The mere mention opens up a debate about whether federal funds were necessary to ensure our nation’s economic recovery. But are these funds having a direct effect on retailers’ tobacco business on a local level?
Perhaps. The American Recovery and Reinvestment Act of 2009 allotted $650 million to carry out clinical and community-based prevention and wellness strategies. The U.S. Department of Health and Human Services enlisted the Centers for Disease Control and Prevention(CDC) to allocate these funds through an initiative known as Communities Putting Prevention to Work (CPPW).
“Communities Putting Prevention to Work was a two-year funding project that began in 2010 to address obesity and tobacco,” says Karen Hunter, CDC senior press officer.
The National Organization of Tobacco Outlets (NATO) reports that the CDC granted $142.8 million in tobacco-related grants to 19 cities and counties in 2010 alone. The CPPW evolved into the Community Transformation Grant (CTG)—apiece of President Obama’s health-care legislation, the Affordable Care Act. Between CPPW and CTG, NATO estimates these dollars will fund an additional $315 million to $450 million in tobacco related grants from 2011 to 2015.
Put another way, these funds are incenting communities across the country to adopt further restrictions on the sale and merchandising of tobacco products.
“The grant funds have been used to propose a variety of different local ordinance restrictions,” says NATO’s executive director Thomas Briant, “including graphic health warning posters at registers, cigar package size restrictions, restriction son coupon redemption and a ban on the sale of certain flavored tobacco products.”
From a health perspective, one might approve the federal government’s incentive program as a vehicle of reducing healthcare costs. There’s one problem, though: The use of federal funds to enact tobacco regulations is against federal law.
Not surprisingly, the CDC and communities that have enacted regulations emphatically deny that CPPW funds were used to support such efforts. Yet trade organizations aren’t alone in questioning the use of CPPW dollars: The inspector general and U.S. House Energy and Commerce Committee have also expressed concerns.
Read on to learn how various local governments could be abusing this seemingly well-intentioned program, whether or not such efforts are truly reducing tobacco use and why it’s crucial for retailers to get involved in such hot-button issues.
‘He Said, She Said’ Debate
In 2012, NATO observed an increase in the number and type of tobacco-related ordinances being considered at the local level and began to monitor the situation.
Its conclusion? “The CPPW and CTG grant programs have resulted in more local units of governments considering tobacco-related ordinances as NATO monitored and responded to more than 50 local tobacco ordinances in 2012,” Briant says, and he expects the trend to continue.“The number of local ordinances that NATO will monitor in 2013 will exceed the more than 50 ordinances in 2012.”
Jim Calvin, president of the New York Association of Convenience Stores(NYACS), agrees with NATO’s assessment, calling out the cities of New York and Haverstraw, N.Y., specifically.“Here in New York, and presumably in other states, hyperactive anti-tobacco groups infused with federal stimulus dollars are hounding cities, villages and counties to force retailers to conceal tobacco products and reduce or eliminate tobacco signage,” he says of New York’s graphic health warning POS requirement and Haverstraw’s proposed tobacco display ban. (Both have failed to be enacted.)“Some elected bodies are acquiescing, either because they accept the propagandas gospel or because they just tire of the relentless badgering.”
Asked about these claims, the CDC flatly rejects any federal financial connection with Haverstraw or other local proposals. “There was no tobacco-related legislation enacted through CPPW funds,” says Hunter. “The CPPW grants were designed to support environmental changes that address obesity and tobacco use. However, CDC awardees were prohibited from using federal funds for lobbying activities and CPPW funds could not be used to enact legislation.”
There’s good reason for such denials: Use of Congressional funds in an attempt to enact tobacco regulations is illegal. U.S. Code Title 18, Section 1913 states that “no part of the money appropriated by any enactment of Congress shall ... be used directly or indirectly to pay ... to influence in any manner a member of Congress, a jurisdiction, or an official of any government, to favor, adopt, or oppose, by vote or otherwise, any legislation, law, ratification, policy, or appropriation …”
But it’s not just retail organizations questioning whether certain CPPW and CTG grants were used to do just that. Government officials also are suspicious.
On June 29, 2012, the U.S. Inspector General issued an “Early Alert” letter to the CDC’s director, asserting that quarterly grant reports filed by cities and organizations “may reflect inappropriate lobbying activities using CPPW grant funds.”
