6. Proposition 99's First Implementing Legislation

Governor George Deukmejian's proposals for Proposition 99 revenues did not carry much weight with the Legislature. Legislators had their own ideas about how to allocate the money from the Health Education and Research Accounts and what programs should be established with the money. By introducing a bill, a legislator could jockey for a dominant position in the allocation of the Proposition 99 revenues. A total of thirty-eight pieces of legislation were introduced in the Senate or the Assembly to implement Proposition 99's six accounts. The simplicity of the initiative language helped win the support of the voters and minimize political attacks by the tobacco industry during the initiative campaign, but it also encouraged individual legislators to interpret the initiative in ways that belied its original public health roots.

The Voluntary Health Agencies' Legislation

As preparation for working with the Legislature, members of the Coalition for a Healthy California met on February 3, 1989, to discuss their proposals for how the Proposition 99 monies should be spent. They agreed that their first priority was making sure that the Health Education and Research Accounts were spent for the purposes specified in the initiative. The Coalition supported Senate Bill (SB) 1099, sponsored by Senator Diane Watson (D-Los Angeles), chair of the Senate Health

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Committee; the bill required that the Health Education money be used to fund tobacco use prevention programs through both the Department of Health Services (DHS) and the California Department of Education (CDE), using a grants mechanism rather than an entitlement-based program. Watson and her chief of staff, John Miller, had a close relationship with the voluntary health agencies, particularly the American Lung Association (ALA). They expected opposition to their plan because both the county health departments and CDE wanted all the money.^[1] The voluntary health agencies also worried that the Proposition 99 money would not be used for real tobacco control efforts, but would instead disappear into existing generic programs under the assumption that these programs would include a tobacco control component.

By mid-February 1989, Miller, working with the ALA, ACS, and AHA lobbyists, had agreed that an anti-smoking media campaign should be funded from the Health Education Account. They agreed that Superintendent of Schools Bill Honig's “Healthy Kids, Healthy California” proposal should be handled through the grant proposal route and that only the portions of it that dealt with tobacco education would be funded from the Health Education Account. Similarly, proposals for comprehensive health education would be supported only insofar as they dealt with education about tobacco.^[2]

Finally, the role and funding of an oversight committee for the health education programs was discussed. An oversight committee would be an independent body that would monitor only the Proposition 99 health education programs, as opposed to a legislative committee that has oversight over an extensive array of programs. While such a committee could both monitor and protect the program, its creation would take resources from direct program services, and the voluntary health agencies wanted to insure that most of the Proposition 99 revenues would go toward funding programs, not administration. (This concern would also manifest itself in fights over the amount of overhead research universities would receive from the Research Account.) In order to deal with ACS concerns about creating a new bureaucracy and the amount of power it would have, they agreed to limit the oversight committee's funding to one-fourth of one percent of the total Health Education Account budget.^[2]

The conversations with CDE continued. On March 7, 1989, Coalition chair Jim Nethery and ALA representative Carolyn Martin wrote to Honig, summarizing what they believed to be “the essential areas of agreement” between the Coalition and CDE, based on a February 8 meeting: 70 percent of the money would go to programs focused on people

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aged eighteen or younger, with an emphasis on school-based programs, a media component, the use of competitive grants for distributing the money, and the appointment of an oversight committee with some financial support. There was also agreement that DHS and CDE would each have half of the available money and that CDE would use Proposition 99 monies to fund only those portions of Healthy Kids, Health California that dealt specifically with tobacco.^[3]

In March 1989 Watson introduced SB 1099 to allocate Health Education funds. The bill largely drew upon language contained in SB 2133, the bill she had introduced in the previous session. The language on what constituted tobacco education was specific: “It is the intent of the Legislature, therefore, to require the State Department of Health Services and the State Department of Education to both cooperatively and individually conduct activities directed at the prevention of tobacco use and tobacco related disease.”^[4] SB 1099 also authorized the oversight committee to appoint an executive director and necessary support staff if it chose to do so. If the oversight committee could appoint an executive director and support staff, then it could indeed serve as an independent oversight commission. If it was forced to rely on staff from DHS or CDE, it would be less independent and potentially more subject to political pressures. By codifying the oversight committee's power to appoint staff in SB 1099, the Coalition was trying to establish the independence of the oversight committee.

The proponents understood that they were venturing into uncharted territory. No one had ever designed and implemented such a large and comprehensive tobacco control program. As a result, they sought to stress the experimental nature of the effort with the goal of refining the program as it developed. The three key elements underlying SB 1099 reflected this philosophy:

• The creation of an outside oversight and policy committee to monitor the anti-tobacco program. The committee, which would be appointed by the Legislature and the Governor, would consist of both education and health interests and be responsible for the development and focus of the overall policies and guidelines for the Health Education Account funds.
• An initial period of experimentation and evaluation to refine the program. It was decided that the first two years of the expenditure of the Health Education Account funds would support experimental

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  projects and would also be used to evaluate existing programs. Funds would be distributed by a grant approach to public, nonprofit, and for-profit sectors based on guidelines developed by the oversight committee. Both DHS and CDE would be involved in distributing money, but the plan was to have a varied approach to tobacco use prevention which would be better achieved through grants than by an entitlement-based program.
• The development of a master implementation plan. After two years, an evaluation of the effectiveness of the programs would be conducted. The oversight committee would then develop a master plan to utilize the most successful programs with the goal of reducing tobacco use in California by 75% by the year 2000.^[5]

In addition to a general framework, SB 1099 established several specific priorities for anti-tobacco education: (1) a focus on youth, with a minimum of 70 percent of the funds to be utilized for programs targeted at young people; (2) an emphasis on high-incidence/high-risk groups, recognizing that the tobacco industry was targeting lower-income and minority smokers; (3) a multifaceted approach, with 50 percent of the funds going to programs in schools and the other 50 percent to a variety of community-based programs; (4) cessation activities targeting people who were already smoking; and (5) efforts to protect nonsmokers from the health dangers of secondhand smoke. CDE was responsible for the school-based programs of the Health Education Account while DHS was responsible for the community-based programs. The oversight committee was to coordinate both departments' program implementation.

