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October 1, 2002

Host: Michael Grant
Topics:
Proposition 303: Taxation of Tobacco Products;
Proposition 301: Continuation of State Lottery to 2012
· Learn more abour Prop 303 and Prop 301 on the Election 2002 Web site
In-Studio Guests:
State Representative Bob Cannel, one of the drafters of Prop. 303;
Darcy Olsen, Executive Director of the Goldwater Institute;
Ira Rubins, Chair of the "Preserve the Lotteruy Committee;"
Jeff Grocost, who opposes continuation of the lottery

>> MICHAEL: TONIGHT ON "HORIZON," IF PROPOSITION 303 IS PASSED BY THE VOTERS NEXT MONTH, THE TAX ON ALL TOBACCO PRODUCTS WILL MORE THAN DOUBLE IN ARIZONA. WE'LL FIND OUT HOW THAT REVENUE WOULD BE SPENT, AS WELL AS THE PROS AND CONS OF AN INCREASED TOBACCO TAX. ALSO TONIGHT, WE'LL LOOK AT PROPOSITION 301, WHICH WOULD KEEP THE STATE LOTTERY IN "PLAY" FOR ANOTHER 10 YEARS. GOOD EVENING, I'M MICHAEL GRANT. FOR SEVEN YEARS, ARIZONA HAS RECEIVED HUNDREDS OF MILLIONS OF DOLLARS IN TOBACCO TAX REVENUE. SUPPORTERS OF PROPOSITION 303 WOULD LIKE TO SEE EVEN MORE.

>> Reporter: IN 1994, ARIZONA VOTERS APPROVED PROPOSITION 200, THE TOBACCO TAX AND HEALTHCARE ACT INCREASING THE TAX ON CIGARETTES BY 40 CENTS ON PER PACK. REVENUES GENERATED FROM THE TAX WERE DEDICATED TO THREE PURPOSES: HEALTH CARE FOR THE NEEDY, TOBACCO USE PREVENTION AND RESEARCH OF TOBACCO-RELATED DISEASES.

>> Cathy Bischoff: ACCORDING TO THE CENTERS FOR DISEASE CONTROL, IT COSTS ABOUT A BILLION DOLLARS IN DIRECT HEALTH CARE EVERY YEAR DUE TO TOBACCO-RELATED DISEASES. ABOUT A QUARTER OF THE DEATHS IN ARIZONA ARE DUE TO TOBACCO-RELATED DISEASES. WE LOSE ABOUT 600 WOMEN A YEAR DUE TO BREAST CANCER, ABOUT 1100 A YEAR DUE TO LUNG CANCER, AND 90% OF THE LUNG CANCERS ARE DUE TO SMOKING. THIS ADDICTION TAKES AN ENORMOUS TOLL ON THE STATE OF ARIZONA.

>> Reporter: THIS YEAR, IF PROPOSITION 303 IS APPROVED, THE REVENUES COLLECTED FROM THIS ADDITIONAL TAX WOULD BE DEPOSITED INTO A NEW TOBACCO PRODUCTS TAX FUND ADMINISTERED BY AHCCCS. OF THE MONIES COLLECTED, 42% WOULD GO TO PROGRAMS AND SERVICES TO EXPAND THE POPULATION OF INDIVIDUALS ELIGIBLE FOR AHCCCS. 27% TO MEDICAL SERVICES FOR LOW INCOME AND INDIGENT PERSONS. 20% FOR REIMBURSEMENT OF UNCOMPENSATED CARE, PRIMARY CARE AND TRAUMA CENTER READINESS COSTS. 5% TO RESEARCH FOR PREVENTING AND TREATING TOBACCO-RELATED DISEASES AND ADDICTIONS, AS WELL AS OTHER DISEASES. 4% TO THE HEALTH CARE ADJUSTMENT ACCOUNT WHICH WOULD COMPENSATE OTHER TOBACCO TAX PROGRAMS FOR DECREASES IN TOBACCO TAX REVENUES, AND 2% FOR PREVENTION AND EARLY DETECTION OF THE FOUR LEADING DISEASE RELATED CAUSES OF DEATH IN ARIZONA. PROPOSITION 303 WOULD REPEAL AND RE-ENACT THE CURRENT STATUTE THAT ESTABLISHES THE TOBACCO TAX AND HEALTH CARE FUND HEALTH EDUCATION ACCOUNT. THIS WOULD PREVENT FUTURE LEGISLATURES FROM SUBSTANTIALLY CHANGING THE ACCOUNT. PROP 303 WOULD REQUIRE THE LEGISLATURE TO ESTABLISH BY JANUARY 2004 A TOBACCO REVENUE USE TRACKING AND SPENDING COMMISSION.

