JUNE 2002

• Acknowledgements
• About Common Cause Education Fund
• Robert Wood Johnson Foundation
• Executive Summary
• WISCONSIN: THE CAMPAIGN CONTRIBUTIONS AND LOBBYING EXPENDITURES OF THE TOBACCO INDUSTRY AND ITS ALLIES
  • Introduction
  • TOBACCO INDUSTRY LOBBYING EXPENSES, 1999-2001
  • LOBBY EXPENSES OF TOBACCO INDUSTRY ALLIES, 1999-2001
  • TOBACCO COMPANIES' CAMPAIGN CONTRIBUTIONS
  • CONTRIBUTIONS TO CONFERENCE COMMITTEE MEMBERS, 1995-2001
  • CAMPAIGN CONTRIBUTIONS TO WISCONSIN GOVERNORS, 1995-2001
  • OTHER INDUSTRIES THAT SHARE TOBACCO COMPANIES' LEGISLATIVE GOALS
  • THE HISTORY OF TOBACCO PREVENTION PROGRAMS IN WISCONSIN
  • SECURITIZATION: SELLING OFF THE STATE'S TOBACCO SETTLEMENT MONEY
  • TOBACCO INTERESTS HOBBLED EFFORTS TO CURB UNDERAGE SMOKING
  • LEGISLATURE ADDRESSES GRAY MARKET CIGARETTES
• SUMMARY
• APPENDIX A: TOBACCO COMPANY LOBBYING IN WISCONSIN BY ISSUE, 1999-2000
• APPENDIX B: TOBACCO COMPANY LOBBYING IN WISCONSIN BY ISSUE, 2001
• METHODOLOGY

The primary author of "Wisconsin: The Campaign Contributions and Lobbying Expenditures of the Tobacco Industry and Its Allies" is Senior Research Associate Michael Surrusco. Senior Policy Analyst Celia Viggo Wexler made a significant editorial contribution to this report. Research Director Ben Bycel and Common Cause Education Fund Executive Director Bob Walker also made editorial contributions.

Established by Common Cause in February 2000 as a separately chartered (501)(c)(3) organization, the Common Cause Education Fund (CCEF) seeks to promote open, honest and accountable government through research, public education and innovative programs.

This report is the first in a series of reports made possible through a grant from the Robert Wood Johnson Foundation. The Robert Wood Johnson Foundation was established as a national philanthropy in 1972 and today it is the largest US foundation devoted to improving the health and health care of all Americans.

Common Cause Education Fund

1250 Connecticut Ave., NW #600

Washington D.C. 20036

202/833-1200

The tobacco industry and its allies spent almost $7 million lobbying legislators in the Wisconsin Assembly from 1999-2001. In addition, the same group gave $327,129 in campaign contributions to legislators from 1995-2001.

Recently, the Wisconsin legislature has considered and voted on several pieces of legislation that the tobacco industry spent considerable time and money lobbying on. These include tax issues, the contentious issue of compliance checks for local retail stores, and the marketing and sales of gray market cigarettes in the state.

Currently, the Wisconsin legislature is considering the future of the proceeds from the nationwide tobacco settlement decided in 1998. The legislature originally agreed, after public pressure, to use the money as a basis for funding anti-smoking programs in Wisconsin. That has changed, however, as the current proposal is to use the entire $1.3 billion in projected proceeds to cover a short-term budget deficit. Anti-smoking advocates bemoan the decision as a serious threat to the future of smoking programs in Wisconsin.

This report takes a detailed look at the issues mentioned above, and the efforts of the tobacco industry to influence the Wisconsin legislature. This report has been made possible through a grant from the Robert Wood Johnson Foundation.

The tobacco industry has lobbied the Wisconsin legislature on a variety of issues over the past several years, ranging from excise taxes to the sale of gray market cigarettes. This Common Cause Education Fund (CCEF) report takes a detailed look at the political contributions over the past seven years (1995-2001) and the lobbying expenditures of the tobacco industry and their allies for the past three years (1999-2001). It also outlines the various issues on which the tobacco industry has lobbied in recent years and looks at the role that the industry has played in resolving those issues.

According to lobby disclosure reports filed with the Wisconsin Board of Ethics, tobacco interests have lobbied on three main issues:

• local efforts to investigate retailers who sold cigarettes to minors;
• a proposed tax increase on cigarettes; and
• government prosecution of the "gray" market cigarette industry.

TOBACCO COMPANIES HAVE SPENT MILLIONS ON LOBBYING IN WISCONSIN

CCEF has analyzed the lobby disclosure reports filed with the State Ethics Board in Wisconsin and found the following:

• Tobacco interests have lobbied intensely in Wisconsin. From 1999-2001, tobacco companies spent $2.7 million or 10,779 hours lobbying members of the Wisconsin legislature.

• In addition, other industry groups closely allied with the tobacco industry spent $4.2 million lobbying Wisconsin legislators from 1999-2001.

• In total, tobacco interests and their allies spent nearly $7 million lobbying Wisconsin legislators during 1999-2001.
• In 2001, this group accounted for almost 10 percent of all lobbying done in the state of Wisconsin.

