Economic Development

New PA budget strips Philadelphia of power to regulate cigarette sales

Even as some Pennsylvania legislators head out the door for their summer recess, the impacts of a speedily passed $32.7 billion state budget are just beginning to be fully understood. To wit: One small amendment slipped into the voluminous state fiscal code effectively stripped Philadelphia of its power to pass additional regulations on tobacco sales.

The move comes just as City Council was gearing up for a renewed push to curb sales of nicotine products as a health initiative. The rub, according to Capitol Republicans who pushed for the recent amendment, is that the city is also dependent on the sale of cigarettes and similar products for school funding. 

Drew Crompton, chief of staff to Republican Senate President Pro Tempore Joe Scarnati, said so-called “hold harmless” provisions leave the state liable for funding shortfalls from a $2-per-pack levy on certain tobacco sales in the city, introduced almost four years ago to patch the local school district budget.

“We’ve already had one cycle where we had to up funding because of increased regulation in Philadelphia,” he said. “My understanding is that there was something like a $10 million drop off in what Philadelphia collected in the last few years. We were on the hook for that.”

In fact, the gap last year was closer to $26 million – although it's hard to say how much of the decline in cigarette tax revenues was due to the new regulations versus the increased price or overly optimistic revenue projections.

Harrisburg regards Philadelphia as a city of the first class – the only municipality in the state with the autonomy to legislate its own cigarette regulations beyond state codes. Shortly after the passage of the 2014 cigarette tax, Council enacted new geographic restrictions on tobacco sales. More recently, Councilmember Curtis Jones Jr. had recently floated a ban on flavored tobacco products, while Councilmember Derek Green was reportedly preparing a ban on cigarette sales at pharmacies. (Neither responded to requests for comment.) 

The new preemption clause added to the recently passed state fiscal code puts a stop to all that. While it keeps existing restrictions, it precludes any further regulation – with the exception of how tobacco products are displayed. 

Senate Democrats had a different take on what went down.

“During budget negotiations, the Republicans brought language to the table from Big Tobacco to work against Philadelphia’s carveout to regulate tobacco at the local level,” said Senate Democratic Caucus spokesperson Brittany Crampsie. 

Crampsie painted the final amendment as a deal cut with Republicans who had originally wanted to strip the city of its ability to regulate cigarette products at all. Others, she said, had sought to dump the “hold harmless” provisions entirely, thus jeopardizing local school funding.
“Senator (Vincent) Hughes worked out a compromise to ensure Philadelphia’s existing regulations were grandfathered and to allow the City to continue to regulate how tobacco products may be displayed,” she said.

Jon Kirch, a government relations director for the American Heart Association, was far more blunt about the development.

“The idea that this was a compromise...This was something that people found out about at the eleventh hour and was snuck into a must-pass budget bill,” he said. “It’s just disastrous.”

Kirch described preemption language as a tactic that the tobacco lobby had frequently used around the country in the past, including in Pennsylvania, whose Clean Indoor Air Act is riddled with loopholes. He described the recent amendment as lawmakers seeking to “protect the tobacco industry.”

“There are lots of public health advocates in Philadelphia who want to protect kids from tobacco. And lawmakers in Harrisburg just shut that down,” Kirch said. “If governments are addicted to proceeds from the sale of tobacco products and they say that's why they can't protect kids, the public is going to see through that.”

Crompton insisted the move was made to help children enrolled in the Philadelphia School District, by preserving its fiscal health.

“I understand the bugaboo about Big Tobacco,” Crompton said. “But it’s a smokescreen.”