Other Significant Tobacco Education Legislation

Watson's bill was not the only bill dealing with how the Health Education Account money would be spent. By the end of March, two other bills were also being given serious attention—Assembly Bill 1695, introduced by Assembly Member Bruce Bronzan (D-Fresno), and SB 1392, introduced by Senator Barry Keene (D-Benicia). Unlike SB 1099, which concentrated on reducing tobacco use, these two bills represented the interests of forces that sought to use the Health Education Account money for medical service programs with a much less direct connection, if any, to tobacco control.

Assembly Bill (AB) 1695 concentrated on developing a

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comprehensive health education program instead of one aiming to reduce tobacco use. Although Bronzan authored AB 1695, the bill was chiefly proposed and lobbied by Steve Thompson, director of the Assembly Office of Research, on behalf of Assembly Speaker Willie Brown.^[6] The new program, which was called the Comprehensive Maternal and Child Health Program, targeted women, children, and adolescents and resembled the programs suggested to the Tobacco Institute by Nielsen, Merksamer in December 1988 for moving money into “acceptable” areas.^[7] Although a tobacco education component was included as a small part of the program, the bill's main purpose was to consolidate several state health programs into one single new program, which would include provisions for health education and dental disease prevention through grade school programs; nutritional supplements to pregnant women, new mothers, and their children; and childhood immunizations, health screening, and hospital and physician services for the target populations. The bill would have appropriated $123.3 million from the Health Education Account to fund the program.

In reaction to AB 1695, Assembly Member Lloyd Connelly (D-Sacramento) again went to the Legislative Counsel, this time asking if the Comprehensive Maternal and Child Health Act could be funded legally from the Health Education Account. On May 4, 1989, the Legislative Counsel issued the opinion that it could not be funded with money from the Health Education Account because the funding of medical services was not the purpose of the account as presented to voters.^[8] Despite the fact that it violated Proposition 99, the voluntary health agencies had to give the bill serious attention because comprehensive health issues were popular and Bronzan was chair of the Assembly Health Committee, the program committee that would likely hold hearings on the plans for the Health Education Account funds. In addition, AB 1695 had the support of Assembly Speaker Willie Brown and of the county health departments, which would benefit financially because most of the proposed programs were to be operated at the county level.

SB 1392 was also a major competitor to SB 1099 because Keene, its author, was the Senate majority leader and the former chair of the Assembly Health Committee. In addition to Keene's sponsorship, the bill had other powerful supporters: the Service Employees International Union (SEIU), which represented county-level heath workers, the County Supervisors Association of California (CSAC), and numerous other county medical service providers and their proponents. The County Health Officers Association also supported it. In addition, the

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administration, acting through the Health and Welfare Agency, had stated that its priority was to channel as much of the tobacco tax revenue as possible to county programs, thereby alleviating the counties' demands on the state's General Fund.

Instead of a centrally organized basis for distributing tobacco tax funds like SB 1099 and AB 1695, SB 1392 proposed a locally based distribution system using policy recommendations from DHS but preserving local autonomy. Targeted recipients included pregnant women, children, and workplace and community services, including smoking cessation and tobacco control programs. No money was set aside for schools. It was more difficult for proponents of SB 1099 to criticize SB 1392 than AB 1695, since it specifically mentioned anti-tobacco efforts. There were still several items of concern, however, because the target groups were narrowly defined, there was little state oversight or direction, and there was enough latitude to make all kinds of health education, such as alcohol or nutrition, legitimate under the bill. DHS was to develop programs for use in local communities, but the money would essentially go to the counties as block grants with some strings attached. Nevertheless, because of Keene's sponsorship and the fact that the bill gave financial assistance to the counties, Proposition 99 advocates recognized that it would be given consideration along with SB 1099. CDE opposed the bill.

Most of the competition for the Health Education Account money took place in late spring and early summer in behind-the-scenes negotiations among the various interests that were pushing their programs. Although it was clear from the opinion polls conducted at the time of Proposition 99 that the public wanted the Proposition 99 funds to go to anti-tobacco education and research more than it wanted the money to go to indigent health care (table 1), the Legislature was on record through its previous actions as being unsupportive of tobacco control efforts but supportive of health care screening for children. In particular, funding health care for sick children was attractive to liberals and keeping money out of tobacco education was attractive to members across the political spectrum who supported the tobacco industry.

The Child Health and Disability Prevention Program

In December 1988 Nielsen, Merksamer had recommended to the Tobacco Institute that the Child Health and Disability Prevention (CHDP)

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program was an “acceptable” way to spend Health Education Account funds.^[7] The program was popular and had very strong political backing from Speaker Brown, who had carried CHDP's initial authorizing legislation. Brown was closely allied with the tobacco industry,^[9] so shifting money from anti-tobacco education to CHDP would meet both Brown's and the industry's needs.

