Working through local hospitality association affiliation is an important strategy for the tobacco industry, because it allows the tobacco industry involvement in politics and public health issues while keeping out of the public eye.In addition to assistance with lobbying and public relations, the restaurant and licensed beverage associations and several chambers of commerce aligned with the tobacco industry on tobacco public policy, first to oppose Proposition 200 in 1994, which increased the tobacco tax and created Arizona’s tobacco control program, which the tobacco industry labeled as bad for business. As elsewhere,the tobacco industry had convinced these Arizona industries their business would suffer if Arizona tobacco taxes were increased or workplaces were made smoke free. Independent research has consistently shown that smoke free laws have no effect or a positive effect on hospitality industry business.The Synar Amendment is federal legislation coupling mental health and drug abuse prevention block grant funding with meeting targets of reducing the sale of tobacco products to minors. The ADHS Division of Behavioral Health Services is responsible for conducting the inspections used to determine eligibility under the Synar Amendment to receive federal Substance Abuse and Mental Health Services Administration SAMHSA’s block grants to the state require tobacco youth access noncompliance rates of 20% or lower to receive full federal funding.Although Arizona could combine its Synar inspections with youth access law enforcement efforts in Arizona as some other states do, ADHS chooses not to.While at first glance Arizona’s history complying with the Synar Amendment appears positive and uneventful, with a low 7.6% violation rate in 2006 ,movable grow racks other government agencies’ differing reported youth access compliance rates raise questions about the situation.

ADHS’ Behavioral Health Division subcontracts with the Pima County Partnership and Community Bridges organizations to actually inspect tobacco retailers, which yielded the 7.6% noncompliance rate, which is well below the 20% threshold.This retailer noncompliance rate, however, is significantly lower than the noncompliance rates observed by Arizona Attorney General’s Office working with TEPP, which found 23% noncompliance. Law enforcement accompanies most AGO youth access compliance inspections,and, as a result, one would expect the AGO’s compliance checks to find higher – not lower – compliance.Potential reasons for the discrepancy given in Arizona’s application to receive SAMHSA funds include Behavioral Health and the AGO checking different retailers, drawn from different lists.For example, Behavioral Health does not check Native American Reservations, while the AGO checks do. Arizona’s AGO makes more than twice the amount of compliance checks that ADHS does, and also routinely brings law enforcement along to cite the offending retailers. The fact that the more vigorous AGO-TEPP youth access compliance checks are reporting retailer noncompliance rates three times that reported by the ADHS Division of Behavior of Health Services’ checks raises serious questions about the reliability of the data Arizona is submitting to the federal government to document its compliance with the Synar Amendment.The process that led to the Master Settlement Agreement began when the states of Mississippi and Minnesota sued the tobacco industry in 1994 to recover the costs of smoking-caused illness for state healthcare programs and to win restrictions on cigarette marketing, particularly those directed toward youth. Despite opposition from Governor Symington , in August, 1996 Arizona sued the tobaccoindustry. In 1998, Arizona was one of 46 states participating in the “Master Settlement Agreement” that resolved the state litigation in exchange for monetary payments to the states and the tobacco industry accepting some restrictions on its marketing activities.The MSA yielded $3.1 billion to Arizona over the first 25 years. In the end, all the MSA money went to the state Medicaid program , with no funds for tobacco control. The voluntary health agencies , which had led the 1994 initiative creating the state’s tobacco control program , made only minimal efforts to secure the MSA money as a source of funding for Arizona’s tobacco control program.

They did not pursue the MSA to fund tobacco control because in 1999-2000 when decisions on spending the MSA money were made, Arizona had one of the highest per capita expenditures for tobacco control in the U.S. and its funding seemed secure. Ironically, an unintended effect of Arizona’s MSA allocation actually would contribute to TEPP’s evisceration in FY2002.Proposition 200, “Healthy Children, Healthy Families,” would have provided prevention services for preschool-age children and families, health insurance coverage for eligible uninsured parents, schools to enroll uninsured children in KidsCare, hospice care for the terminally ill, and fund early detection and prevention for the most common causes of death in Arizona including cancer and stroke.Proposition 200 had the endorsement of the voluntary health organizations which had worked with the AzHHA to pass the 1994 tobacco tax because the 2000 Proposition 200 would have secured TEPP funding from the kind of legislative diversions that had occurred in the past.In addition to allocating MSA funds, Proposition 200 would “reenact” Proposition 200 of 1994 to “voter protect” the 1994 proposition. “Voter protection” in Arizona refers to a law created by a 1998 initiative stating that all ballot measures passed by the voters of Arizona are not subject to legislative change except under narrow circumstances. Because the voter protection amendment was not retroactive, it did not apply to the 1994 Proposition that created TEPP and its funding source, the 23% allocation from the 40 cent tobacco tax. By including the text of the 1994 Proposition along with the allocation of the MSA funds, the 2000 Proposition 200 would voter-protect 1994’s Proposition 200 and prevent the Legislature from raiding TEPP’s funding. Rival Proposition 204, the “Healthy Arizona Initiative,” was started by Mark Osterloh, a physician in Tucson, who wanted to expand the eligibility for AHCCCS to 100% of the federal poverty level . Proposition 204 required that AHCCCS serve everyone up to the federal poverty level and allocated all the MSA funds to help pay for doing so.