>> MICHAEL: JOINING ME NOW IS STATE REPRESENTATIVE BOB CANNEL, ONE OF THE DRAFTERS OF PROPOSITION 303 AND DARCY OLSEN, EXECUTIVE DIRECTOR OF THE GOLDWATER INSTITUTE. WELCOME TO YOU BOTH. REPRESENTATIVE, WHY SHOULD PEOPLE VOTE FOR PROPOSITION 303?

>> Bob Cannel: I THINK THE NUMBER ONE THING IS IT WILL DECREASE THE USE OF TOBACCO PRODUCTS, DECREASE SMOKING. SECOND OF ALL, IT WILL STABILIZE THE TOBACCO EDUCATION FUND WHICH THE LEGISLATURE HAS BEEN SWEEPING SOME IN THE LAST COUPLE YEARS. AND EVEN HAS AN ELASTICITY ACCOUNT TO MAKE SURE THAT FUND STAYS HEALTHY. IT'S VERY EFFECTIVE IN TOBACCO PREVENTION AND CESSATION PROGRAMS. AND FINALLY IT WILL BRING MONEY INTO THE STATE COFFERS TO FUND INDIGENT HEALTHCARE. THE STATE IS IN A BIND RIGHT NOW. WE HAVE CRITICAL PROGRAMS THAT NEED FUNDING. THOSE THREE REASONS ARE VERY GOOD REASONS TO VOTE FOR 303.

>> MICHAEL: DARCY, WHY IS THIS A BAD IDEA?

>> Darcy Olsen: I THINK WHEN YOU GET PAST THE GOOD RHETORIC AND GOOD INTENTIONS, WHAT YOU ARE LEFT WITH IS NOTHING SHORT OF JUST PLAIN AND SIMPLY A TAX INCREASE, TAKE AWAY TOBACCO TAX, THIS IS A TAX INCREASE AND $150 MILLION TAX INCREASE. IT'S A PARTICULARLY ODIOUS AND EVEN MEAN-SPIRITED KIND OF TAX INCREASE BECAUSE IT'S JUST ON SMOKERS. IT SAYS SMOKERS, 15% OF ARIZONA'S POPULATION, YOU ARE A MINORITY, UNPOPULAR, WE'RE GOING TO SINGLE YOU OUT AND MAKE YOU PAY FOR THESE HEALTHCARE PROGRAMS THAT HELP EVERYBODY. THE ARGUMENT IS SOMETIMES MADE THAT SMOKERS ARE NOT PAYING THEIR OWN WAY IN HEALTHCARE COST, BUT CONGRESSIONAL RESEARCH SERVICE, THE JOURNAL OF AMERICAN MEDICAL ASSOCIATION, SMOKERS MORE THAN PAY THEIR COSTS MORE THAN ALREADY. IN ARIZONA, FOR EVERY ONE DOLLAR THAT A SMOKER TAKES OUT OF THE PUBLIC COFFERS FOR SOMETHING LIKE AHCCCS HEALTH CARE PROGRAM THEY PAY $20 IN TAXES. LET ME WRAP UP BY SAYING IF WE WANT TO REDUCE SMOKING, WHICH IS I THINK A LAUDABLE GOAL, STUDIES SHOW THE BEST WAY IS TO ENFORCE THE LAWS THAT ARE ON THE BOOKS. YOU CAN GET A 70% REDUCTION IN TEENAGE SMOKING BY ENFORCING THE LAWS.

>> MICHAEL: REPRESENTATIVE, LET ME GO BACK TO THE EARLY POINTS THERE. THERE IS SOME FAIRLY IMPRESSIVE DATA TO SHOW SMOKERS DO IN FACT CARRY THEIR LOAD IN RELATION TO SMOKING-RELATED ILLNESS. IS THIS MEAN-SPIRITED? IS 58 CENTS A PACK, MORE THAN ENOUGH?

>> Bob Cannel: I THINK THE EXPLANATION IS MEAN-SPIRITED. PROBABLY EACH PACK WILL COST ABOUT $7 IN COST FOR MEDICAL CARE. IT'S ESTIMATED IN ARIZONA PROBABLY ABOUT A BILLION DOLLARS A YEAR FOR RESULTS OF SMOKING AND --

>> Darcy Olsen: THAT BILLION DOLLARS IS A MISLEADING FIGURE, I THINK IT'S IMPORTANT.

>> MICHAEL: LET HIM FINISH.