CHDP originated in 1973, when the California Children's Lobby approached Assembly Member Willie Brown and his staff member Steve Thompson about creating a program that would offer free health screens to all children, not just poor ones.^[10] At the time, children's advocates were dissatisfied with California's implementation of the federal child health screening program, Early and Periodic Screening, Diagnosis, and Prevention. The federal program had been set up in California as a welfare program rather than a health program, and it provided mass screenings by paraprofessionals instead of doctors, which the medical establishment did not like. In addition, the screenings were divorced from the provision of medical care and providers were reimbursed at very low rates, which reduced the incentive to provide services. Brown and Thompson created CHDP to solve these problems.

CHDP was to be administered by the health department, not welfare, and incorporate doctors into program delivery.^[10] The CMA and the California chapter of the American Academy of Pediatrics supported this program. Once the costs of implementing the full program were clear, however, the target population was “temporarily” redefined to be children between the ages of four and six whose family incomes were no more than twice the poverty level; only the costs of screening, not treatment, were covered.^[10] When Proposition 99 passed in 1988, CHDP was a popular program with strong political backing that needed money to be more fully implemented. Using the Health Education Account to finance CHDP would advance the policy agenda of important legislators, provide money for doctors, and reduce funds for programs that could damage the tobacco industry.

Negotiations and Agreements

By May, several of the Assembly bills to implement Proposition 99 ended up in the Assembly Health Committee. Bronzan, the committee chair, decided to consolidate all of the Proposition 99 bills into one omnibus bill. The voluntary health agencies convinced him to incorporate the language of Watson's SB 1099 into his bill and to drop AB 1695. No

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dominant bill emerged in the Senate, so the legislative leadership agreed to have the Senate pass a related bill that had already passed the Assembly, then let a conference committee consisting of members of both houses work out the final implementing legislation for Proposition 99. That bill was Assembly Bill 75. Authored by former Willie Brown staffer, now Assembly Member, Phil Isenberg (D-Sacramento), AB 75 dealt with some of the Proposition 99 medical accounts and could thus be used to resolve issues related to the other accounts as well. Since it was the only bill that was close to being ready for a conference committee and Isenberg was an acceptable chair to all the major parties, including the Deukmejian administration, Speaker Brown, and Bronzan, he became the chair.^[11] According to Isenberg, “By the time my little bill doing nothing got over to the Senate, it was the only survivor. And all the giant gorillas of the Legislature had killed each other, because they didn't want anybody else to have control over the issue. …Also the interest groups became very interested in doing that because as time passed there was an actual chance the money wouldn't be divided for a while and there's nothing worse if you expect to get some money than the thought that the getting may be delayed.”^[11] The Conference Committee included Assembly Members Isenberg, Bronzan, and Bill Baker (R-Walnut Creek) and Senators Keene (D-Benicia), Herschel Rosenthal (D-Los Angeles), and Ken Maddy (R-Fresno), some of whom represented significant interests that had been involved in developing the Proposition 99 legislation. Maddy, the Republican Senate minority leader, represented the administration's interests. Watson, the tobacco control forces' strongest advocate, was left off the committee.

Although the tobacco industry stayed out of public view, it was very active behind the scenes. The tobacco industry spent $2.2 million on lobbying in the 1987-1988 election cycle and another $2.2 million in 1989-1990 (compared with only $274,394 in 1985-1986 before Proposition 99 passed).^[9] Between the 1985-1986 and 1989-1990 election cycles, tobacco industry campaign contributions to California legislators more than doubled, from $266,488 to $563,366.^[9] Assembly Speaker Willie Brown had received $124,900 for the twelve-year period between 1976 and 1988. In 1989-1990 alone, he received $62,250, more than any other member of the Legislature and more than most members of the US Congress. Senator Ken Maddy (R-Fresno), the leading Republican on the AB 75 Conference Committee, received $38,500 in 1989-1990, more than twice the $19,500 he had received between 1976 and 1988.^[9]

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During the summer, the Conference Committee staff, lobbyists, and other key individuals worked out the specific language for spending the Health Education Account. By the time the committee met, according to John Miller, “We pretty much knew how we wanted to spend the money and had…defeated or derailed most of the really ugly [suggestions for spending the money]. What remained of the ugly ones, we had already accepted. …The process inside the Conference Committee was to actually put it into words and put dollars beside each agreement.”^[12] For the most part, the voluntaries had been successful in defending the language originally in Watson's SB 1099, which had also been sent to the committee to consider in its deliberations. However, they also believed that in order to achieve the necessary support for the provisions in Watson's bill, they would need to come to an agreement with the other organizations that had made a pitch for Health Education Account revenues.

According to Miller, the strategy he and Najera settled on was based on their perception that they had little real support inside or outside the Capitol.

We had unreliable allies (Heart/Cancer); a fearsome opponent (tobacco); various supporters (hospitals, counties, CMA); an indifferent Legislature; and a mildly antagonistic administration (Deukmejian). We also had a completely untested, unproven theory on reducing smoking. We did have popular support, but it was broad, shallow, and skeptical.

In our estimate, the tobacco industry had the political capacity to bury tobacco control. They could do so either by diverting the funding, or by implementing the mandated program so ineffectually that diversion was unnecessary. This could be done by their “insider” methods.

Tony [Najera] and I resolved that we would avoid an absolutely direct confrontation. We were not strong enough to prevail against a united tobacco/Republican/medical provider coalition, and we determined to buy (literally) time to establish an effective, highly visible, and hopefully popular anti-tobacco program. …We resolved to make financial and programmatic concessions when we had to (we had more than enough money) and to associate ourselves with powerful friends such as the CMA, the counties, and Western Center. We did not know the full extent of their duplicity during the first few years, but we did know their support of Prop 99 was opportunistic and we were aware they would pursue their own narrow interests if events evolved in such a direction.^[13]

They completely discounted their ability to mount an effective public campaign directed at the Legislature, abandoning their most powerful weapon, public opinion.