During the last several years, tobacco companies have made campaign contributions to Wisconsin legislators as well. In many cases, it is the lobbyists themselves who are donors to the campaigns of members. Using data provided by the Wisconsin Democracy Campaign, CCEF analyzed contributions from the tobacco industry and its allies as follows:

• Big Tobacco and its allies have donated $327,129 to the campaigns of Wisconsin legislators from 1995-2001.
• Members that are currently sitting on the conference committee working on a final version of the highly contentious budget repair bill have received $12,649 during the same period from tobacco companies, their lobbyists and the various pro-tobacco trade groups.

• Recipient/Amount
  • Jensen, Scott R/$4,449
  • Foti, Steven/4,000
  • Gard, John/1,700
  • Panzer, Mary/1,600
  • Jauch, Robert/500
  • Decker, Russ/400
• Total $12,649

Source: CCEF analysis of data provided by Wisconsin Democracy Campaign.

• Combined, Governors Tommy Thompson and Scott McCallum received $44,306 from this group over the same period.

• Recipient/Amount
  • Thompson, Tommy G/32,406
  • McCallum, Scott/11,900
• Total $44,306

Source: CCEF analysis of data provided by Wisconsin Democracy Campaign.

Other factors also affect the influence the tobacco industry has in Wisconsin. Philip Morris is one of the largest employers in Wisconsin through its subsidiary companies Miller Brewing and Kraft Foods. The coalitions that tobacco companies have helped form are made up of companies that are in the same industries as Philip Morris' subsidiaries.

The different laws that apply to campaign contributions have given rise to different strategies for donating to legislators. Because companies are barred from giving money directly to legislators, political action committees (PACs) are formed that collect money from individuals and are subject to contribution limits. In addition, businesses have developed other ways to make contributions as well.

Companies and associations can also sponsor political fundraising events or create conduits whereby many individuals make simultaneous contributions that are then "bundled" for maximum political effect. Tobacco companies, in particular, can help raise money through a network of trade associations that include alcohol merchants and convenience store operators that are indirectly affected by tobacco regulations. Working together, this group can generate significant sums that can be tied to a specific legislative or political agenda.

Other groups that commonly lobby for the same things as tobacco companies include the Tavern League of Wisconsin, the Merchants Federation, the Grocers Association, the Restaurant Association, and the Association of Distributors. According to lobby disclosure reports, these groups have traditionally sided with the tobacco industry on issues like taxation and compliance checks. Recently, tobacco companies have come under fire by national campaigns that highlight the dangers of smoking. Since then, tobacco companies have formed coalitions around contentious issues with other businesses like restaurants and beer distributors.

According to lobby disclosure forms, the Wisconsin Manufacturers and Commerce (WMC), is frequently lobbying for the same things as tobacco companies. The largest lobbying operation in Wisconsin, WMC runs ads on television and radio as well as phone banking operations that involve calling thousands of residents asking them personally to support WMC's cause.

According to press reports, Philip Morris holds considerable sway in the WMC as one of the largest employers in Wisconsin. In 2001, the WMC lobbied against an increase in cigarette taxes despite opposition within the organization from companies wanting to discourage tobacco use because it increases their insurance premiums. The lobbying expenditures of tobacco companies and their allied industries and trade organizations constitute a significant amount of the money spent lobbying in Wisconsin.

While the Centers for Disease Control and Prevention (CDC) recommends spending more than $30 million a year on tobacco prevention programs in Wisconsin, the programs in Wisconsin have never received that level of funding.

When Tommy Thompson was Governor of Wisconsin, he received $32,406 in political contributions from tobacco companies and their allies between 1995-1998. In 1999, Thompson proposed spending $2 million per year on anti-smoking programs, but the legislature increased that amount to $23.5 million.

While the legislature increased Thompson's original proposal, funding for the state's tobacco control programs has remained smaller than the amount recommended by the CDC. In 1999, the budget for the Wisconsin Tobacco Control Board (WTCB), the government entity that administers the state's smoking prevention and cessation programs, was cut to $21 million, then reduced again to just $15 million a year later.

In 2001, Governor Scott McCallum decided to sell 25-years' worth of future proceeds from the 1998 tobacco settlement between 46 states and the major tobacco companies. Through the process of "securitization," a state may borrow against the future proceeds that would come out of the settlement and then use the future proceeds to pay off the loans over time. In Wisconsin, the state accepted a smaller amount upfront - roughly $1.3 billion, or less than forty cents on the dollar - and forfeited its right to future proceeds.

Initially, Governor McCallum proposed using only part of the money to cover the deficit, creating an endowment with the remainder. The Governor's original plan provided for no use of the endowment funds to support tobacco control programs. After significant pressure from the public health community, however, the legislature dedicated a portion of the interest income from the endowment to fund anti-smoking programs.

This year, however, Governor McCallum has proposed using all of the money from the settlement for deficit reduction, foreclosing any possibility that the money could be used to support anti-smoking programs in the state. Moreover, there are no plans to rebuild the tobacco endowment from other sources.

