BILL REQ. #:  S-5315.2 

READ FIRST TIME 03/06/10.   

     AN ACT Relating to providing funding for the basic health plan by increasing the taxes on cigarettes and facilitating the funding within the state expenditure limit; amending RCW 82.24.020, 82.24.026, and 43.135.035; adding a new section to chapter 82.24 RCW; adding a new section to chapter 70.47 RCW; repealing RCW 82.24.027 and 82.24.028; making an appropriation; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 82.24.020 and 2009 c 479 s 66 are each amended to read as follows:
     (1) There is levied and ((there shall be)) collected as provided in this chapter, a tax upon the sale, use, consumption, handling, possession, or distribution of all cigarettes, in an amount equal to ((one and fifteen one-hundredths)) 12.125 cents per cigarette. All revenues collected from the tax in this section must be deposited into the state general fund.
     (2) ((An additional tax is imposed upon the sale, use, consumption, handling, possession, or distribution of all cigarettes, in an amount equal to five hundred twenty-five one-thousandths of a cent per cigarette. All revenues collected during any month from this additional tax shall be deposited in the state general fund by the twenty-fifth day of the following month.
     (3) An additional tax is imposed upon the sale, use, consumption, handling, possession, or distribution of all cigarettes, in an amount equal to two and five one-hundredths cents per cigarette. All revenues collected during any month from this additional tax shall be deposited in the state general fund by the twenty-fifth day of the following month.
     (4))) An additional tax is imposed upon the sale, use, consumption, handling, possession, or distribution of all cigarettes at no cost, or reduced cost where such offer is conditioned on the purchase of one or more tobacco products in an amount equal to 9.125 cents per cigarette. This applies to offers of "buy-one-get-one-free," "two for one," "fifty percent off the purchase of two," and offers that are substantially similar. Revenues collected from the tax in this subsection must be deposited into the general fund.
     (3) Wholesalers subject to the payment of this tax may, if they wish, absorb five one-hundredths cents per cigarette of the tax and not pass it on to purchasers without being in violation of this section or any other act relating to the sale or taxation of cigarettes.
     (((5))) (4) For purposes of this chapter, "possession" ((shall)) means both (a) physical possession by the purchaser and, (b) when cigarettes are being transported to or held for the purchaser or his or her designee by a person other than the purchaser, constructive possession by the purchaser or his or her designee, which constructive possession ((shall be)) is deemed to occur at the location of the cigarettes being so transported or held.
     (((6))) (5) In accordance with federal law and rules prescribed by the department, an enrolled member of a federally recognized Indian tribe may purchase cigarettes from an Indian tribal organization under the jurisdiction of the member's tribe for the member's own use exempt from the applicable taxes imposed by this chapter. Except as provided in subsection (((7))) (6) of this section, any person, who purchases cigarettes from an Indian tribal organization and who is not an enrolled member of the federally recognized Indian tribe within whose jurisdiction the sale takes place, is not exempt from the applicable taxes imposed by this chapter.
     (((7))) (6) If the state enters into a cigarette tax contract or agreement with a federally recognized Indian tribe under chapter 43.06 RCW, the terms of the contract or agreement ((shall)) take precedence over any conflicting provisions of this chapter while the contract or agreement is in effect.

Sec. 2   RCW 82.24.026 and 2009 c 479 s 67 are each amended to read as follows:
     (1) In addition to the tax imposed upon the sale, use, consumption, handling, possession, or distribution of cigarettes set forth in RCW 82.24.020, there is imposed a tax in an amount equal to three cents per cigarette.
     (2) The revenue collected under this section ((shall)) must be deposited as follows:
     (a) ((28.5)) 14 percent ((shall)) must be deposited into the general fund.
     (b) The remainder ((shall)) must be deposited into the education legacy trust account.

NEW SECTION.  Sec. 3   A new section is added to chapter 82.24 RCW to read as follows:
     (1) As used in this section, "nonparticipating manufacturer" means a tobacco product manufacturer, as defined in RCW 70.157.010(i), that is not a participating manufacturer within the meaning of section II(jj) of the master settlement agreement, as defined in RCW 70.157.010(e).
     (2) There is levied an equity assessment at the rate of 2.1 cents on each cigarette for all cigarette packages of nonparticipating manufacturers to which a stamp is affixed as required under RCW 82.24.030. The equity assessment imposed by this section is in addition to all other assessments, fees, and taxes levied under existing law, and shall be paid by affixing a stamp in the manner and at the time described in RCW 82.24.030.
     (3) Except as otherwise provided in this section, the equity assessment shall be collected, paid, administered, and enforced in the same manner as the taxes on cigarettes levied by this chapter.
     (4) The purposes of this equity assessment are:
     (a) To recover health care costs to the state imposed by nonparticipating manufacturers;
     (b) To prevent nonparticipating manufacturers from undermining the states policy of reducing underage smoking by offering cigarettes for sale substantially below the prices of other manufacturers;
     (c) To protect funding, which is reduced as a result of the growth of nonparticipating manufacturer cigarette sales for programs funded in whole or in part by payments to the state under the master settlement agreement as defined in RCW 70.157.010(e);
     (d) To recoup settlement-payment revenue lost to the state as a result of nonparticipating manufacturer cigarette sales; and
     (e) To fund the enforcement and administration of:
     (i) The stamping requirements of this chapter;
     (ii) The escrow payment imposed by chapter 70.157 RCW; and
     (iii) The equity assessment imposed in this chapter.
     (5) Each manufacturer, distributor, wholesaler, or retail dealer who under RCW 82.24.030 affixes a stamp to a package of cigarettes shall report monthly to the department of revenue for each place of business the number and denominations of stamps affixed to individual packages of nonparticipating manufacturer cigarettes sold by the manufacturer, distributor, wholesaler, or retail dealer in the preceding month, including the manufacturer and brand family. A person required to file a report under this section is subject to the penalty provisions of this chapter for failing to file a report in a timely manner, or for supplying false or fraudulent information.