The letter proceeded to state that CDC-provided information “appear to authorize, or even encourage grantees to use grant funds for impermissible lobbying. Furthermore, grantee activity reports posted online make troubling assertions that, on their face, raise the possibility that… anti-lobbying provisions were violated.”
As an example of stimulus funds potentially going toward lobbying efforts, the inspector general pointed to a graphic warning-sign ordinance proposed by the Philadelphia Board of Health, which was awarded a $10.4 million CPPW grant in 2010. The Philadelphia CPPW Recovery Act Summary reported that the grant would be used in part to “explore new regulations that affect the size, number and placement of tobacco ads in stores and that mandate in-store ads that discourage tobacco use at the point of purchase.”
In other words, the CDC’s own documents acknowledge that CPPW funds were granted to a community intending to use the money for legislative purposes.
Philadelphia was also cited in an August 2012 letter sent by the U.S. House Energy and Commerce Committee to the U.S. Department of Health and Human Services on potential violations of CPPW funds. The letter cited several cases in which CPPW recipients might have used grant dollars toward enacting legislation(including the Philadelphia Department of Public Health’s attempt to raise the cigarette excise tax rate). As such, the Energy and Commerce Committee has requested documentation on all CPPW grants to determine if federal grant funds were improperly used for lobbying local and state government officials.
“This use of federal funds in such a manner is illegal under federal law,” Briant says. “We will need to wait for the outcome of the investigation being pursued by the U.S. House Energy and Commerce Committee to learn how this improper use of federal funds will be corrected and future improper use of taxpayer dollars prevented.”
A Question of Effectiveness
While questions circulate as to whether CPPW funds were inappropriately doled out, another fundamental question has surfaced—that is, whether CPPW funds are being effectively used to truly improve public health.“In addition to the serious legal and compliance issues ultimately raised about the CPPW program, we have serious concerns about the integrity and effectiveness of spending in the program,” reads the U.S. House Energy and Commerce Committee letter. “The Committee supports the need for preventative initiatives designed to improve health outcomes and reduce chronic disease. However, the lack of attention by HHS officials to grant management may have had the effect of diverting billions in federal funds from initiatives that actually improve public health.”
Take the Philadelphia Board of Health’s decision to pursue a graphic health-warning sign ordinance. Regardless of whether the inspector general finds that the CPPW aided the organization’s lobbying efforts or if the funds came from elsewhere, the Board of Health chose to move forward with the ordinance despite the fact that a nearly identical proposal was found unconstitutional in New York. NATO not only wrote a letter to the Philadelphia Board of Health about the issue, but NATO president Andrew Kerstein also provided testimony to the same effect Sept. 8, 2011.
“It is NATO’s position that taxpayer dollars are being misused and wasted when a local board of health considers an ordinance that federal law, federal court decisions and U.S. Constitutional protections would strike down,” he said.“Government officials have a fiduciary duty to citizens to spend taxpayer dollars prudently, but to consider and adopt an ordinance that clearly violates federal law and is unconstitutional on its face is a breach of that very duty.”
Of course, many cities and counties looking to pass tobacco regulations consult past rulings and scientific research. Such was the case when Providence, R.I., passed ordinances to ban flavored tobacco products and product coupons. (Peter Asen, director of the city’s Healthy Communities Office, says CPPW grants were not used to help pass these regulations.)
“Studies have shown that 17-year-old smokers are three times more likely to use flavored tobacco products than are smokers 25 and older,” says Asen, referring to a Nicotine Tobacco Research study published in 2008. “Other research has shown that young smokers are particularly price sensitive, which is why we also believe the pricing ordinance will reduce youth consumption. Our hope is that our youth use rates will decline as a result.”
Research might support flavor and coupon bans; however, the Constitution may not, at least concerning coupons. Because coupons are considered a form of advertising, the First Amendment could provide some protection to the use of coupons, which is part of the basis of an appeal filed by NATO, the Cigar Association of America Inc. and several manufacturers.
Despite legal questions concerning the Providence ordinances, the city of Haverhill, Mass., opted to move forward with a similar coupon ban last summer.
Anne Flint, senior category manager for tobacco for Framingham, Mass.-based Cumberland Farms, attended a June 26 meeting of the Haverhill Board of Health to discuss the issue. While health advocates were allowed to testify in support of the ordinances, Flint and other retailers were not afforded the same opportunity.