>> Bob Cannel: I WASN'T THROUGH. YOU SEE STATISTICS ALL OVER THE PLACE. THE ONES I SEE SHOW THAT SMOKERS ARE NOT GETTING CLOSE TO PAYING FOR THEIR HEALTH CARE. I DON'T SEE ANY INSURANCE FOR SMOKERS, HEALTH INSURANCE IS FOR EVERYBODY. THE NON-SMOKERS PAY FOR THE COST OF THE SMOKERS. THE PEOPLE ON THE LOW END OF THE SCALE ECONOMICALLY ARE NOT GOING TO BE ABLE TO AFFORD THAT CARE, THEY ARE GOING TO RUN THROUGH LIFE SAVINGS, GO ON TO MEDICAID AND WE THE TAX PAYER ARE GOING TO PAY THAT CARE. THERE IS NO WAY THAT SMOKERS COME CLOSE TO PAYING THE COST OF THEIR MEDICAL CARE.

>> Darcy Olsen: THE BILLION DOLLAR FIGURE IS MISLEADING. IF SMOKERS WERE INCURRING -- IT ONLY LOOKS AT THE EXPENSE SIDE OF THE HEALTH CARE AND IT ASSUMES THEY ARE NOT PAYING ANYTHING IN, ASSUMES THEY DON'T PAY THEIR OWN MEDICAL BILLS, THAT NONE OF THEM HAVE THEIR OWN INSURANCE. HARVARD ECONOMISTS HAVE LOOKED SPECIFICALLY AT ARIZONA AND FINDS FOR EVERY DOLLAR THAT A SMOKER WITHDRAWS USING ANY PUBLIC PROGRAMS THEY ARE PAYING $20 INTO THE SYSTEM SO THEY ARE NOT PAYING THEIR OWN WAY, THEY ARE PAYING FOR THEIR NEIGHBORS, FOR PEOPLE IN THE COMMUNITY. THEY ARE TAXED AT 60 CENTS A PACK. YOU HAVE A SITUATION IN THE STATE WHERE THE STATE IS IN A SERIOUS BUDGET PINCH. SMOKERS ARE ABOUT 15% OF THE POPULATION, THEY ARE NOT A POPULAR GROUP. THIS IS A QUICK WAY FOR THE STATE TO GET MONEY AT 150 MILLION A YEAR WITH NOT MANY PEOPLE OPPOSING IT. THE MOST UNFORTUNATE THING IS MAKING THE SMOKERS SECOND CLASS AND MAKING THEM SOMEHOW DIFFERENT.

>> MICHAEL: WHY NOT ATTACK IT ON ALL FRONTS? THERE IS CERTAINLY DATA TO INDICATE THE MORE EXPENSIVE YOU MAKE IT, THE MORE PEOPLE YOU DRIVE OUT OF IT. SURE, ENFORCE THE SMOKING LAWS ON THE BOOKS, BUT BRING EVERY WEAPON TO BEAR THAT YOU HAVE TO MAKE STOP SMOKING INCLUDING EXTREMELY HIGH TAXES.

>> Darcy Olsen: WE KNOW, THIS IS WHAT THE JOURNAL OF THE AMERICAN MEDICAL ASSOCIATION HAS PUBLISHED, THE BEST WAY TO REDUCE SMOKING AMONG CHILDREN AND TEENS, I HOPE WE ARE NOT TALKING ABOUT TRYING TO CONTROL ADULTS, BECAUSE WE HAVE A WHOLE LOT OF OTHER THINGS TO TALK ABOUT, ALCOHOL AND COFFEE AND CHEESEBURGERS AND, FOR ME, KRISPY KREME DONUTS. IF WE PROSECUTE THE RETAIL PEOPLE FOR SELLING TO PEOPLE UNDER AGE, IF WE FORCE CHILDREN TO SHOW ID WHEN THEY PURCHASE, IF YOU PROHIBIT VENDING MACHINE SALES IN SCHOOLS, YOU WILL REDUCE SMOKING BY 70%. THAT IS THE WAY TO DO IT. IT DOESN'T PUNISH ADULT SMOKERS WHO HAVE THE RIGHT TO SMOKE AND SHOULDN'T BE FORCED TO BEAR THE BURDENS OF THE HEALTH CARE SYSTEM.

>> MICHAEL: HERE'S THE PROBLEM I SEE. THE ULTIMATE OBJECTIVE IS TO EXTINGUISH THE REVENUE SOURCE, BUT YOU ARE FUNDING SOCIAL PROGRAMS THAT RAPIDLY BECOME ENTITLEMENTS ONCE GRANTED. ON THE OTHER HAND, YOU ARE TRYING TO DRY UP THE FUNDING SOURCE FOR THOSE PROGRAMS. AREN'T YOU PUTTING STATE GOVERNMENT IN A SITUATION WHERE IT'S MAKING A LOT OF PROMISES THAT IT CAN'T KEEP?