At the end of June, the Coalition had reached an agreement with Senator

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Keene and his competing bill, SB 1392.^[12] Under this agreement, funding would be evenly divided among local county-based anti-smoking programs, school-based anti-smoking programs, and state-run competitive grants. Money would also be used for an anti-tobacco media campaign. Thus, SB 1099 now included assurances that local jurisdictions would receive a share of the Proposition 99 funds.^[14] According to the June 30, 1989, minutes of a meeting held by the Coalition, the negotiations with the SEIU and health officers resulted in the following allocations: 10 percent of the available funds in the Health Education Account ($12 million) for media, 30 percent ($36 million) to schools through CDE on an entitlement basis, 30 percent ($36 million) to state grants through DHS, and 30 percent ($36 million) to local health departments on an entitlement basis. This meant that over half of the money was going to the county level on a noncompetitive basis, which the voluntaries had been trying to avoid because they worried that it would disappear into local school and health department budgets. They believed that a centrally run program conforming to state standards would be stronger and more likely to actually reduce tobacco use. Sending some of the money to the counties was seen as a way to stop SB 1392 and to make the counties happy but not necessarily as a route to strong programming.^[12] This ambivalence about the value of the local programs was to continue in subsequent versions of the Proposition 99 implementing legislation.

The pressure was also heavy to include some funding for CHDP from the Health Education Account, along the lines that Nielsen, Merksamer had suggested to the Tobacco Institute seven months earlier, in December 1988.^[7] From a political standpoint, CHDP was popular with several legislators, key lobbyists, including SEIU and the Western Center for Law and Poverty, and the administration. Funding for CHDP directed additional funds to the counties, which also pleased them. Steve Thompson was an important player in the decision to move Health Education Account money into CHDP.^[15] In return for the Coalition's support of CHDP, the administration agreed to support SB 1099 and to include anti-tobacco education in the CHDP screening interview. According to Carolyn Martin, a volunteer who represented ALA on the Coalition, “DHS was to meet with the voluntaries to develop the anti-tobacco education component of CHDP. That never happened. Instead, they just added three questions about smoking to the screening interview. That was DHS's idea of an `effective tobacco education program.' Ha!”^[16]

Rather than making a strong public argument that spending Health Education Account money on CHDP violated the intent of the voters, as

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they had done when Governor Deukmejian proposed using the medical service accounts to supplant funding for local medical programs, the Coalition agreed to divert some money from the Health Education Account to CHDP. In a June 26 memo, Miller told Watson, “If the administration wanted to steal some of the Education funds for themselves, and were willing to let us establish good programs in return, we would let them steal a little (say 20 or 25 million). Anything we can do to reduce the block-grant structure of the program is also welcome.”^[17] On June 30, with the American Heart Association abstaining, the Coalition passed a motion to go along with the diversions: “The Coalition supports funding for CHDP, $20 million for year one and $20 million for year two [of the two years that AB 75 covered], from the reserve account [in the Health Education Account]. These funds are to be used exclusively for anti-tobacco education. The program will be subject to standard accounting and evaluation procedures. There will be a two year sunset.”^[18] The decision to divert funds from Health Education to medical services through CHDP established a precedent for deviating from the will of the voters as well as for funding medical services from the Health Education Account. As Isenberg observed, “This support would haunt them in years to come.”^[19] Giving up $39.1 million for CHDP (out of $271.9 million appropriated from the Health Education Account over two years) in exchange for getting a decent bill, viewed from a Sacramento insider's perspective, was a reasonable and appropriate action. From the standpoint of mobilizing public support to protect the anti-tobacco programs, it was not.

To protect the anti-tobacco programs mandated by Proposition 99, public health advocates could have framed the issue for the public simply as “following the will of the voters.” By agreeing to diversions, the voluntaries surrendered the “voter mandate” rationale, clearing the way for medical groups and others to frame the fight over Proposition 99 revenues as sick children versus health education or as just another fight over money among Sacramento special-interest groups. The health groups lost the moral high ground. Moreover, the fact that the Coalition agreed to funding medical services from the Health Education Account demonstrated to the CMA, the tobacco industry, and others that they did not have to pass a new initiative to move Health Education Account money from “unacceptable” tobacco control to “acceptable” medical services; they could negotiate it.

The die was cast.

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Project 90

While the Coalition spent most of 1989 concentrating on convincing the Legislature to use Proposition 99 funds to establish effective tobacco control programs, the tobacco industry continued to push its long-term strategy of passing a new initiative that would eliminate the Health Education Account. This strategy, articulated in secret plans the previous February as the Project California Proposal (discussed in Chapter 5),^[20] involved providing financial, legal, and political support for a coalition of medical, labor, and business groups that were seeking to amend the Gann Limit and change the way the state finances were managed. While staying out of the limelight, the tobacco industry had budgeted $330,000 for Nielsen, Merksamer “to represent industry in coalition, lobby coalition members, draft legislation/initiatives, prepare background materials.”^[20] The original effort, known as the Gann Limit Coalition, had been renamed the Project 90 Coalition. Steve Merksamer, who had helped facilitate the Napkin Deal, was the principal advocate behind the redirection of funds. David Townsend, who ran the campaign against Proposition 99 for the tobacco industry, was hired to conduct the campaign for Project 90. Jeff Raimundo, who worked on the campaign against Proposition 99, was the spokesman for the Project 90 Coalition.^[23][22][23] The industry's support was explicitly tied to using the planned initiative “to eliminate earmarking of dedicated Prop 99 revenues.”^[20]

