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Insurance's Loss Is Cigar Makers' Gain

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By BILLY HOUSE and CATHERINE DOLINSKI, The Tampa Tribune

Published: October 4, 2007

WASHINGTON - Cigar manufacturers in the Tampa Bay area and elsewhere got a reprieve Wednesday from a huge tax increase when President Bush refused to sign a bill to renew and expand a children's health insurance program into law.

According to numbers provided by Florida Chief Financial Officer Alex Sink, the bill would have allotted nearly $353 million in federal funding. The children's health care issue was likewise heating up in Florida. One day into their special budget-cutting session, state House and Senate lawmakers renewed debate over expanding KidCare, the state's version of children's health insurance that relies on federal matching funds.

Bush's veto did not quite kill the negotiated House-Senate bill to renew the State Children's Health Insurance Program, known as SCHIP. Democratic leaders in Congress say they will push for a veto override which, if successful, would make the bill a law anyhow.

The proposed $35 billion increase for SCHIP would add about 3.3 million children nationally to the 6.6 million enrolled. That funding hike relies heavily on raising taxes on tobacco, include boosting the federal tax on cigarettes by 61 cents a pack to $1, and raising the current 5 cents per cigar to as much as $3 each, a 6,000 percent increase.

Bush wants to add only $5 billion to the program.

As Democrats try to round up enough votes for a veto override, Tampa's freshman Democratic Rep. Kathy Castor is feeling heat by her own party to reconsider her previous opposition to the bill.

Castor said Wednesday that despite the urging of House leaders, 'I haven't told them one way or the other.'

Castor said her decision will depend on whether some of the bill's policies can be 'ameliorated' and what 'assurances can be made.' She said that includes 'undoing the harm' that would be done to the cigar industry. The proposed cigar tax hikes are projected to raise as much as $800 million, but Castor has doubts about that.

She also remains concerned that the bill's funding formula is based on previous state enrollment and expenditures - where she says Florida has done poorly.

'The ball is really now in the court of the State Legislature, and the governor, to do something that really hasn't been done in Florida ... and that is be proactive in enrolling children in SCHIP,' said Castor.

Eric Newman, president of the J.C. Newman Cigar Co. and president of the Cigar Manufacturers Association of Tampa, praised Castor for her vote. 'She voted to represent the interests of her district, and for that she deserves a lot of credit.'

Senate Democrats already appear to have the needed two-thirds votes in that chamber to override the veto. But House Democratic leaders need to pick up as many as 25 votes for that process to be finalized, including more than a dozen Republicans and some Democrats.

The Tallahassee Arena

Washington isn't the only setting for revved-up political maneuvering and over government-subsidized funding of children's health care. Similar fights are under way in state capitals, including Tallahassee.

Talk in the state House of funding 5,000 new slots in KidCare has set the stage for a repeat of last spring's drama over a failed effort to reform and expand the program. Now as then, a bipartisan group of House lawmakers vows to fight for expansion, which the Senate is rebuffing for a second time.

Aaron Bean, chairman of the House Healthcare Council, said Wednesday he intends to press hard during the current session for more KidCare slots. Not doing so, he said, will probably mean the program will hit a cap by spring 2008. The program included 224,175 non-Medicaid children in July, up from 196,674 a year earlier.

Bean, R-Fernandina Beach, acknowledged that a budget-cutting session is a tough venue for expanding the program, but said 'as legislators, that's what we do; we make tough decisions ... We're going to go for it.'

Less than an hour later, however, the chairman of the Senate health appropriations committee firmly rejected the notion of expanding KidCare right now.

'It won't be in our proposal because we think that's probably an issue that we need to look at in the regular session,' he said, adding that he was not interested in negotiating on the issue this session.

Bill Galvano, House Healthy Families Chairman, said he is going to push to improve KidCare next spring. He was disappointed, he said, in Bush's veto of SCHIP.

'I did write the president and ask him to reconsider his threat at the time,' said Galvano, R-Bradenton. 'Florida depends very heavily on the funds we receive from the federal government.'

'It is unthinkable that the president would exercise his veto power to place the health insurance of millions of American children in jeopardy. More than 500,000 Florida children currently lack health insurance,' Sink, a Democrat, said. 'Without reauthorization of this vital program, hundreds of thousands more will join their ranks, despite the fact that their parents are willing to pay affordable rates.'

But buried under such debates nationally have been the concerns of cigar manufacturers. They say such a tax increase on their industry would have dire effects on operations in West Tampa, Ybor City in Castor's district, elsewhere in Florida, the nation, and even other parts of the hemisphere.

'We in the cigar industry are not opposed to expanding children's health care,' added Newman, 'just the funding mechanism congressional staffers used to cover it.'

'This bill would have a devastating effect,' said Norman Sharp, president of the Cigar Manufacturers Association of America.

Inappropriate Expansion

While cigar industry officials in Tampa and Washington on Wednesday applauded Bush's veto, the president himself said nothing specifically about the cigar taxes in his message to the House explaining his veto.

Rather, Bush said he opposed increasing the program to a total of $60 billion over five years because it would inappropriately expand the federal role in health care and lead some middle-class families to drop private coverage.

Democrats seized on Bush's rejection of the bill to suggest he and other Republican opponents have a lack of compassion. Senate Majority Leader Harry Reid described Bush's veto as 'heartless.'

White House press secretary Dana Perino said Democrats who control Congress 'only sent a bill that they knew the president couldn't sign and then used a lot of different ways to demagogue the issue.'

The veto - only the fourth of Bush's presidency - sets up a potential showdown with House and Senate later this month, where leaders say they will attempt an override, probably on Oct. 18.

It also sets up another potentially tortuous chapter on the issue for Castor, who has been one of Congress' biggest advocates for expanding children's health insurance.

Castor earlier voted in favor of an initial House version of the same bill that she had helped to push. But she was stung by criticism within her district about the dire consequences of a significant cigar-tax increase contained in that bill to business in her district and state.

Castor responded that she had battled to minimize such an increase in an original House bill, getting colleagues to raise the current 5-cent-a-cigar tax to only 33 percent of the manufacturing costs, with a $1 cap per cigar.

An initial version would have raised the cap to $10, her office noted.

But when the final version of the bill was worked out with the Senate, the cigar tax was instead set at 52.9 percent of the manufacturers' cost per cigar, with a cap of $3 each per cigar.

Reporter Billy House can be reached at (202) 662-7673. Reporter Catherine Dolinski in Tallahassee can be reached (850) 222-8382.

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