>> Bob Cannel: I THINK WHEN PROP 204 PASSED BY THE CITIZENS OF ARIZONA TO PROVIDE HEALTH CARE FOR WORKING FAMILIES, THE IDEA WAS THE TOBACCO SETTLEMENT MONEY WOULD PAY FOR THAT PROGRAM. IN FACT, IT ISN'T. STATES THAT HAVE PASSED TOBACCO TAXES CONTINUE TO HAVE HIGHER REVENUES AND THEY DECREASE THE INSTANCE OF SMOKING PARTICULARLY IN THE 18 TO 24-YEAR-OLDS. I'M A PEDIATRICIAN. FOR THE PAST 35 YEARS I'VE TAKEN CARE OF KIDS. I HAVE DEALT WITH CRIB DEATH, ANOTHER THING THAT CIGARETTE SMOKING INCREASES THE INCIDENCE OF. SMOKING IS A VERY HARMFUL THING. FOR A DOCTOR, THERE'S THE PROBLEM. THE PEOPLE BEHIND THE INITIATIVE BEFORE WE CAME THROUGH WITH OUR LEGISLATIVE REFERENDUM WERE TRYING TO STABILIZE THE TOBACCO EDUCATION FUND AND DECREASE THE INCIDENCE OF SMOKING. THAT'S ALL THEY WERE TRYING TO DO. THE LEGISLATURE DECIDED IF THIS TAX IS GOING TO PASS WE NEEDED THAT REVENUE FOR PROGRAMS. THOSE WILL SERVE THE VERY PEOPLE MOST AFFECTED BY THE TOBACCO TAX.

>> MICHAEL: YOU DON'T THINK THE PROGRAMS ARE BUILT ON A SHIFTY AND SLIPPERY REVENUE BASE?

>> Bob Cannel: I DON'T THINK SO. MY HOPE WOULD BE PEOPLE STOP SMOKING AND THOSE REVENUES GO AWAY. IF THAT HAPPENS WE WILL HAVE TONS OF MONEY WE'RE NOT SPENDING ON MEDICAL CARE. THE PICTURE SO FAR IS THE REVENUES AS WE INCREASE TAXES GO UP, NOT DOWN. AND DO FUND THE PROGRAMS QUITE WELL.

>> Darcy Olsen: MICHAEL, LET'S LOOK AT A COUPLE OF FACTS HERE. ONLY 5% OF THE REVENUE FROM THE TAX INCREASE IS GEARED TOWARD SMOKING PREVENTION. ONLY 5%. IF THAT WERE THE GOAL, 100% WOULD BE THERE. IT'S TO FUND GENERAL HEALTH CARE FOR THE PEOPLE OF ARIZONA, MOSTLY INDIGENT. I'M NOT ARGUING ABOUT THAT, HEALTH CARE POLICY IS A SEPARATE ISSUE. IF THE VOTERS OF ARIZONA BELIEVE WE SHOULD FUND HEALTH CARE FOR THE POOR PEOPLE OF THE STATE, THEN ALL TAX PAYERS SHOULD CONTRIBUTE TO THAT FROM THE GENERAL FUND. YOU SHOULDN'T PUNISH SMOKERS BECAUSE IT'S EASY TO GET THAT MONEY. I'M AFRAID THIS IS WHAT THEY ARE DOING. IF ARIZONA PASSES THIS WE WILL BE THE 18TH STATE THIS YEAR TO PASS A TOBACCO TAX INCREASE TO SHORE UP GENERAL FUND SPENDING, PUNISHING SMOKERS FOR LEGISLATIVE OVERSPENDING.

>> MICHAEL: ONE OF THE OTHER CONSEQUENCES IN THE CATO INSTITUTE WAS INCREASED SMUGGLING AND BLACK-MARKET ACTIVITY. IS THAT A VALID CONCERN.

>> Darcy Olsen: IT IS. BUREAU OF ALCOHOL, TOBACCO AND FIREARMS SAYS SMUGGLING CIGARETTES IS A $1.5 BILLION INDUSTRY. THIS WOULD MAKE ARIZONA THE FIFTH HIGHEST TAX TOBACCO STATE. PEOPLE WOULD HAVE AN INTEREST IN BRINGING CIGARETTES HERE AND SELLING THEM CHEAPER. IN CANADA, AN ESTIMATED 50 PERCENT OF CIGARETTES WERE BEING SMUGGLED IN. LET ME SAY SOMETHING ABOUT INCREASING THE PRICE. IT WOULDN'T BE A $150 MILLION PROSPECT AND PARTICULARLY AMONG TEENS. THE UNITED KINGDOM, THEIR CIGARETTES COST TWICE THAN IN THE UNITED STATES YET THEY HAVE THE SAME INCIDENCE OF TEEN SMOKING WE DO. I'M FOR REDUCING SMOKING AMONG MINORS, THE WAY TO DO IT IS ENFORCE THE LAWS ON THE BOOKS, YOU GET A 70% REDUCTION, AND DON'T TREAT YOUR SMOKERS LIKE SECOND CLASS CITIZENS.