While Project 90 stayed in the shadows and its tobacco ties remained unknown until mid-June, the Coalition started to get wind of its activities earlier. On May 17, 1989, the ALA's executive director, George Williams, commented, “We were told at a coalition meeting that the CMA is working on an initiative that would divert all Prop 99 money, except research, to a fund to provide health insurance for uninsured workers. As a side note, it's interesting that CMA has the money to do this, but not to support Prop 99—so much for friends.”^[24] Assembly Member Lloyd Connelly, writing to the California Taxpayers' Association, a participant in Project 90, on behalf of Assembly Member Tom Hayden (D-Santa Monica), ACS, ALA, AHA, and the Planning and Conservation League, reported,

While we are in agreement with the basic thrust of Propect [sic] 90, we view with concern reports that Project 90 is contemplating including amendments to the allocation and purpose sections of Proposition 99. …Before taking any irrevocable action impacting the purposes and integrity of Proposition 99, and the prospects of the Project 90 initiative succeeding, we ask that you consult

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with all the members of the Coalition for a Healthy California.

It would be unfortunate if the Project 90 initiative does not have the broadest possible coalition supporting it. An initiative that amends Proposition 99 inconsistent with its purposes will have the active opposition of the below signatories, including the signing of the opposition ballot argument and conducting a free media campaign.^[25]

This letter did not deter the backers of Project 90.

One of the Coalition's members, the CMA, was not a signatory to the Coalition's letter and was part of Project 90 in order to secure additional funding for health care, which the CMA intended to get by revising Proposition 99. The CMA's specific proposal was to give 5 percent to Research, 7.5 percent to Public Resources, 35 percent to Hospital Services, 10 percent to Physician Services, and 42.5 percent to a new account for “uncompensated health care services, preventive health care services, health education, or the state's subsidy of a health insurance program for the medically uninsured.”^[26] The CMA would have ended the requirement that any money be spent on anti-tobacco education. The CMA knew it was serving the tobacco industry's interests by pursuing the initiative. On June 27, 1989, Jack Light, a CMA staffer, wrote an internal memo reporting that “the tobacco industry initiated this request to eliminate education and they did it because they realize that a massive educational campaign is the most effective deterrent to smoking there is.”^[27]

On June 15, Sacramento Bee political columnist Dan Walters exposed the connections between the CMA, the tobacco industry, and Project 90 in a column entitled “A Lousy Way to Make Policy.”

The Project 90 executive committee is to meet this week to make final decisions on the content of the initiative.

And one of those decisions will be whether to accept a quarter-million dollar commitment of campaign funds from the tobacco industry in return for placing in the initiative a significant change in Proposition 99, the cigarette tax initiative approved by voters last year.

One portion of Proposition 99, which boosted taxes on cigarettes by 25 cents a pack, requires funds, currently $120 million, to be spent on a massive anti-smoking educational program among California school children and the larger public.

The tobacco industry wants that provision to be axed. It wants to trade the quarter-million-dollar commitment (plus a promise of more later) for a provision to remove all funds from the anti-smoking program and shift them to general health care programs. The move has the support of some medical provider groups such as the California Medical Association, but not such public health groups as the American Cancer Society.^[22]

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On June 29, Walters' next column on Project 90 appeared, entitled “A Smoky Fight over Initiative.”

While Project 90 leaders, most of whom come from business groups, agreed to the tobacco industry deal as a means of obtaining badly needed campaign funds, it created a big split among health groups, pitting the doctors and other professional providers against volunteer anti-smoking organizations… .

The matter came to a head this week during what sources described as an acrimonious, two-hour telephonic meeting of CMA's executive board.

The Board was deeply divided over the issue and finally settled on a strangely worded statement that is to be submitted to the CMA's governing council next month.

While the statement says CMA “disassociates itself” from attempts to eliminate anti-smoking education money and reaffirms the organization's commitment to a smoke-free environment, it also implies that it could not be held responsible for what others might do, including the shift of anti-smoking funds into a broader substance-abuse program and/or direct health care. In effect, the CMA seems to be washing its hands of the deal while leaving open the possibility that its members could profit from it.^[21]

The column triggered a firestorm of protest from the public health groups, particularly the ALA and ACS.

The initiative proposed by Project 90 would both revise the Gann spending limit and raise the gas tax. The intent of the supporting organizations was to free state revenues for spending on a variety of public programs and to allow gas taxes to be raised for transportation improvements. Although Project 90 was directed toward putting the proposed initiative on the ballot through legislative action, it was deemed unlikely that the Legislature would pass it, meaning that a signature drive would be necessary. This meant that members of the campaign executive committee, known as Taxpayers for Effective Government, each had to contribute $100,000 for the campaign.^[28] The tobacco industry had agreed to provide $250,000 to the effort if the initiative also included language stripping the Health Education Account of money.^[22]

The CMA initially confirmed its relationship with the tobacco industry. According to a story in the Santa Maria Times,

The Medical Association's spokesman confirmed last week that deals have been made at the Capitol between doctors and the tobacco industry.

“Yeah, it's true, but the world is not black and white,” said Chuck McFadden, communications director for the association.

