COMPTON, Calif. -- California voters eked out a win for children more than two decades ago based on a "sin tax." Proposition 10 slapped cigarettes with a hefty surcharge to pressure smokers to give up their habit and used the money to improve the health and well-being of young children and their families.
When the measure passed in 1998, about 1.5 billion packs of cigarettes were sold and taxed annually in California. By 2022, sales were down to fewer than 550 million packs.
The downside is the inherent paradox baked into the financing of the measure. The less people smoked over time, the less money was available for early childhood programs.
As Proposition 10 approaches its 25th anniversary in November, the "First 5" public agencies it created — named for the first five years of life — have hit a critical juncture as the decline in funding accelerates. A recent voter-approved ban on the sale of flavored tobacco, including menthol cigarettes, is projected to lead to a 20% decline in First 5's tobacco tax revenue by June 2024.
The well-known agencies that have collected more than $11 billion from smokers — for preschools, homeless family housing, pediatric dental and mental health services and key infant-mother home visiting programs, among others — are confronting an existential crisis. How do they remake themselves amid shrinking revenue, and what programs will they preserve with the money they have left?
"It seemed like a brilliant solution — tax the sinners who are smoking to help newborns and their parents. It was great," said Deborah Daro, a senior research fellow at Chapin Hall at the University of Chicago and a First 5 Los Angeles consultant. "But then people stopped smoking, which from a public health perspective is great, but from a funding perspective for First 5 — they don't have another funding stream."
First 5's tobacco tax funding peaked in 1999 — the first year of the program — at around $690 million, according to the First 5 Assn. of California, which represents the county groups. It hit a low of $388 million in the 2021-22 budget year despite being propped up by additional revenue, including a new tax on vaping products.
Proposition 10 called for 20% of revenue from the tobacco tax to go to a statewide agency focused on public outreach, research and statewide initiatives. The other 80% is divided among agencies serving the state's 58 counties, based on birthrate, with First 5 Los Angeles getting the largest share, almost a quarter.
"The emergency is now," said Avo Makdessian, executive director of the First 5 Assn. Without First 5, "I'm afraid California will lose its focus on our youngest residents."
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