Each year 26,000 children (young people under age 18) in Wisconsin become smokers. Minors purchase an estimated 5 million packs of cigarettes in Wisconsin stores annually. If current trends continue, 117,000 underage smokers in the state will likely die of a smoking-related illness. According to the 2000 Wisconsin Tobacco Youth Survey done by the State Health and Family Services Department, 46 percent of middle school students and 69 percent of high school students have used a tobacco product. A significant number of 6th graders currently use tobacco products. By the 12th grade, 39 percent of students in Wisconsin have become "smokers".

Several years ago, local governments conducted compliance checks among convenience stores to prevent the sale of tobacco products to minors. In 1999, legislators removed the authority of local officials to conduct compliance checks and placed it with the State Department of Health and Family Services (DHFS).

In 1999, tobacco companies spent $191,517 lobbying on the Health and Family Services section of the state budget. The Wisconsin Grocers Association (WGA) worked with the Governor to draft language that would pre-empt local authority, requiring the state to conduct the checks. Governor Thompson later introduced a "non-fiscal item" into the 1999-2001 biennial budget that closely matched the language written by these industry groups.

Moving jurisdiction to the DHFS has impacted the effectiveness of the compliance check program according to compliance data. The new protocol allowed local governments to conduct investigations only if contracted by the DHFS, but no additional resources were provided for the department to enforce them. The DHFS was left to conduct surveys of compliance rates in the state, but without funds for enforcement, non-compliance rates began to rise again.

Under a provision of federal law, known as the Synar Regulation, a state must be in compliance with laws prohibiting the sale of tobacco products to minors. If a survey reveals that less than 80 percent of stores are in compliance, Wisconsin could lose 40 percent of its federal Substance Abuse Prevention and Treatment and Block Grant. In 1996, roughly half of the stores investigated in Wisconsin were found to sell cigarettes to minors. The lowest failure rate in Wisconsin - 22 percent - came in 1999 before the changes were made to the compliance check program. After Governor Thompson's budget passed, the failure rate rose to 25 percent in 2000 and rose again to 34 percent last year.

In April of 2002, the Governor signed into law a bill that would allow local governments to resume testing without first contracting with the state. It empowers the local officials to levy fines for selling cigarettes to minors, but instead of fining the stores, the clerk who physically sells the cigarettes receives the fine - a provision opposed by tobacco control advocates. The law also requires the DHFS to make available a training program for retail employees on how to prevent the sale of cigarettes to minors, but the department is again faced with the problem of funding such a program.

Higher cigarette prices have proven to be effective at reducing underage smoking, but Philip Morris and other tobacco companies have lobbied heavily against proposed tax hikes. In 2001 alone, tobacco interests in Wisconsin spent $656,921 lobbying the Wisconsin legislature on tax related issues. While the legislature ultimately passed an 18-cents per pack increase, some legislators had called for increases as large as one dollar.

Wisconsin is prone to re-imported cigarettes or gray market cigarettes. These are cigarettes that tobacco companies manufacture for sale abroad, but that are re-imported and sold in the United States without the manufacturer's consent. Gray market cigarettes can hurt the profits of tobacco companies because prices on cigarettes intended for other countries may be significantly lower. Each pack of gray market cigarettes that is sold in the U.S. may reduce sales of the more expensive packs companies intended for sale here.

Tobacco companies began lobbying on these issues during 2000-2001, spending $333,228 on the issue of gray market and re-imported cigarettes, according to lobby disclosure reports.

In mid-2001, Governor McCallum proposed stricter rules to close the gray market for cigarettes. His proposals included: 1) increasing fines and prison sentences for unlawful possession of gray market cigarettes; and 2) expanding authority for state enforcement action; and 3) requiring destruction of any gray market cigarettes seized by the state. The legislature approved the measures.

As the Wisconsin legislature continues to wrestle with various issues relating to public health and smoking, it is important that the citizens of Wisconsin are fully aware of the tobacco industry's efforts to influence the legislative process in their state. In Wisconsin, as in many states, the tobacco industry has been very successful in persuading legislators to divert tobacco settlement money away from smoking prevention efforts, and in impeding efforts to enforce existing laws designed to prevent young people from smoking.

This report is the first in a series of Common Cause Education Fund reports on the lobbying and political contributions of the tobacco industry at the state level. These reports are made possible by a grant from the Robert Wood Johnson Foundation.

Note: Includes Philip Morris subsidiaries Kraft Foods and Miller Brewing.

Note: Includes Philip Morris subsidiaries Kraft Foods and Miller Brewing.

Lobbying information was obtained by CCEF from disclosure reports available from the Wisconsin Board of Ethics. Under current Wisconsin law, every lobbying company and organization must file a disclosure report twice a year that includes the names of their lobbyists, lobbying expenditures, hours spent lobbying, and specific legislative interests.

Campaign contribution data was provided by the Wisconsin Democracy Project, a not-for-profit independent coalition working on money and politics issues. The data was analyzed by CCEF through the creation of a comprehensive database of contributions from tobacco interests to Wisconsin state candidates from January 1, 1995 through December 31, 2001. Wisconsin law requires that state candidates, candidate committees and political committees register with the Elections Board, and that they file reports with the Board six times during an election year, and four times during a non-election year.

Return to Commentary