise the cigarette tax to $1.55 a pack. “If we can do it by looking ahead instead of just at this year, we can solve that problem.”
The governor's 45-cent proposal would raise $71.5 million a year, $43 million of which would go to cover employers' share of increased PEIA premiums — a premium increase that would offset the need to impose $120 million of severe cuts in PEIA benefits to nearly 250,000 insurees.
Prezioso's proposed $1 increase would raise $115.3 million a year, all of which would be dedicated to funding PEIA, except for $1 million a year for a new smoking cessation program.
He said the revenue above what is needed for premiums would go into the PEIA reserve fund, a fund that was spent down over the past four years when the Legislature failed to provide additional funding for PEIA.
“Just look at all the heartache and trouble you saved by being able to do that,” Prezioso said of having the reserve funds that allowed PEIA to put off potential benefits cuts until this year.
Prezioso said his proposal is prudent, based on testimony from PEIA executive director Ted Cheatham that inflation alone will increase the program's medical and pharmaceutical costs by $50 million to $60 million each year.
Earlier, in a Senate floor speech, Prezioso said the Legislature needs to come up with a long-term funding plan for PEIA benefits.
“I think that the governor's proposal is basically a cheap shot, a band-aid approach,” he said.
In committee, Joey Garcia, legislative director for Gov. Earl Ray Tomblin, told senators the governor believes the 45-cent increase is the ideal amount to fund PEIA without hurting state retailers.
“Certainly, we thought 45 cents was a sweet spot,” Garcia said. “Also, we want to see something that can pass both houses.”
Deputy Revenue Secretary Mark Muchow said a $1 a pack tax will decrease cigarette consumption by about 5 percent, through a combination of people quitting or not starting smoking, and lost out-of-state sales. At $1.55, consumption will drop by about 20 percent, he said.
However, proponents noted that at $1.55 a pack, the state cigarette tax still would be lower than neighboring Ohio, Pennsylvania or Maryland.
Sen. Ron Stollings, D-Boone, a physician, reminded senators that an important goal of higher cigarette taxes is to deter young people from smoking.
“That would save hundreds of millions of dollars?” he asked Cheatham.
“In the long-term, it would save a lot of money, yes,” Cheatham answered.
Much of the debate was over whether the higher proposed tax would take the bill from a hard sell in the House to a no-go.
“We certainly don't want an all-or-nothing approach,” Garcia said. “We feel like 45 cents is something that can get passed.”
However, Sen. John Unger, D-Berkeley, said the Senate should not be burdened by what the House may or may not do, saying the House is free to propose an alternative amount.
“We have a problem with PEIA, and the people have been screaming for us to do something,” he said, endorsing the $1 increase.
Prezioso's amendment was adopted on a voice vote, as was the motion to advance the bill to the full Senate, with a few “no” votes heard.
Reach Phil Kabler at philk@wvgazettemail.com, 304 348-1220, or follow @PhilKabler on Twitter.