>> MICHAEL: WHAT ABOUT THE SMUGGLING BLACK-MARKET CONCERN?

>> Bob Cannel: THAT SOUNDS LIKE THE TOBACCO COMPANY'S ARGUMENT. THE HARD FIGURE IS 3 TO 5%. IT'S HARD TO BELIEVE THE GOLDWATER POSITION. WHEN BARRY GOLDWATER SUPPORTED THIS TO PASS THE TOBACCO TAX. FOR THE REASON HE SUPPORTED IT, IT HAS WORKED; WHEREAS THE REST OF THE COUNTRY, THE INCIDENCE OF SMOKING IN TEENS HAS GONE UP, IN ARIZONA IT HAS GONE DOWN 25%, THIS IS THE COST OF THE TOBACCO AND EFFECTIVENESS OF OUR EDUCATION PROGRAM.

>> MICHAEL: IF IT'S SUCH A GOOD IDEA, WHY DID $90 MILLION AS OF FISCAL YEAR OF '99 REMAIN UNSPENT?

>> Bob Cannel: THAT'S A GOOD QUESTION. I THINK THEY PLAN AHEAD AND THERE WAS A BACKLOG OF FUNDS THERE. SENATOR GERARD WHO HELPED ME WITH THIS THAT THERE WILL BE A COMMISSION THAT OVERSEES THE SPENDING OF THE TOBACCO EDUCATION PROGRAM BY THE DEPARTMENT OF HEALTH SERVICES. BUT THERE IS NO QUESTION THAT THOSE PROGRAMS ARE EFFECTIVE. WHEN WE WERE SWEEPING MONEY OUT OF THE TOBACCO EDUCATION FUNDS, I WAS GETTING CALLS ABOUT HOW EFFECTIVE THE TOBACCO CESSATION PROGRAMS HAVE BEEN ACROSS THE STATE.

>> MICHAEL: DARCY, WANT TO RESPOND?

>> Darcy Olsen: ABOUT BARRY GOLDWATER, IT WAS 1995 THERE WAS AN ARTICLE IN THE WALL STREET JOURNAL WHERE HE TALKED ABOUT THE IMPORTANCE OF REDUCING SMOKING AMONG TEENAGERS. AT THAT TIME HE THOUGHT TAX INCREASE WAS THE BEST WAY TO GO ABOUT THAT. WE HAVE LEARNED IT IS DIRECTLY ENFORCING THE LAWS THAT AFFECT THE JUVENILES AND I THINK THAT'S VERY CONSISTENT WITH A BELIEF IN INDIVIDUAL LIBERTY AND RESPONSIBILITY.

>> MICHAEL: DARCY OLSEN, WE ARE OUT OF TIME. THANK YOU FOR JOINING YOU AND TALKING ABOUT PROPOSITION 303. REPRESENTATIVE CANNELL, THANK YOU, AS WELL.

>> Bob Cannel: THANK YOU, MICHAEL.

>> MICHAEL: YOU CAN'T WIN UNLESS YOU VOTE. THAT COULD BE THE MOTTO FOR PROPOSITION 301, WHICH WOULD EXTEND THE ARIZONA LOTTERY BY ANOTHER 10 YEARS. MIKE SAUCEDA TELLS US MORE ABOUT THE PROPOSITION.