“We would like it to be morally pure and black and white. Unfortunately you have to engage in trade-offs to enact good public policy. That does not, by any stretch of the imagination, put us in bed with the tobacco companies.”^[23]

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With or without Project 90, however, the CMA stood by its intentions to redirect the money from the Health Education Account. In a July 14 letter to a member of the Legislature responding to a news article critical of the CMA's actions, CMA president William Plested III wrote,

Advocates of developing a stronger publicly operated delivery system (e.g. free clinics, county hospitals, etc.) want all of the tobacco tax revenue committed early and permanently to the support of that system. CMA and other health providers want the short-term commitment to go toward temporary programs so that the long-term uses will go toward reform of the existing employer-based health insurance delivery system. I do not claim that the CMA is motivated by higher moral purposes than any of the other interested parties who are fighting for this money like jackals over a carcass. We have, however, unlike the others, openly presented our priorities and articulated our rationale for those priorities.^[29] [emphasis added]

On July 12, the CMA's position on AB 75, the implementing legislation for Proposition 99, was to oppose it unless it was amended to move the funds in the Unallocated Account into a Physician Services Fund to pay for uncompensated physician services.^[30] On July 21, the CMA Council adopted its general policy for Proposition 99 implementation, which had three chief features. First, the CMA wanted all health care money from Proposition 99 to go to a health care insurance program for the working uninsured and their dependents. Second, the CMA opposed any legislation that did not make funds available to all physicians for a portion of their uncompensated services. Third, the CMA supported using the Unallocated Account for physicians who treated patients with emergency conditions.^[31] While the council reaffirmed its “total dedication for achieving a tobacco free California by year 2000” and emphasized that “CMA will not participate in any activities which might compromise that goal,”^[31] CMA's actions regarding the Health Education Account should not have reassured the voluntary agencies and other defenders of the Health Education Account. There was no promise to support the 20 percent allocation for health education.

The voluntaries went back to the public to defeat the Proposition 99 proposal advanced by the Project 90 Coalition. They organized statewide press conferences in Sacramento and Los Angeles.^[32] The press conferences, which received widespread media coverage, articulated the voluntaries' point of view, including a threat on their part to sue if the health education programs did not receive full funding. They encouraged their volunteers to drop their CMA memberships.^[33][34] On August 21 physicians Lowell Irwin and Donald Beerline, the president and president-elect

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of ACS, wrote their volunteers urging them to write to Plested with a request to respect the integrity of Proposition 99.^[35] Project 90's threat to the Health Education Account dissipated under the glare of public attention, again demonstrating the power of public sentiment and attention in overcoming the power of the vested interests who had controlled tobacco policy making in Sacramento.

On August 29, the CMA's vice president for government affairs, Jay Michael, tried to distance Project 90 from the tobacco industry: “The Tobacco Institute never offered to contribute $250,000 or any other amount to a campaign to redirect the anti-smoking revenue from Proposition 99. Various companies associated with or owned by tobacco companies had…offered to contribute money to…Project 90. …Tobacco owned companies (not tobacco or cigarette manufacturers, per se) indicated a willingness to contribute $250,000 `or more' to the overall campaign” (emphasis in original).^[36] To health groups, this was a distinction without a difference.

When the Legislature and the governor reached an agreement on revising the Gann Limit, the entire Project 90 effort lost momentum.

The Battle over the Media Campaign

By August 24, the Conference Committee had made its report available. The Coalition seemed satisfied with the result regarding the Health Education Account. An internal ACS memo concluded that the recommendation was “quite close to the agreement reached by the Coalition and other parties in the form of amendments to SB 1099.”^[37] At this point, the revenue was divided into one-time and ongoing expenditures. One-time expenditures included $15 million in reserves, $30 million in competitive grants, and $14 million in unallocated funds. Ongoing expenditures were broken down into state programs and local programs. State programs included $3 million for oversight and data collection and analysis, $15 million for the media campaign, $20 million for CHDP screening, and $12 million for competitive grants. Local programs included $36 million for school-aged populations and $36 million for high-risk populations.

At Miller's request, the Coalition members reaffirmed their support for SB 1099 as it existed on August 18, 1989. Miller had asked the Conference Committee to incorporate the substance of SB 1099 into the AB 75 package and reported that SB 1099 would not have a separate hearing. At that point the Coalition decided that a single bill should cover

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appropriations from the Health Education Account and the medical service accounts; tobacco interests and the CMA would presumably have more difficulty killing the anti-tobacco education program if it were part of a larger bill that included the appropriations for the medical services accounts.^[38] According to Miller, “We wanted to make it so that they couldn't have all that money for their clinics and their hospitals unless they voted for health education as well.”^[12]

The media campaign was the main bone of contention; Miller expected the industry to try to kill it. Steve Scott, political editor of the California Journal, observed that the media program “was the main issue because…it was that component that bothered them [the tobacco industry] the most. I mean the tax was the tax, there was nothing they could do about it, but the notion that Californians would be educated and that there would be a specific media component to it was what terrified them.”^[39] As Miller and Scott expected, in September, after AB 75 had moved out of the Conference Committee, the tobacco industry emerged from the shadows and launched an all-out lobbying blitz to kill the anti-tobacco media campaign.

During the final days of the Conference Committee, tobacco industry contract lobbyists saturated legislators.^[41][40][41] On September 13 Assembly Members Bronzan and Isenberg and Senators Keene and Rosenthal sent an alert to their fellow members warning them that twenty-five lobbyists had been hired by the tobacco industry to try to kill the provisions authorizing the anti-smoking television ads.^[42] Miller recalled the dramatic standoff inside the Conference Committee:

The blitz of lobbying was awesome—the tobacco industry brought in the “first team” from Washington, D.C., and New York. They literally hired every contract lobbyist around. They would hire a lobbyist just to win one vote. Judge Garibaldi, then the preeminent contract lobbyist, told Senator Watson the industry offered him a blank check—he could fill in any amount he wished, just to add his clout to the contest.