NEW SECTION.  Sec. 4   The following acts or parts of acts are each repealed:
     (1) RCW 82.24.027 (Additional tax imposed -- Rate -- Deposited into the general fund) and 2009 c 479 s 68, 2008 c 86 s 303, 1999 c 309 s 925, & 1986 c 3 s 12; and
     (2) RCW 82.24.028 (Additional tax imposed -- Rate -- Deposited into the general fund) and 2009 c 479 s 69, 2008 c 86 s 304, & 2002 c 2 s 3.

NEW SECTION.  Sec. 5   A new section is added to chapter 70.47 RCW to read as follows:
     The basic health plan stabilization account is created in the state treasury. Funds from the account must be used to fund enrollment in the subsidized basic health plan under this chapter.

NEW SECTION.  Sec. 6   The sum of eighty-five million six hundred ninety-eight thousand dollars is appropriated from the general fund for deposit into the basic health plan stabilization account for the fiscal year ending June 30, 2011. The funds used from this appropriation must be used to support enrollment for approximately thirty-six thousand six hundred low-income individuals in the subsidized basic health plan for fiscal year 2011.

Sec. 7   RCW 43.135.035 and 2010 c ... (ESSB 6130 as amended by the House) s 2 are each amended to read as follows:
     (1) After July 1, 2011, any action or combination of actions by the legislature that raises taxes may be taken only if approved by a two-thirds vote of each house of the legislature, and then only if state expenditures in any fiscal year, including the new revenue, will not exceed the state expenditure limits established under this chapter. Pursuant to the referendum power set forth in Article II, section 1(b) of the state Constitution, tax increases may be referred to the voters for their approval or rejection at an election.
     (2)(a) If the legislative action under subsection (1) of this section will result in expenditures in excess of the state expenditure limit, then the action of the legislature ((shall)) may not take effect until approved by a vote of the people at a November general election. The state expenditure limit committee ((shall)) must adjust the state expenditure limit by the amount of additional revenue approved by the voters under this section. This adjustment ((shall)) may not exceed the amount of revenue generated by the legislative action during the first full fiscal year in which it is in effect. The state expenditure limit ((shall)) must be adjusted downward upon expiration or repeal of the legislative action.
     (b) The ballot title for any vote of the people required under this section shall be substantially as follows:

     "Shall taxes be imposed on . . . . . . . in order to allow a spending increase above last year's authorized spending adjusted for personal income growth?"

     (3)(a) The state expenditure limit may be exceeded upon declaration of an emergency for a period not to exceed twenty-four months by a law approved by a two-thirds vote of each house of the legislature and signed by the governor. The law ((shall)) must set forth the nature of the emergency, which is limited to natural disasters that require immediate government action to alleviate human suffering and provide humanitarian assistance. The state expenditure limit may be exceeded for no more than twenty-four months following the declaration of the emergency and only for the purposes contained in the emergency declaration.
     (b) Additional taxes required for an emergency under this section may be imposed only until thirty days following the next general election, unless an extension is approved at that general election. The additional taxes ((shall)) expire upon expiration of the declaration of emergency. The legislature ((shall)) may not impose additional taxes for emergency purposes under this subsection unless funds in the education construction fund have been exhausted.
     (c) The state or any political subdivision of the state ((shall)) may not impose any tax on intangible property listed in RCW 84.36.070 as that statute exists on January 1, 1993.
     (4) If the cost of any state program or function is shifted from the state general fund to another source of funding, or if moneys are transferred from the state general fund to another fund or account, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), ((shall)) must lower the state expenditure limit to reflect the shift. For the purposes of this section, a transfer of money from the state general fund to another fund or account includes any state legislative action taken that has the effect of reducing revenues from a particular source, where such revenues would otherwise be deposited into the state general fund, while increasing the revenues from that particular source to another state or local government account. This subsection does not apply to: (a) The dedication or use of lottery revenues under RCW 67.70.240(3), in support of education or education expenditures; ((or)) (b) a transfer of moneys to, or an expenditure from, the budget stabilization account; or (c) the deposit of funds to the basic health plan stabilization account under section 6 of this act or the appropriation of those funds.
     (5) If the cost of any state program or function and the ongoing revenue necessary to fund the program or function are shifted to the state general fund on or after January 1, 2007, the state expenditure limit committee, acting pursuant to RCW 43.135.025(5), ((shall)) must increase the state expenditure limit to reflect the shift unless the shifted revenue had previously been shifted from the general fund.
     (6) For the purposes of chapter 1, Laws of 2008, "raises taxes" means any action or combination of actions by the legislature that increases state tax revenue deposited in any fund, budget, or account, regardless of whether the revenues are deposited into the general fund.

NEW SECTION.  Sec. 8   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect June 1, 2010.