>> REPORTER: EVER SINCE 1980 YOU HAVE BEEN ABLE TO PARTICIPATE IN STATE SPONSORED LEGAL GAMBLING, THE LOTTERY WAS PUT ON THE BALLOT BY LAWMAKERS AGAIN IN 1998 AND WAS APPROVED BY 57% OF THOSE VOTING. THAT EXTENDED THE LOTTERY UNTIL JULY 1, 2003. ONCE AGAIN IT WILL BE ON THE BALLOT THIS YEAR AS VOTERS DECIDE WHETHER TO CONTINUE THE LOTTERY AND THE STATE LOTTERY COMMISSION FOR ANOTHER 10 YEARS. SINCE THE LOTTERY STARTED IT RAISED $1.5 BILLION. THAT MONEY PROVIDED NEARLY 600 MILLION TO THE GENERAL FUND, OVER 400 MILLION TO LOCAL TRANSPORTATION, OVER 200 MILLION HAS GONE TO THE HERITAGE FUND, ALSO GETTING A CHUNK OF LOTTERY FUNDS, COUNTIES, ECONOMIC DEVELOPMENT, MASS TRANSIT AND COURT ADVOCATES FOR CHILDREN. LOTTERY FUNDS HAVE HELPED WITH WILDLIFE CONSERVATION, PARKS AND RECREATION, CULTURE AND ARTS, OUTDOOR EDUCATION. THE AVERAGE LOTTERY PLAYER, IS 47 YEARS OLD, MAKES JUST UNDER $45,000 ANNUALLY. 64% OF PLAYERS HAD SOME COLLEGE, BY A SLIM MAJORITY MOST PLAYERS ARE MEN.

>> MICHAEL: HERE TO TELL US MORE ABOUT PROPOSITION 301 IS IRA RUBINS, CHAIR OF THE "PRESERVE THE LOTTERY COMMITTEE." ALSO HERE IS JEFF GROSCOST WHO OPPOSES CONTINUATION OF THE LOTTERY. IRA, WHY YES ON PROPOSITION 301?

>> Ira Rubins: PROPOSITION 301 ASKS THE VOTERS TO CONTINUE THE ARIZONA LOTTERY FOR 10 YEARS. IT HAS BEEN IN EXISTENCE FOR 20 YEARS. SINCE 1980 WHEN ORIGINALLY PASSED THE BY THE VOTERS, THE LOTTERY HAS RAISED OVER $1.5 BILLION TO SUPPORT STATE PROJECTS AND PROGRAMS, INCLUDING THE HERITAGE FUND, LOCAL TRANSPORTATION PROGRAMS, THE COUNTY ASSISTANCE PROGRAMS AND THE COURT APPOINTED SPECIAL ADVOCATE PROGRAM, CASA. CASA RECEIVES ITS ONLY FUNDING FROM LOTTERY MONIES. ADDITIONALLY, $580 MILLION OVER THE LAST 20 YEARS HAS GONE TO THE STATE'S GENERAL FUND. IF THE LOTTERY EXPIRES, THE STATE WILL LOSE ABOUT $79 MILLION JUST IN THIS PAST YEAR, GIVEN THE FIGURES OF REVENUE. THE LOTTERY HAS BEEN GOOD FOR THE STATE. IN THE LAST FIVE TO 10 YEARS IT'S BEEN RUN WELL, RECEIVED WELL, AND SHOWN A BENEFIT TO THE STATE AND CITIZENS. SO CONTINUE IT.

>> MICHAEL: YOU CAN'T WIN IF YOU DON'T PLAY. WHY DON'T YOU WANT TO PLAY?

>> Jeff Groscost: I THINK A BETTER STATEMENT MAYBE YOU CAN'T LOSE IF YOU DON'T PLAY. THIS IS A LOTTERY THAT HAS HAD PROBLEMS FOR ITS ENTIRE LIFETIME, THINGS SUCH AS NOT PROGRAMMING IN A NUMBER 9 COUPLE OF YEARS AGO. AFTER TWO YEARS OF PEOPLE NOT WINNING BECAUSE THEY CHOSE NUMBER 9, WE FOUND THAT'S BECAUSE OF A PROGRAMMING ERROR. A BINGO GAME, ROLLED OUT AND PULLED BACK IN AFTER TWO MONTHS WASTING THE MONEY OF ALL THE PRINTING, LITERALLY TRYING TO PUT SLOT MACHINES IN CIRCLE K'S UNDER THE BANNER OF VIDEO LOTTERY TERMINALS AND ULTIMATELY SINCE THE THIRD YEAR IN OPERATION IT HAS BEEN LOSING REVENUE EVERY YEAR, EVEN IF YOU CONCEDED THAT IT WAS A GOOD THING THAT WE WENT OUT AND ACTIVELY SOLICITED OUR CITIZENS TO LEARN TO GAMBLE. THE POINT IS, OUT OF $272 MILLION THAT WAS BROUGHT IN, THE GENERAL FUND GOT ABOUT $23 MILLION, THE HERITAGE FUND ANOTHER 16 AND SOME CHANGE THIS YEAR. $40 MILLION ON $272 MILLION IS LESS THAN 15%. THAT'S A LOUSY RETURN FOR WHAT WE'RE HAVING TO PUT UP WITH IN ORDER TO RECEIVE THOSE REVENUES.