Prior to adoption of the Conference Committee report, the industry had brought high pressure on the six members to target all tobacco education to youth. They clearly had the Republican members, and were about to win some of the Democrats (and destroy health education). Before a vote could be taken, however, Phil Isenberg and Bruce Bronzan stood up from the table, stepped to the front of the room, and publicly refused to have anything further to do with the conference. Both men shamed their colleagues, Isenberg described the youth proposal as one of the cheapest tricks he had witnessed. The demonstration by both men effectively killed the “youth only” effort and assured adoption of a legitimate health education proposal.^[13] [emphasis added]

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When the bill moved to the Assembly floor, tobacco lobbyists were lined up three and four deep along the public railing outside the Assembly chamber, sending messages in to legislators and talking to them as they went into the chamber.^[43] Mary Adams, the ACS lobbyist at the time, noted, “The tobacco industry was handing out $10,000 checks to any and every lobbyist it could find who would work on the issue. It was a hoot to see who was at the railing! They would have hired my cat if she had been a registered lobbyist!”^[44] The industry was successful in reaching some legislators, most notably Senator Maddy and Speaker Brown, both of whom questioned the value of using Health Education Account money for a massive and untested media campaign.^[19]

Fortunately for public health advocates, the tobacco industry went too far and generated a backlash among many legislators. In Bronzan's words, the lobbying campaign became “so gross and so obvious that it becomes dangerous for [lawmakers] to associate themselves with it.”^[43] The health advocates alerted the media to the tobacco industry's lobbying tactics. Walters summed up the effort in his Sacramento Bee column: “The tobacconists may have made a tactical error. Their heavy-handed push drew attention from news media, which put the politicians on the spot and, in the end, they abandoned the drive and the ad money remained.”^[45] Walters declared the industry's defeat a public victory over narrower interests.

In 1989 politicians still saw implementing the voter mandate as a priority. The industry had put itself in the limelight with a too-obvious lobbying effort. Once again, outside attention had worked to the advantage of the health groups and to the defeat of the industry.

The Research Account

While the Health Education Account was widely debated and many proposals were floated for how to use the money, the Research Account attracted far less attention. The Research Account, like the Public Resources Account, was not “on the table” because it was viewed as an earmarked account.^[46] Everyone assumed that the 5 percent allocation specified by the initiative would be put into research. Three issues had to be resolved concerning the Research Account: (1) who would administer it, (2) how indirect costs (overhead) would be handled, and (3) what kinds of research would be funded. None of the preferences that the voluntary agencies had initially expressed ended up in the final legislation.

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Instead, the preferences of the governor and the University of California (UC) prevailed.

The voluntaries wanted DHS to administer the money and limit the amount of indirect costs that could be charged to research grants funded out of the Proposition 99 Research Account. In their view, indirect costs would involve general support for the universities rather than support for tobacco-related work. By January 20, 1989, the California research universities had drafted their own statement of principles, supporting UC as the lead agency, establishing scientific merit as the basis for awards, and requiring the payment of all research costs, both direct and indirect, consistent with federal guidelines.^[47] The private universities opposed limiting overhead. (Stanford's overhead at the time was higher than 80 percent.^[1]) On March 7 the UC proposal, supported by Stanford, Cal Tech, the University of Southern California, and the California State University system, was on the table. It proposed UC as the administrator, a system of outside peer review based on the National Institutes of Health model, a policy advisory committee, and full-cost reimbursement of indirect costs “consistent with federal guidelines.”^[48]

The research program was eventually authorized by Senator John Garamendi's (D-Walnut Grove) SB 1613. It specified that the Research Account was to be managed by the University of California, and the university was directed to appoint a Scientific Advisory Committee to advise it in administering the account to conduct research related to tobacco. The private universities got full indirect costs, but UC did not. The university was given wide latitude in administering the Research Account. Deukmejian approved SB 1613 on October 2, 1989, which authorized the research programs through December 31, 1993.

The Outcome

AB 75 appropriated a total of $272 million from the Health Education Account, which included the money raised from January 1, 1989, through June 30, 1991. The bill appropriated $978 million for indigent health care from the Physician Services Account, Hospital Services Account, and Unallocated Account for medical services. (A separate bill allocated $74 million from the Research Account for tobacco-related disease research; $74 million from the Public Resources Account was distributed through the budget for environmental protection.) The Child Health and Disability Prevention (CHDP) program was funded from the

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Health Education Account, even though it was a medical service program. In total, AB 75 appropriated $1,017 million for medical services, or 69 percent of the total revenues available from the tobacco tax increase, including $96 million that the voters had earmarked for anti-tobacco education. AB 75 did not follow Proposition 99's directive that 20 percent of revenues be spent on anti-tobacco education (figure 5). For true anti-tobacco education it appropriated only $229 million, or 15.8 percent of total revenues.

The Health Education Account money was to target “high-risk populations,” particularly school-age youth and their families, blacks, Hispanics, Native Americans, pregnant women, and current smokers. The money for local health department programs was allocated to “local lead agencies,” California's fifty-eight county health departments and three city health departments. Amounts were included in the 1989-1990 and 1990-1991 budgets to fund the competitive grants for other public and nonprofit agencies. School programs were to be administered by the California Department of Education (CDE), and money

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to school districts was to be distributed as an entitlement on the basis of average daily attendance. Ninety percent of the money allocated to CDE was to be allocated to school districts and county offices of education. The remaining 10 percent was to be awarded as grants for innovative programs. All other programs were to be administered by the Department of Health Services.

