Tobacco Documents Online

C VIRGINIA c PREFACE Virginia has a 1986 population of 5.3 million. The state is a mix of urban and rural economies and also has one of the largest ocean ports in the world. There are several sub-regions of the state: The eastern or Tidewater section, the central or Piedmont section, and the western or Mountain section. The area north and west of Fredericksburg is known as Northern Virginia. There are four major metropolitan areas in Virginia: 1. The Virginia counties in the Washington D. C. area - population, 1.3 million. 2. The Richmond area, including independent cities of Petersburg, Hopewell and Colonial Heights - population, 875,000. 3. Norfolk/Virginia Beach/Portsmouth/Chesapeake/Suffolk/ Newport News/Hampton and environs -- population, 1.25 million. 4. Roanoke area - population 250,000. Tobacco is grown in the central, and southern areas of Virginia. The state's market share is 2.8 percent. STATE OVERVIEW Economic Condition and Outlook The economy of Virginia is robust, with strong growth occurring in the manufacturing and service sectors. In addition, a growing number of companies are moving their corporate headquarters to the state. The City of Richmond is headquarters for 14 of the Fortune 1000 companies. Particularly strong growth continues to occur in the Washington Metro area, particularly Fairfax County. The State of Virginia ended the 1984-86 biennium with a budget surplus of $31.6 million. Other available funds and current projected surplus result in approximately $42 million more. The revenue flow to state government is clearly healthy. In the first year of his administration, Governor Gerald L. Baliles convened a Special Session of the General Assembly for the purpose of considering and approving additional highway construction (10-year need estimated at $5 billion) and passing taxes to raise this revenue. A tax package was approved, and takes effect January 1, 1987. The package is expected to raise approximately $400 million per year.

Virginia, page 2 The state expects to receive a windfall of $187 million in state income taxes as a result of federal income tax reform; however, the Governor has indicated a desire to return most or all of this, in some way, to the taxpayers. Political Situation Virginia has a Democratic controlled state legislature, and a Democratic Governor, Lieutenant Governor and Attorney General. The Lieutenant Governor, L. Douglas Wilder, is a black, and the Attorney General, Mary Sue Terry, a woman. Wilder is the highest ranking black elected state official in the country. Virginia's two U.S. Senators are Republicans, while the ten congressional seats are divided evenly between the two parties. The Virginia General Assembly is comprised of 140 members (40 Senators, 100 Delegates) with a 2 to 1 Democratic majority. The House of Delegates has 64 Democrats, 33 Republicans and 2 Independents. The Republicans lost two seats in the House during the 1985 general election. The Senate has 31 Democrats and 9 Republicans, including a Republican elected in a special election in August to fill the seat of the late Senator Edward E. Willey. During the summer of 1986, Edward E. Willey, D.-Richmond, the President Pro Tempore of the Senate, passed away. Senator Willey had served in the Senate since the early 1950s, and was the Chairman of the Senate Finance Committee. He was unquestionably the most powerful member of the General Assembly, and was strongly opposed to state or local tobacco taxes. The new Chairman of the Appropriations Committee is Senator Hunter Andrews, D.-Hampton, who is also the Majority Leader. Neither Andrews nor any other Senator appears likely to wield the power once held by Willey. As a result, the Senate may become less predictable. In addition, Willey's sympathetic views of the tobacco industry are probably not as strongly held by the new Senate leadership, in part due to the lack of a strong tobacco farming or manufacturing presence in Senator Andrews' district. In general, Virginia is a pro-tobacco state. This has been brought about over the years by positive industry campaign and hard work at the grassroots level by industry participants. In addition, the news media in the state is generally more pro-tobacco than in other tobacco-producing states. Significant State Problems The most significant state problems are: a. Local "fiscal stress," which is a term being applied to the C4h11 revenue shortfalls of local governments which arise, according tdo the localities, because of the insufficiency of local tax bases . to raise revenue sufficient to fund programs mandated by the state. Some localities are affected severely, according to a recent legislative study; others are hardly affected at all. C (