>> MICHAEL: $40 MILLION IS $40 MILLION. WHEN YOU'RE LOOKING AT 300 TO $400 MILLION SHORT. THAT'S 10 PERCENT OF THE AMOUNT THAT WE'RE SHORT. ISN'T THIS A PARTICULARLY BAD IDEA OR A BAD TIME TO CANCEL IT?

>> Jeff Groscost: IF YOU ARE LOOKING AT WAYS TO RAISE REVENUE THROUGH LICENSING VICE, THERE'S A LOT BETTER WAY. WE SHOULD MAKE IT PRIVATE AND GET IT OUT OF STATE HANDS. THIS IS THE ONE AND ONLY GAMBLING ACTIVITY ILLEGAL IN LAS VEGAS, BOTH BECAUSE IT HAS SUCH A LOW RETURN TO THE HOUSE AND PATHETIC ODDS OF WINNING TO THE PLAYERS. IF THAT WAS WHAT WE WERE LOOKING AT, YOU SHOULD LOOK AT CASINOS AND REGULATE THEM AND TAX THEM LIKE THEY DO IN LAS VEGAS AND WE WOULD BRING IN MORE REVENUE THAN YOU WILL EVER SEE FROM THE LOTTERY WHICH IS DROPPING OFF EACH YEAR.

>> MICHAEL: ARE WE NOT GETTING GOOD BANG FOR THE BUCK, IRA?

>> Ira Rubins: WE ARE. WHILE THERE WAS A PERIOD IN THE LATE '90S AND 2000, WHERE REVENUES WERE DOWN, FISCAL '02 ACTUALLY SHOWED AN INCREASE, PEOPLE WERE COMING BACK. WHILE YOU WERE CLOSE, JEFF, SOME OF YOUR FIGURES WERE WRONG. THE HERITAGE FUND GOT $17 MILLION THIS PAST YEAR OUT OF A POSSIBLE 20 WHICH IS THE MAXIMUM THEY COULD GET.

>> Jeff Groscost: THIS IS THE LOTTERY DOCUMENT IT SAYS THEY GOT 16 MILLION AND SOME CHANGE.

>> Ira Rubins: I'M LOOKING AT FUND TRANSFERS; MAYBE ON DIFFERENT YEARS.

>> Jeff Groscost: I'M LOOKING AT 2001 WHICH IS THE LAST COMPLETED YEAR.

>> Ira Rubins: THIS IS --

>> Jeff Groscost: WE'RE ALL OF THREE YEARS INTO FISCAL 2002.

>> Jeff Groscost: THE POINT IS THAT EVEN AT THAT $16 MILLION, YOU ARE $4 MILLION AWAY FROM WHAT YOU SHOULD BE RECEIVING AT THE HERITAGE FUND. THE HERITAGE DOES SOME GOOD THINGS, IT'S A GOOD PROGRAM. WE BROUGHT THE ALLIANCE IN AND TRIED TO CONVINCE THEM TO UNHITCH THEIR STAR FROM WHAT WAS A LOSING STATE REVENUE SOURCE AND TAKE IT OFF LINE. THEY DECLINED TO DO THAT. WE POINTED OUT THAT OVER THE NEXT FIVE YEARS THEY WOULD BE IN A ZERO REVENUE STATE AT WHICH POINT AT LEAST MAYBE THEN WE CAN HAVE A REAL DEBATE ABOUT WHETHER NORTH THE LOTTERY IS AN APPROPRIATE REVENUE SOURCE AS OPPOSED TO TALKING ABOUT THE DRIBBLES AND DRABS THAT IT FUNDS OF GOOD PROGRAMS.

>> MICHAEL: WHAT ABOUT SOME OF THE POINTS THAT JEFF MADE IN TERMS OF PROBLEMS WITH THE LOTTERY, PROBLEMS WITH LOTTERY GAMES, THOSE KIND OF THINGS?

>> Ira Rubins: THERE HAVE BEEN PROBLEMS IN THE PAST. SINCE JEFF HAS BEEN IN CHARGE OF THE LOTTERY, THEY HAVE NOT HAD THOSE PROBLEMS, IT HAS RUN SMOOTHLY FOR A NUMBER OF YEARS AND INDEED, AS I SAID, CONTINUING TO GROW NOW THEIR NUMBERS. SOME OF THE POINTS THAT JEFF MAKES THAT ARE VALID AND MAYBE WE SHOULD CONSIDER THOSE AFTER WE RENEW THE LOTTERY, IT DOESN'T SEEM TO MAKE SENSE TO KILL THE GOOSE BECAUSE THE EGG THAT IT LAYS ISN'T BIG ENOUGH.