AB 75 also established an eleven-member Tobacco Education Oversight Committee (TEOC), which was charged with advising DHS and CDE on programs funded by AB 75 and developing and updating the Master Plan. Members were to be appointed by the governor, the Senate Rules Committee, the speaker of the Assembly, and the superintendent of public instruction to represent specific constituencies, including voluntary health agencies, health care employees, university faculty, and target population groups. While TEOC was more limited in authority than originally envisioned by tobacco control advocates, they still hoped that TEOC would play an important role in guiding and evaluating the new program.

Throughout the development of AB 75, extending as far back as Watson's first proposal a year earlier (SB 2133), tobacco control advocates had recognized explicitly the experimental nature of the tobacco control program they sought to develop. In order to ensure accountability, they had included a sunset clause, requiring a return to the Legislature after two years to obtain new spending authorization. The idea behind this decision was to provide adequate oversight and adjustment for the new program during its developmental period. The sunset provision was incorporated into AB 75, requiring a new bill authorizing the Proposition 99 programs to be enacted by July 1, 1991. While this two-year period of initial experimentation seemed reasonable at the time, in fact only twenty-one months elapsed between the signing of AB 75 and the date when new legislation was required. Far from providing a more rational approach to developing the new program, the sunset provision was to create a new opportunity for the tobacco industry and its allies among the medical service providers to continue their efforts to divert Proposition 99 funds into “acceptable” programs.

AB 75 passed the Assembly by a 72-2 vote and the Senate by a 38-0 vote, and the governor signed it on October 2, 1989.

Conclusion

The primary source of protection for Proposition 99 during the initial implementation phase was public pressure. With the election less than a year in the past, the Legislature was conscious of what the public wanted. As the California Journal noted, “Their [the tobacco industry's] most important

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ally at the time was Speaker Brown, but with the election still fresh in memory, even Brown's muscle couldn't pull enough votes for the industry to get its way in this battle. It was one of the first major losses suffered by the industry in the Legislature until that time.”^[49] But as the election faded from memory, the public health groups had to find other ways to keep public interest activated and the media involved.

The need to keep the public involved reflected the different dynamic faced by the voluntaries in their legislative fight compared to that of the initiative campaign. In drafting Proposition 99, the voluntary health agencies were able to control most of the critical policy decisions, and they succeeded in the election by presenting a broad and generalized concept that allowed for minimal attack. Once Proposition 99 arrived in the Legislature, however, many more players got involved in policy decisions. Another key to the voluntaries' success in the initiative campaign was that their only major opponent in the fight over the initiative was the tobacco industry. Within the Legislature the industry could find allies. While not succeeding in diverting all the money away from “unacceptable” anti-tobacco programs to “acceptable” medical services, the tobacco industry was able to exploit its common interests with medical service providers during the legislative battle. The conservative CMA and the liberal Western Center on Law and Poverty had used CHDP funding as a wedge that would expand diversions away from genuine anti-tobacco education in future years.

The insider forum of the Legislature was not an environment where the voluntaries were generally successful in creating tobacco policy. According to Cliff Allenby, Deukmejian's secretary of health and welfare in 1989, the voluntary health agencies were not well positioned for the insider game.

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When asked about the voluntaries and their power relative to the other groups who sought money from AB 75, he said, “They had a lot going for them. They had this whole education thing, and they really believed that that was their initiative.”^[50] He commented that they probably did not realize their potential strength but went on to say,

Nobody ever realizes their potential. …My theory is the assertion theory…you just say you're right. And if you know where you're going to go, then you really are in a stronger position than the opponent who is kind of defensive. Because they had to defend in discussions why the money shouldn't go to provide screening for kids to determine whether they had problems with their teeth. …We knew how the education money should be spent. …They didn't really have a clue of what they wanted to do or how they wanted to carry it out, and we did. I mean, we knew what we wanted to do. And that's a hell of an edge.^[50]

When asked if the voluntaries would have done better by going on the offensive, he remarked, “To go on the offensive, they would have had to have been better prepared than they were. So, if they had gotten their act together, maybe. They had no act.”^[50] The voluntaries were relying on the election victory to create an “entitlement” for them to the Health Education monies, but the other legislative players were likely to give this mandate only minimal respect unless the voluntaries kept public attention on the negotiations. As Allenby noted, the administration was working to establish the issue as “health care for children” versus “tobacco education,” a framing that the voluntary health agencies had to avoid.

From Miller's perspective, the diversion of money into CHDP was in the best long-term interest of the Proposition 99 programs: “The tens of millions we `gave away' bought time for us to establish a real program. We gave our opponents no opportunity or justification to eliminate health education and no justification for CMA or the counties to abandon us. Yes, we surrendered a moral position, but we won three years to prove Prop 99's promise.”^[13] But for those who had to protect Proposition 99 in the long run, the surrender of the moral high ground in pursuit of a workable insider political strategy was problematic. By compromising, the health groups lost the ability to make a compelling argument: that the Legislature had to follow the will of the voters. They themselves had agreed to compromise the voters' will; why should the politicians flinch at doing the same thing?AB 75 established the basic structure of how the health education program would operate in California. It created the largest tobacco control program in the world and featured several types of interventions: a media campaign; state-level programming; and local, community-based programs in the schools and county and city health departments.^[51] Although AB 75 was close to what the voters had specified in Proposition 99, the health groups had made compromises with medical service providers that would seriously undermine the anti-tobacco education and research programs that had led the public to vote for Proposition 99 in the first place.

More important, by compromising on the money, the health groups lost the moral high ground by abandoning the demand that the politicians respect the will of the voters.

Notes