The state would be obligated to provide services to these people, even if the MSA funds were not adequate to cover the costs. Proposition 204 aimed to provide healthcare to “approximately 130,000 uninsured poor people through extension of the existing state health program, AHCCCS.”The initiative noted that at the time “only those with very low incomes–less than $5,500 a year for a family of four, or one-third the federal poverty level–[were] eligible for AHCCCS.”Proposition 204 not only increased the number of working poor eligible for medical care coverage, but also expand health education,plant growing racks nutrition and prevention programs, premium sharing,* and other health care programs. After a failed attempt to implement Healthy Arizona in 1996 when it passed on the ballot but the Legislature refused to fund it from the General Fund, Osterloh decided that the MSA funds were a perfect opportunity to expand Arizona’s Medicaid program. By April 1999 he had started to gather contributionsto finance his proposed initiative . He took out his first loan to fund his planned MSA initiative on September 29, 1999.AzHHA CEO John Rivers and his colleagues at the AzHHA saw the MSA money as an opportunity for funding hospital expenses for Medicaid. After Osterloh’s committee announced its initiative intentions for the MSA money, the gate was opened for Rivers’ initiative. To get the support of the health voluntaries and to appease tobacco control advocates – and because of Rivers’ long history of strong support for tobacco control, dating back to his leadership in passing Proposition 200 in 199411, 24 – the AzHHA included the text of the original 1994 Proposition 200 in their initiative to voter-protect the TEPP funds. Normally, if both initiatives passed, both would go into effect, with the provisions of the one receiving more votes taking priority in case of a conflict. The AzHHA, however, included additional “poison pill” language to ensure that the AzHHA allocation of funds would take priority if they won, creating a situation where only the initiative that received the most votes would go into effect if both passed. AzHHA included this language so that the Osterloh’s initiative would not go into effect should the AzHHA initiative get more votes, but it also prevented the AzHHA’s provisions should Osterloh’s campaign receive more votes. A legal challenge Proposition 204’s proponents filed against the State of Arizona demanding retraction of the sample ballot statement of the possible ramifications of the initiative may have contributed to their success at the ballot. The Arizona Legislative Council and the Joint Legislative Budget Committee includes analysis of each ballot measure in literature voters receive to assess each measure’s fiscal impact on the state.

Proposition 204 proponents challenged this statement in court and eventually won a decision by the Arizona Supreme Court, barring from inclusion in the Legislative Council analysis the concerning the future fiscal impact of expanding AHCCCS beyond the MSA’s revenues.The Healthy Arizona Initiative committee prevented the public from knowing the full ramifications of passing Proposition 204,84 even though the disputed analysis would in FY2002 become Arizona’s reality. In a 2006 interview, Rivers remarked that expanding AHCCCS eligibility “was a goal that we [Proposition 200] supported 100% but we knew there wasn’t enough tobacco settlement money to do that and that was where the divide occurred between our measures. We allocated the tobacco settlement money for early childhood development money and expanded access to our AHCCCS program, but only within the available resources of the MSA. [emphasis added]”To fully fund the AHCCCS up to the federal poverty level, much more money was required than the MSA would provide. By design, Proposition 204 was an underfunded program unalterable by the Legislature, which would suck resources from other program areas and the general fund. This situation would ultimately happen in FY2002, when $32.8 million was transferred from TEPP to AHCCCS. Both initiatives passed in the November 7, 2000 election, with Proposition 200 receiving 54% and Proposition 204 receiving 58% of the vote. The Proposition 200 “poison pill” language provided that in the case of both propositions passing, the one with the most votes would go into effect while preventing the less successful measure from having any effect. Had the poison pill provision not been included, Proposition 200would have voter protected the 1994 Proposition 200 even though 204 received more votes. Instead, the hospitals’ “poison pill” clause would have the unfortunate side effect of preventing the voter-protection provisions in Proposition 200 from going into effect, opening the door for a legislative raid on TEPP.The tobacco companies were closely watching the allocation of the MSA money in Arizona, as they were in all the states. The industry was prohibited from playing any direct role in the debate over allocation of MSA money because the MSA provides that no Participating Manufacturer “may support or cause to be supported the diversion of any proceeds of this settlement to any program or use that is neither tobacco-related nor health-related in connection with the approval of this Agreement or in any subsequent legislative appropriation of settlement proceeds.”Nonetheless, tobacco industry lawyers grew concerned over the reenactment of the 1994 tobacco tax increase that Proposition 200 contained; they mistakenly thought Proposition 200 intended to double the 1994 40 cent tobacco tax by reenacting it.Because of this false belief, the industry preferred Proposition 204 to Proposition 200.Despite the MSA’s restrictions on tobacco industry interference with decisions regarding spending the MSA funds, an email from Ginny Corwin to Ted Lattanzio and Pam Inmann among others, reported that, “we are looking at meeting in Phoenix on August 16 or 18 to determine interest by the industry in opposing [Proposition] 200.”Opposition to Proposition 200 did not appear to relate to voter-protection of the TEPP funds; the industry’s preoccupation revolved around Proposition 200’s actual language and its mistaken belief in an additional 40 cent tobacco tax.In a draft of a letter to Arizona Attorney General Janet Napolitano, Rip Wilson, lobbyist for Philip Morris, thanks Napolitano for meeting with him and Paul Eckstein “regarding ambiguities that we believe may be present in Proposition 200 regarding the repeal and implementation of the current $.40 per pack tax on cigarettes.”He goes on to provide four paragraphs arguing that Proposition 200 does not create an additional 40 cent tax, and asks Napolitano to communicate to him or his associate “should [she] be presented with an argument that indeed claims that the current tax on tobacco should be doubled under the provisions of Prop. 200.”