>> MICHAEL: 67% OF ARIZONA VOTERS VOTED FOR THIS. YOU'RE FIGHTING AN UNPOPULAR CAUSE.

>> Jeff Groscost: I UNDERSTAND. I HAVE NEVER SHYED AWAY FROM POLL FIGURES.

>> MICHAEL: THAT WAS ELECTION RESULT.

>> Jeff Groscost: THAT'S THE ULTIMATE POLL IN MY MIND. AND YOU'RE RIGHT, I MEAN, LITERALLY THERE WAS ONLY ABOUT 34% OF THE STATE THAT THOUGHT WE SHOULD GET RID OF IT. I DON'T THINK THAT NECESSARILY IS A REFERENDUM ON THE LOTTERY PER SE, A REFERENDUM ON SOME PROGRAMS THAT PEOPLE THINK ARE FUNDED BY IT. IN FACT, 8 OF THE REVENUE RECIPIENTS THAT ARE SUPPOSED TO RECEIVE -- OF THE 8 REVENUE RECIPIENTS THAT ARE SUPPOSED TO RECEIVE REVENUE, THERE ARE THREE THAT NEVER RECEIVED A PENNY FROM THIS.

>> MICHAEL: WHAT ABOUT THE PHILOSOPHICAL POINT THAT THERE'S SOMETHING UNTOWARD ABOUT THE STATE RUNNING A NUMBERS GAME REGARDLESS OF THE MONEY IT GENERATES OR DOESN'T?

>> Ira Rubins: I DON'T THINK YOU CAN ARGUE WITH SOMEONE'S PHILOSOPHICAL POSITION. THERE ARE SOME THAT THINK THE STATE SHOULD GET OUT OF GAMBLING ALL TOGETHER, INDIANS, ALL OF THEM. OTHERS THINK IF THE STATE IS IN IT, FREE MARKET PREVAIL, OPEN IT UP. THIS IS NOT A PHILOSOPHICAL ISSUE ON THE BALLOT. THE LOTTERY HAS BEEN IN EXISTENCE FOR 20 YEARS, IT'S DONE WELL FOR THE STATE CITIZENS AND REVENUES. THE QUESTION IS LET'S EXTEND IT FOR 10 YEARS, LIKE EVERY OTHER STATE AGENCY, AND THEN DECIDE IF THEY WANT TO KEEP IT.

>> MICHAEL: JEFF, THAT'S THE REAL OBJECTION, ISN'T IT, PHILOSOPHICAL --

>> Jeff Groscost: WE SAT DOWN WITH THE HERITAGE ALLIANCE AND MADE SURE THEY RECEIVED FUNDING, THAT'S MORE THAN $3.5 MILLION MORE THAN THEY RECEIVE. FIVE YEARS AGO, I'M THE ONE THAT RAN THE LOTTERY REFORM BILL, THAT WAS GOING INTO THE GENERAL FUND BACK INTO THE LOTTERY PIPELINE. OTHERWISE, THE HERITAGE FUND WOULD NOT HAVE RECEIVED A SINGLE PENNY THIS YEAR. THE ISSUE IS, QUITE FRANKLY, SHOULD WE BE EXPENDING THE SECOND LARGEST AD BUDGET IN THE STATE TO CONVINCE OUR CITIZENS TO BASICALLY PAY A TAX WHERE WE ONLY GET 15% IN THE STATE PROGRAM OFF OF THE REVENUE. THAT IS, YOU KNOW, WOULD YOU ACCEPT DOR TAKING 85% OFF OF EVERY DOLLAR YOU COLLECT TO GET 15 CENTS FOR YOU.

>> MICHAEL: JEFF, THANK YOU FOR JOINING US. IRA RUBINS, THANKS TO YOU.

>> MICHAEL: FOR MORE INFORMATION ABOUT ALL THE ELECTION ISSUES, PLEASE VISIT CHANNEL 8'S WEBSITE AT WWW.KAET.ASU.EDU. CLICK ON "HORIZON" OR ELECTION 2002 AND FOLLOW THE LINKS.

>>> TOMORROW NIGHT ON "HORIZON" WE'LL EXAMINE BOTH SIDES OF THE CLEAN ELECTIONS ISSUE. THURSDAY WE'LL LOOK AT PROP 304 WHICH WOULD GIVE LEGISLATORS A 50 PERCENT PAY RAISE. AND FRIDAY, OUR JOURNALISTS ARE HERE WITH THEIR WEEKLY ROUNDTABLE DISCUSSION. THANK YOU VERY MUCH FOR BEING HERE ON A TUESDAY EVENING. I'M MICHAEL GRANT. HAVE A GREAT ONE. GOOD NIGHT.