( ( C Virginia, page 3 No particular program has been advocated as a solution, but it seems likely that a trend toward delegation of additional taxing powers to municipalities may result. b. The state prison system needs additional facilities. This will require an expenditure in excess of $150 million. Possible sources of funds for the State are: a. The income tax windfall, estimated at $187 million, which will accrue to the state, as a result of federal income tax reform. The Governor has indicated that this money will be returned; however, Republicans are attempting to turn this into a partisan issue. b. A state-operated lottery, which was actively promoted by a number of influential members of both Houses during the 1986 Special Session. Estimates of net revenues from a lottery range from $70 to $300 million. The question could go to voters in the form of a referendum. In addition, tort reform will be considered by the 1987 General Assembly. A legislative subcommittee studying the issue has approved proposed legislation which includes caps on non-economic damages, sanctions for frivolous claims, changes to the exemptions from jury service, structured payments for certain judgments, and other elements. RESOURCES: STRENGTHS AND WEAKNESSES Tobacco Segments Virginia is the second largest cigarette manufacturing state and ranks fourth in the growing of all types of tobacco. Two major cigarette manufacturers are represented with facilities in the state. Philip Morris U.S.A. is headquartered in Richmond. American Tobacco Company is in the process of moving administrative headquarters from New York City to Richmond. In both instances, the corporate headquarters of these companies are located in the New York City area. The tobacco grower segment of the Virginia economy is relatively large and has been extremely helpful in prior years in combating anti-tobacco legislation. The wholesale segment of the industry is very active in the state with strong associations at the wholesaler and vendor level. In each instance the association maintains a full-time state lobbyist and works closely with the Institute.

Virginia. page 4 Business Virginia, like most southern states, is very business oriented and is also a right-to-work state. The Virginia General Assembly is very cognizant of business problems and sympathetic to legislation that fosters support of business. The Virginia Chamber of Commerce, the Virginia Manufacturers Association and other business groups have been helpful to the tobacco industry in combating anti-tobacco legislation and sentiment. Labor Organized labor has comparatively little political influence in the state, although unionization of companies continues to grow. Since Virginia is a right-to-work state there are many facilities with an open shop operation. Fire Groups There are several fire groups in the state, but there seems to be little enthusiasm or current need for any strong alliances at this time. Institute Resources The major T. I. resources in the state are tobacco growers and allied farm groups, employees of cigarette and other tobacco manufacturers, and the wholesale and retail element. In addition, there are a number of leaf tobacco companies headquartered in Virginia that provide help when needed in key political situations. There are a number of supplier companies headquartered in the state, all with Virginia operations that, when called upon, are helpful in combating anti-tobacco legislation at the state and local level. ANTI-TOBACCO FORCES Anti-tobacco activity in Virginia is negligible except at the p local level in the northern Virginia counties of Fairfax and ~ Arlington; there is currently restriction activity in the City of Q Winchester. There is little if any anti-tobacco activity in the ,~ Virginia General Assembly. Primary anti-tobacco groups in the Ati state are the Virginia affiliates of the Lung, Cancer and Heart ~ Associations. (

( Virginia, page 5 TOBACCO INDUSTRY Brief History of Successes and Problems Traditionally, there have been more problems with cigarette taxes than restrictive smoking legislation. One of our major problems is the ability of cities and certain counties to tax cigarettes. This ability arises through general taxing power conferred by charters to cities and towns. A 1985 law gave counties the ability to request charter legislation, which, from a tobacco tax standpoint, gives them precisely the same powers as cities and towns. This situation, coupled with'a growing legislative perception that past distinctions between cities and counties are no longer valid, is likely to create future problems. At the state level, there are occasional efforts to increase the state cigarette tax (at 2.5 cents currently the second lowest in the country) as well as to enact legislation enabling counties to tax cigarettes, separate and apart from the county charter phenomenon. Doubling the state tax was proposed, but not seriously considered in the 1986 special session on transportation funding. During recent sessions, restrictive smoking bills have been introduced, usually aimed at state office buildings. In 1983, a bill was introduced to require a "self-extinguishing" cigarette, but it was soundly defeated in committee. Major Issues - State and Local The major tobacco legislative issue in the Virginia General Assembly will continue to be taxes, although restrictive smoking legislation will become more popular as public sentiment for this type law increases across the country. The primary thrust of local tobacco legislation will also continue to be cigarette taxes, although legislation to restrict smoking in areas such as municipal buildings, restaurants, etc., will undoubtedly be seen also. Local taxation of cigarettes in Virginia localities often greatly exceeds the state tax of 2.5 cents per package. With the spread of county charters, care must be taken to avoid a backdoor increase in tobacco taxes. The first county charter bill passed by the General Assembly provides some precedent for this, as it was amended to include a provision prohibiting tobacco taxes (Roanoke County, 1986 General Assembly). Outlook The two challenges facing the industry in Virginia will be holding the line on cigarette taxes, both state and local, and ensuring that public smoking bills are not enacted. December 1986

