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Note: The following contentions are prominent among the arguments used by opponents of the proposal. They do not necessarily represent the views of the Mackinac Center for Public Policy.
Terrible Precedent
If the proposal is adopted, it will send a message to every special interest that would like to corner a steady stream of taxpayer dollars: "You can do so by spending a few hundred thousand for ads that generate a 'yes' vote on a ballot initiative." Given widespread public (and media) ignorance and apathy about state government, emotion-driven modern mass marketing campaigns featuring melodramatic depictions of personal tragedies, and no unified, well-funded opponent equally motivated to make the negative case, the success rate of such adventures could be high indeed.
This means we could expect a steady stream of initiatives that violate the spirit of the Constitution’s provision for making citizens the final arbiter of the laws they live under. The Constitution could become merely an instrument for harnessing the coercive power of the state to transfer wealth from citizens to clever special interests.
Wrong Answer to Health Care Finance Problems
The American health care finance system is in trouble, teetering under the weight of capped rates on federal Medicare for seniors, and state/federal Medicaid for the poor. These government programs do not reimburse health care providers at market rates, so providers must make up the difference elsewhere.
The system is inherently inefficient because it is insulated from market forces, with 80 cents of every health care dollar paid by someone other than the consumer receiving the care. Low co-pays and deductibles are incentives for consumers to use more, rather than limit expenses, shop around, and ask questions. An out-of-control malpractice liability lawsuit epidemic has converted the civil tort system into a jackpot lottery. Political gridlock in Washington, D.C. makes reform a mirage, even as the baby-boom generation approaches the age when their health care costs will implode Medicare. The response of politicians is new trillion-dollar prescription entitlements that only hasten the collapse.
Given all this, it’s no wonder that hospitals are desperate. Even so, this initiative is not the answer to their problems. Hospitals statewide will garner some $80 million a year if the proposal is adopted; other health care providers and researchers will lock in some $130 million. It sounds like a lot, but given a $9 billion-plus state health care budget, and many billions more from private insurance payments, it is a drop in the bucket. And it does nothing to resolve the underlying structural problems challenging hospitals.
Transfers Millions to Unaccountable Special Interest Groups
A “Tobacco-Free Futures Fund, Inc.” would receive some $50 million annually. Around $3 million a year would go to “Healthy Michigan Foundation.” Neither of these would be subject to legislative oversight, and they would be exempt from the Open Meetings Act and Freedom of Information Act (FOIA). The “Tobacco-Free Futures Fund, Inc.” is an assembly of health-related special interest groups with a strong lobbying presence in Lansing. The initiative is silent on the makeup of the corporation’s board or any details about it’s operations. It is also silent on the functions of the “Healthy Michigan Foundation,” an organization which did not even exist until three lobbyists for the proposal’s opponents registered a Michigan corporation under that name, and thereby established a claim on $60 million over the next 20 years! This illustrates just how poorly the initiative is drafted. When reporters asked about the maneuver one of the lobbyists replied, “We will be as accountable as anyone, which means we won't be accountable at all.”
The only oversight is a provision requiring annual reports from recipients of the money to the legislative Auditor General, who in turn would prepare an annual report on where the money is spent. Since the disbursement formula would be written into the Constitution, the only way to discipline a wayward recipient would be another ballot measure. Auditor General Thomas McTavish wrote that the proposal "does not call for any audit procedures or critical analysis to be performed, or for any opinions to be rendered."
Taxpayers – Not Special Interests – Won the Tobacco Settlement
The tobacco lawsuit settlement left it up to the states how to spend the tobacco company money. The lawsuit sought compensation for past health care expenditures by states – that is, by taxpayers. Payment is not contingent on using the money for future state health care expenditures, or for anti-smoking publicity campaigns. Therefore, supporters of the initiative are wrong when they say “it’s only right” to spend the money on smoking prevention, research, and health care programs. That is their opinion, but it’s not the law, and unlike Michigan’s legislature and governor, these special interests were not elected by the people, or accountable to them for how the tobacco money is spent.
The Initiative Torpedoes the College Merit Scholarship Award Program
When the tobacco lawsuit settlement was announced it set off a scramble by politicians and special interests over how to divide the money. Gov. John Engler forestalled the worst of this in Michigan, when he proposed spending part of it on a college and trade school scholarship program in his 1999 State of the State address. This was quickly agreed to by large bipartisan majorities in the legislature (despite the concerns of conservatives suspicious of government tests, and Democrats concerned that poor and inner city students who don’t test as well could be shortchanged). The program pays $2,500 to high school graduates who do well on the Michigan Educational Assessment Program test (MEAP), and lesser amounts for junior high students who do well. Around $100 million a year now goes to students, with another $20 million for administration of the scholarship and the MEAP test programs. These incentives for academic excellence will likely disappear if the proposal is adopted, and thousands of students who had been planning on them will be left out in the cold.
Blows a Hole in the State Budget
Initiative supporters contend that by spending more on anti-smoking programs, tobacco use will decline, causing future health care expenditures by the state to also fall. However, the non-partisan House Fiscal Agency points out the initiative mandates that the proportion of the state budget spent on Medicaid and other health programs in FY 2000-2001 must not be allowed to fall. Any increase in the state budget would require a proportional increase in Medicaid. Also, if federal Medicaid payments decline (as expected), General Fund support would have to rise even more to make up the difference. (The "General Fund" is the portion of state spending that comes from actual state tax revenues, rather than special restricted fund revenue or federal pass-through dollars.) Total Medicaid spending now accounts for more than 25 percent of the General Fund portion of the state budget. Therefore, the agency concludes that Medicaid could absorb more than 30 percent of General Fund expenditures within several years.
The Money Belongs to the People
When all is said and done, this debate should not even take place. Some have called the tobacco settlement "extortion by litigation." That may be extreme, but at the very least it is legislation by litigation, which is not the way a free people govern themselves. If tobacco opponents want a new tax on the companies (that is, on their customers), they should work through the political process, which means Congress and state legislatures. No new tax should ever come through the "back door" of the courts. The proper thing to do with the tobacco settlement money is not take it at all, or at least return it to tobacco customers in the form of reduced excise taxes.
For more arguments against the proposal, visit the website (previously at http://www.protectmiconstitution.com) of “People Protecting Kids and the Constitution,” an umbrella group opposing the initiative.
