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Colorado Health Programs Affected By Cigarette Tax Declines

Ruzanna Harutyunyan's picture

A decline in smoking rates in Colorado has led to a decline in cigarette tax revenue that is used in part to fund state health insurance programs, the Denver Rocky Mountain News reports. In 2004, the state increased the cigarette tax by 64 cents per pack with the goal of using the revenue for health care and tobacco education.

The tax generated $169.6 million in the first year, but revenue has fallen for two straight years and budget forecasts show the revenue is expected to decline to $135.5 million in fiscal year 2012 -- a 20% drop before accounting for inflation. The purchase of cigarettes across state lines, over the Internet and on the black market also is contributing to lower cigarette tax revenue.

State legislators say that they anticipated the decline in revenues and that most of the new money was allocated in yearly grants that can be reduced without much impact. However, 46% of the cigarette tax revenue is used to expand enrollment in public health insurance programs, such as Medicaid and SCHIP. State Sen. Betty Boyd (D) said, "That's a problem if the funds aren't there, because you can't provide services if you don't have money. In the end, if we lose enough money, less kids will get services." She added, "If the money falls off, that's good news and bad news. And I think we celebrate the good news and hope that a dropoff in smoking reduces the cost of health care."

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Smoking rates in the state have declined in two of the past three years and smoking rates among teenagers already are below the 2010 goal set by a national coalition of health care professionals.

The state Department of Health Care Policy and Financing, which oversees Medicaid and SCHIP, currently has a reserve of $91.4 million but expects it will be completely depleted by July 2012 if it continues to provide services at the current level. The law also specifies percentages of revenue that must go toward programs such as public health insurance, community clinics and anti-smoking programs, which prevent the state from cutting smoking cessation program grants while keeping the same amount of money in place for Medicaid and SCHIP as revenue declines, according to the Rocky Mountain News.

Sen. John Morse (D-Colo.) said the state could reduce the income eligibility level to reduce costs but that would reverse years of expanding eligibility (Sealover, Denver Rocky Mountain News, 12/3).

Reprinted with permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign up for email delivery at kaisernetwork.org/email . The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation. © 2007 Advisory Board Company and Kaiser Family Foundation. All rights reserved.