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C WASHINGTON PREFACE Washington state is the focal point of the northwest economy. With a population just over 4.3 million, the Evergreen State has the most diverse economy, the most fluid population and the least predictable politics of the Northwest states. Washington's market share is 1.5 per cent. STATE OVERVIEW Economic Condition and Outlook Washington's economy is still in a state of transition from agriculture and aerospace to a more balanced economy, which now includes computer technology, foreign trade and expanding tourism. Because of the growth of these new industries, the state's population is undergoing change from a traditionally blue collar population to one of more diversity with an increasing percentage of highly educated and trained employees. As examples, the state will soon be the location of three new foreign-owned electronic businesses, will be the headquarters of the largest domestic producer of computer software, is at the forefront of the nation's nuclear industry, and is improving its position as a gateway to Pacific Rim trade. On the other hand, the state's agricultural economy continues to suffer with the timber industry in deep doldrums and farming and ranching suffering the same problems as the.rest of the nation's farmers. This rather schizophrenic economy and the fact that Washington is one of the few states without an income tax, make the state's fiscal picture extremely difficult to forecast, and revenue receipts subject to intensive cyclical changes." Political Overview As there was no gubernatorial election in 1986, the most important activity took place in the legislative elections. In the state House of Representatives, there will be 61 Democrats and 36 Republicans in the 1987 legislative session. This compares to 53 Democrats and 45 Republicans in the 1986 session. One seat in District 6-Spokane, is still undecided. In the Washington state Senate, there will be 25 Democrats and 23 ~ Republicans. District 15-Yakima, is still undecided. - -

Washington, page 2 In the U.S. Senate and Congressional elections, former Carter administration official Brock Adams, a Democrat, defeated incumbent Republican Senator Slade Gorton. All other Congressional incumbents were reelected. Significant State Problems The state's revenue picture is uncertain. To avoid the cycles of funding the state has faced in the past, the Governor has recommended an increase in revenue sources. Also of concern to the state's residents is the water quality in Puget Sound and several eastern Washington aquifers. In addition, state employees have not received a raise in several years and feel the Governor promised them one for 1986. A five percent state employee raise would cost approximately $105 million. Other costly issues being discussed are a state-funded basic health care plan, low income housing and school funding. RESOURCES: STRENGTHS AND WEAKNESSES Tobacco Segments Washington has no tobacco farmers, a declining wholesaler membership, only a small number of vendors and relatively few tobacco company employees. Of those within the traditional tobacco family, the wholesale distributors and the vendors have been increasingly effective in their efforts. Member company personnel have been helpful in the past and continue to improve the quality of their political efforts. Business Washington's one major business organization, the Association of Washington Business, has been ambivalent to our issues in the past. Recently, however, we've begun to receive more interest from them, particularly on the issue of workplace restrictions and cigarette taxes. We have enjoyed excellent cooperation from the Restaurant Association of the State of Washington (RASW), the Washington Lodging Association, some segments of convenience store associations and limited assistance from the Washington Food Dealers Association. Labor Organized labor has been a difficult coalition to build, largely due to a very entrenched labor leadership. Changes are beginning to take place in the labor movement in Washington. f < e

C C . employees). Washington, page 3 We have recently received excellent cooperation from the Bakery, Confectionary and Tobacco Workers Local in Tacoma (there are three other BC&T locals in the state that have not yet "come aboard"), and from the Technical Engineers in Seattle (city We have heard some grumbles about the tobacco industry being "anti-union." However, we appear to be making inroads on the blue collar employees with workplace restriction and tax issues. Additionally, new inroads with labor have been initiated due to recent action by the City of Seattle with regard to city smoking regulations and changes in working conditions. These actions were supplemented by the filing of an Unfair Labor Practices complaint by the city's largest labor union. ANTI-TOBACCO FORCES The major anti-tobacco organization in Washington is Fresh Air for Non-Smokers (FANS). This group has grown, with the assistance of local lung associations, to five chapters throughout the state. It is an extremely vocal group which is becoming increasingly effective at creating an image of a large, populist organization. FANS is also learning from past defeats, and becoming more effective politically. FANS has several officials on its-local boards of directors. TOBACCO INDUSTRY Brief History Since 1975, Washington has had smoking restrictions in the form of Board of Health regulations in the Washington Administrative Code. Last year the legislature passed the Washington Clean Indoor Air Act. The net effect of this act codified the existing regulations, relaxed to requirements that applied to restaurants and imposed penalties for violations. Traditionally, cigarette excise taxes have been relatively high, compared to neighbor states. Outlook: Major Issues - State and Local The tobacco industry was hit hard during the last•session of the Washington legislature. An 8-cent tax increase, earmarked for pollution clean up of Puget Sound, was passed by the legislature. The industry faces more problems during the next session, not the least of which is the workplace smoking issue on the state level, and several local smoking restrictions in Seattle and surrounding King County. Several anti-industry groups have announced plans to introduce workplace smoking legislation on a city-by-city basis in order to "hog tie" the tobacco industry.

Washington, page 4 ` Recently, a measure to regulate smoking in the workplace in the City of Seattle was passed by the Seattle City Council. This measure was met with a protest and the subsequent filing of an Unfair Labor Practices complaint by the Seattle labor community. Additionally, a similar measure of comparable scope was approved in the King County Council. It is expected that 1987 will be an extremely busy year in the state legislature with regard to smoking restrictions and other anti-industry measures. December 1986 C C