Arizona Healthy Children, Healthy Families Fund, Proposition 200 (2000)

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Arizona Proposition 200, also known as the Relating to Use of Tobacco Litigation Monies for Certain Healthcare Programs Act, was on the November 7, 2000 election ballot in Arizona as an initiated state statute. It was approved.[1]

Election results

Tobacco Settlement for Healthcare Programs
Approveda Yes 837,557 58.1%
Election results from Arizona Elections Department.


In 2000, when Proposition 200 was approved, approximately 500,000 state residents were on AHCCCS. In December 2009 approximately 1.37 million residents were on AHCCCS, a 214,000 increase since December 2008.

In December 2009, Senate approval of a federal health reform, Gov. Jan Brewer said the plan could "bankrupt the state." The plan, she said, will mandate increased spending on AHCCCS. However, because the state of Arizona currently offers expanded AHCCCS/Medicaid coverage, the state will not receive certain reimbursements allotted to other states. Voters, she said, need to vote on a new funding source.[2]

Text of measure

The Summary from Arizona Legislative Council:

In 1998, the attorneys general of 46 states, including Arizona, agreed to settle a lawsuit they had filed against the manufacturers of tobacco products. As a result, the tobacco manufacturers must pay each of those states a portion of the estimated $206 billion settlement each year over the next 25 years. Arizona's share is estimated to total approximately $3.2 billion. The payments are subject to annual adjustments for inflation. The settlement includes a provision to reduce payments if the volume of cigarettes sold in the United States falls. The settlement agreement allows each state to determine how it will spend its share of the settlement.

Proposition 200 would require Arizona to deposit all of the money it receives over the next 25 years from the settlement agreement in a "Healthy Children, Healthy Families Fund."Proposition 200 will prohibit Arizona's counties from suing the tobacco companies to recover tax monies expended by the counties for indigent health care expenses from tobacco-related illnesses. It would also require the counties to turn over to the Healthy Children Healthy Families Fund any sums they recovered from tobacco settlement monies. The fund would also include 70% of the money that is collected by current Arizona tobacco tax revenues. In so doing, Proposition 200 will divert existing tax revenues generated from the tobacco tax without an offsetting reduction in mandated programs previously funded by such taxes. The proposition would also require an annual general fund appropriation of $28 million to fund four programs currently funded by current Arizona tobacco tax revenues. This may result in a need for additional taxes or other revenue sources. All of this money would be distributed as follows:

1. Twenty-one percent in the "Smart Beginnings Prevention Account," which could not exceed $35 million in any one fiscal year. The proposition would establish an appointed "Smart Beginnings Commission" to administer the account. The commission would use account money to fund and provide program administration for family support services.

2. Three and one-half percent in the "Invest in Prevention Account," which could not exceed $5 million in any one fiscal year. The Department of Health Services would administer the account and would use money in the account only for the prevention and early detection of cancer, cardiovascular and pulmonary disease and strokes.

3. Three hundred fifty thousand dollars each fiscal year in the "Oversight and Enforcement Account," which the Attorney General would use to enforce the master settlement agreement and this proposition.

4. Three hundred fifty thousand dollars each fiscal year in the "Auditor General Account," which the Auditor General would use to conduct annual financial audits of the use of money distributed from the Healthy Children, Healthy Families Fund.

Any money that remained in the Healthy Children, Healthy Families Fund would be transferred to the "Healthcare Coverage Account" for distribution as follows:

1. Thirty-four percent in each of the first two fiscal years and 50% thereafter in the "Children's Health Insurance and Working Uninsured Subaccount." The state treasurer would also deposit in this subaccount any money that remains in the Healthcare Coverage Account at the end of each fiscal year after all required distributions are made. The Arizona Healthcare Cost Containment System Administration (AHCCCS) would use subaccount money to ensure that the maximum number of eligible children are served in the Children's Health Insurance Program, to pay for certain organ transplants, to provide HIV/AIDS medication and for outreach programs. The proposition amends the AHCCCS statutes to provide for expanded coverage and the AHCCCS administrator could use monies in the subaccount to cover these additional administrative and program costs.

2. Fifteen percent in the "Annual Health Subaccount," which could not exceed $20.5 million in any one fiscal year. The Legislature could appropriate money in this subaccount to fund health care, including behavioral health care for persons who could not otherwise afford or obtain services. The Legislature could also appropriate money in the fund for "innovative health care programs."