“We wanted to tell the board members that NATO and other plaintiffs had a pending lawsuit against the City of Providence, R.I., and that the board should put the coupon ban on hold until the Providence lawsuit was resolved,” she says. “And we did not want the Haverhill Board of Health adopting a regulation that might violate the constitution. However, the board voted to keep the coupon ban language in the ordinance.”
In a victory for tobacco retailers, Haverhill did listen to retailers’ concerns about a potential ban on the sale of single cigars under $2.50 and the sale of cigars in packages of less than four. Flint recalls how Bob Sanft, category manager for North Grosvenordale, Conn.-based Xtra Mart, pointed out the hypocrisy of enacting such legislation in the name of public health.
“Bob brought up the question of, ‘Why are you forcing people to buy four or more cigars?’ ” Flint says. “You’re forcing them into smoking more. If you force someone to buy a carton of cigarettes rather than a pack of cigarettes, they’re going to smoke more cigarettes. It’s the same with cigars.”
And though Haverhill ultimately removed the limits on single and package cigar sales, the city still spent a good deal of time attempting to enact legislation that might have inadvertently caused cigar consumption to increase.
Retailers Unite
In response to the influx of local tobacco ordinances (both those suspected of using stimulus funds and those who are not), NATO has launched the NATOLocal Project to monitor such activity. When it’s appropriate, NATO encourages area retailers to contact local government officials in an effort to educate them on the effect such regulations would have on their business. “These various ordinances would and are having a major impact on retailers,” Briant says.
It’s an impact retailers in Providence are feeling now that the flavor and couponing ban has taken effect. “Even though the Providence lawsuit is now on appeal,” says Flint of Cumberland Farms, “there is no injunction against the city’s ban on the sale of certain flavored tobacco products, the prohibition against accepting tobacco product coupons for free products or that would bring the price below the list price, or the ban on selling promotionally priced tobacco products like buy-one-get-one-free items.”
Because retailers outside of Providence are still able to sell flavored tobacco products and offer coupons, it’s not an overreach to suggest these bans will have a negative effect on Flint and other retailers ‘tobacco business without the intended effect of curbing tobacco consumption. After all, with Rhode Island the smallest U.S. state, it’s not difficult for smokers to drive to another part of the state to find flavored or discounted tobacco products.
“The important thing is to get involved,” says Flint. “A lot of people don’t like what’s happening, but they won’t get out and say anything.”
Retail efforts are even more important in preventing such legislation, because often little notice is given when municipalities are looking to enact tobacco-related ordinances. Often a hearing is announced less than a day before it’s set to occur—leaving industry groups scrambling to find retailers who are willing and able to attend.
“It is very important for retailers to become involved on these issues because prohibitions on the sale of flavored products, or minimum cigar package sizes, or a ban on redeeming tobacco product coupons will all result in lower sales of legal tobacco products,” Briant says. “This, in turn, can put a retailer’s profitability and employee jobs security at risk.”
And it’s not just local retailers who need to take note. Even if another retailer’s nearest store is hundreds of miles from Providence, the city’s flavor ban could ultimately affect that business. Brian believes that if the ban is upheld, it will set the standard for other cities to do the same; likewise, if the ban is overturned, it could deter flavor bans elsewhere.
“It’s just so essential for retailers to get involved to stop that first domino from falling,” Flint says, “because once one town or city adopts a regulation, the anti-tobacco advocates move on to the next town.”
Local Ordinance Updates
Multiple local tobacco regulations were brought up in this article that may have been funded by stimulus dollars. Here’s where they stand, according to NATO:
- Providence, R.I.’s flavored tobacco and tobacco product coupon ban: The federal district court ruling upholding both ordinances that restrict tobacco product coupon redemption and prohibit the sale of certain flavored tobacco products has been appealed by NATO and the other plaintiffs to the U.S. Circuit Court of Appeals for the First Circuit. NATO is waiting for a hearing date for an oral argument on the case from the First Circuit appeals court.
- Philadelphia’s graphic health warning signs and cigarette excise tax: After the Philadelphia Board of Health tabled further consideration of requiring graphic health warning signs be placed in stores that sell tobacco products, no further action has been taken on the proposal.
- Haverhill, Mass.’ cigar package size restrictions and tobacco product coupon ban: NATO mobilized association retail members with stores located in Haverhill and these retailers testified at a September 2012 board of health hearing. As a result of NATO comments and the involvement of NAT retailers by testifying, the Haverhill Board of Health deleted the cigar package size restriction from the ordinance. The coupon redemption ban was adopted.
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