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Proposition 99's First Implementing Legislation
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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

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]

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]


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

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.

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