3. Nine percent in the "Primary Care and Community Health Centers Subaccount," which could not exceed $11million in any one fiscal year. The Legislature could appropriate money in this subaccount to fund primary care and community health center services.

4. Nine percent in the "Behavioral Health Subaccount," which could not exceed $11 million in any one fiscal year. The Department of Health Services would administer this subaccount and would use 75% of the money in the subaccount to provide prescription medications to persons with a serious mental illness. The Department would use the remaining money to provide crisis stabilization and residential treatment services to children who have serious psychiatric impairments.

5. Three percent in the "Older Arizonans Subaccount," which could not exceed $3.5 million in any one fiscal year. AHCCCS would use 85% of this money to provide care to older persons who are suffering from chronic diseases and whose social security coverage is otherwise insufficient. The Department of Economic Security would use the remaining 15% to fund nonmedical home and community-based care programs for the elderly.

6. A total of $75 million in the "Mental Health Facilities and Services Subaccount."The state would use this money to construct and renovate mental health facilities and to provide mental health services. Any money that remained in this subaccount at the end of four fiscal years would be returned to the Healthy Children, Healthy Families Fund.

7. A total of $30 million in the "State Medical Laboratory Subaccount." The state would use this money to build a state medical laboratory. Any money that remained in this subaccount at the end of three fiscal years would be returned to the Healthy Children, Healthy Families Fund.

8. An amount sufficient to ensure that the "Health Crisis Fund" would maintain a balance of $1million. This fund was enacted into law by the Legislature in 1997 to deal with any potential health crisis and consists of money raised from Arizona's tax on tobacco products.

This proposition would also:

1. Repeal and reenact, word-for-word, the statute that established the current tobacco taxes. By doing this future legislatures would be prevented by the Arizona Constitution from making any substantial changes to the taxes that are collected from tobacco products in this state.

2. Amend Arizona's current Children's Health Insurance Program (Kidscare) to ensure that benefits under that program are identical to the health benefits Arizona now provides to AHCCCS children. Under current law, children are provided the state employee health benefits package. This would increase vision coverage, behavioral health care and nonemergency transportation services to Kidscare enrollees.

3. Require the Legislature to fund four existing AHCCCS programs totalling approximately $28 million annually from the state general fund. Three of these existing programs provides for hospital reimbursement.

4. Prohibit this state from reducing the level of AHCCCS services that it has provided since November 1, 1999 to certain AHCCCS enrollees until at least July 1, 2003.

5. Exempt the newly-created Smart Beginnings Commission from competitive bidding and other legal restrictions under the Arizona Procurement Code.

6. Create the Smart Beginnings Commission, as appointed by the Governor, without requiring confirmation by the Senate and with the members serving at the pleasure of the Governor alone.

Section 24 of the proposition incorporates the tobacco product manufacturers escrow accounts model statute. The settlement agreement with the tobacco manufacturers requires each participating state to enact this model legislation to prevent any tobacco manufacturer that did not participate in the settlement agreement from thereby obtaining an unfair pricing advantage over its competitors. After the filing of this proposition, the model statute was enacted into law.

Proposition 200 includes a provision that attempts to prevent other statutes, initiatives or referendums from using tobacco litigation settlement money in any way that conflicts with this proposition.

Fiscal Impact Summary:

Proposition 200 allocates revenues received by the state from the tax on tobacco products and the monies received from tobacco companies as part of a lawsuit settlement to various health care and family support programs. As part of the tobacco company settlement, the state is expected to receive between $92 million and $109 million annually through 2006. By 2025, the state is expected to have received $3.2 billion in total tobacco settlement revenues. In addition, the Proposition reallocates $108.1 million of existing revenues received from the state tobacco tax in the fiscal year ending June 30, 2002. When tobacco tax and tobacco settlement revenues are combined, it results in approximately $200 million to $216 million per year in funding for health care and family support programs starting in 2002.

In addition to allocating the tobacco tax and tobacco settlement revenues, Proposition 200 specifies that certain health care expenses currently funded by tobacco tax revenue are to be funded by the state's general revenue source. Therefore, Proposition 200 will result in an annual cost to the state of $28.0 million from its general revenues starting in 2002. Proposition 200 also requires that another state funding source be identified for a previous appropriation of $8 million made from tobacco settlement monies.[3] [4]

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