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MINUTES of the STATE ACTIVITIES POLICY COMMITTEE co ~ September 28', 1984 ~

AGENDA STATE ACTIVITIES POLICY COMMITTEE September 28, 1984 10:00 a.m. A. Legislative Update: State and Local B. 1985 Legislative Projections C. Special Reports o Tax sunset plans o Tax study commissions o Public Relations Division report D. Administration o Budget

The State Activities Policy Committee of The Tobacco Institute met in the offices of The Tobacco Institute in Washington, on September 28, 1984. Mr. Stanley S. Scott, Chairman of the Committee, presided. Attending were W~.E. Ainsworth, Jr., Esquire of R.J. Reynolds, James R. Cherry, Esquire of Lorillard, Mr. Donald E. Mott of Liggett & Myers, Mr. Guy L. Smith, IV of Philip Morris, and Ernest Pepples, Esquire and'J. Kend'rick Wells, 111, Esquire of Brown & Williamson. Attending for The Tobacco Institute were Mr. Samuel D. Chilcote, Jr., President, Mr. Roger L. Mozingo, Senior Vice President - State Activities, Mr. William Cannell, Director ot Administrative Services, Mr. Michael J. Kerrigan, Mr. M. Hurst Marshall, Vice President - State Activities, and Mr. William Kloepfer - Senior Vice President, Public Relations. Stanley L. T'emko, Esquire of Covington & Burling, and Martin Haley of The Martin Haley Companies, were also present. (Mr. William A. O'Flaherty was excused from the meeting to attend the annual Burley and Dark Leaf Tobacco Export Association meeting which was occurring simultaneously.) The Committee was in session from 10:00 a.m. until 2:00 p.m. A vote of thanks and appreciation was unanimously accorded Mr. Michael Kerrigan whose resignation from The Tobacco Institute was announced; he is now President of the Smokeless Tobacco Council, Inc. F~+ LEGISLATIVE UPDATE r,a Mr. Mozingo reviewed: O ~ . Legislative issues now reported regularly by standard TI ~ publications. ~

Pae2 . All tax issues being given highest priority including assistance to sustain the sunset. . Possible adverse consequences in the states resulting from anticipation of the federal 8~ sunset. Mr. Scott called for action to start now, utilizing company resources, suggesting a task force to deal with the state situation. Following a comprehensive description from Mr. Chilcote of the federal need for state personnel help and a review of the federal tax situation, discussion ensued: . NCSL resolution asking Congress for an increase in the tobacco tax was withdrawn (Mr. Scott). . State tax plans should be reviewed for relevance (Mr. Chilcote). . National coalition and econometric studies possibilities (Mr. Scott). Companies will be requested for resource inventories (Mr. Mozingo). The assignment to produce plans for resource coordination will be left with Mr. Mozingo (Mr. Scott). The recently enacted tax increase bill in Maine inadvertently omitted'making it contingent on the federal sunset, Mr. Kerrigan reported. The state legislature is to correct this oversight in a session beginning on December 5 either by a separate bill or amendment, or both (Mr. Haley).

Page 3' The Minnesota Plan for Nonsmoking and Health and the Texas Task Force on Cancer reports have both been issued; legislative proposals will be developed from these studies. Similar reports may be done in other states (lri'r. Mozingo). Mr. Ainsworth, asked for comment by Mr. Scott, pointed out that the age 21 feature poses obviously serious problems to the beverage industry; the age 21 question regarding tobacco, included in the Texas Task Force report, has been referred to the Committee of Counsel. The New Jersey surtax issue was described by Mr. Kerrigan: an unsatisfactory situation, an alternative bill present, Governor Kean's position is a question mark; discussions with member companies and distributors are continuing. The possibility of changing Hawaii's ad'valorem tax, after review in detail, is not encouraging, Mr. Mozingo reported. The etfort was made but the opportunity is not present (Mr. Scott). Mr. Kerrigan reviewed the Michigan tax rollback initiative on the November ballot and recommended that the industry not get involved in the issue. SMOKING RESTRICTIONS Erie County, Pennsylvania and Fort Collins, Colorado will both be on the ballot (1,,Ir. Mozingo); Erie is a non-binding advisory question which may have impact on the ordinance currently being considered by the county legislature. A survey similar to the one in Los Angeles is underway; fit subject for a public relations program (Mr. Kerrigan).

Page 4 The possibility of a model ordinance, being aggressive in our opposition and conditioning the legislative environment were also reviewed during the Erie County discussion. Fort Collins, although different, might benefit from the same discussion (Mr. Marshall). A document was distributed' describing two optional programs; Mr. Pepples requested the staff recommen- d'ation. Mr. Mozingo declared for the second option to work through coalitions, and~ to make some limited contribution to the campaign. The industry should draw the line and fight, Mr. Smith emphasized. Other observations and'comments followed': the desirability of opposing in other than direct ways (Mr. Ainsworth); taking a chance on an almost sure loser (Mr. Cherry); the inadvisability of loss by default (Mr. Mott); the desirability of avoiding the contest entirely (Mr. Pepples); and the effect on other communities, expertise of local campaign leaders, regional press effect, and the need to show strength provide more pluses than minuses (Mr. Chilcote). Mr. Scott summarized: • Even through a loss, we win by trying. . We develop strength with wholesalers. • Alternative means of supporting the campaign require further consideration and decision. Discussion of the summary points by Messrs. Pepples, Scott, Chilcote and Marshall developed'several alternatives to be discussed'~ in a conference call on Monday at 3:00 p.m.

Page 5 FURTHER DISCUSSION ABOUT ERIE An indirect positioning of the issue, no visible industry role, and conduct of a public relations campaign to point out frivolity were outlined by Mr. Mozingo. Mr. Smith suggested that we must get involved and give a strong signal to the legislators in Erie County. Mr. Sparber discussed the potential for participation in the campaign by labor. Mr. Scott, speaking for the Committee, said to proceed with a public relations campaign. CALIFORNIA (Editorial comment: At the time of this meeting, the vote on the Los Angeles ordinance had~not been taken.) The consultants were continuing their efforts, and the future was difficult to predict based on information from California. Also discussed was the development of a legislative proposal by the California Tobacco Education~Council to replace their now-eliminated initiative proposal for a 1/2~ per pack tax increase. SAMPLING BANS A possible amendment to the Boston sampling ban and the political background of the Boston action were described by Mr. Mozingo. Messrs. Wells, Mozingo and Kerrigan discussed the possibility of a local preemption amendment to the commercial code in some states, developed by selectively chosen standard-bearers; Mr. Wells recommended considering outdoor advertising groups, to check with them, and that counsel should review the concept as it would apply in each state.

Page 6 TAXES ON SAIMQ'LE PACKS Mr. Mozingo suggested that the industry attempt to change the tax rate on sample packs to a per-stick rate in states where that is not now the case. This concept was supported by Messrs. Pepples and Ainsworth. Possible wholesaler association disagreement was mentioned. Mr. Scott summarized by requesting the question be probed and a report be returned. ADMINISTRATION AND SUPPORT The five regional lobbyists' meetings, with their focus on local planning and active participation by the lobbyists were described (Mr. Mozingo). The Committee discussed the strategy in the "sunset states" and the importance of tax study commissions. riozingo); The background of Division budgeting was reviewed (Mr; comfort with the figures but need for assurance of personnel quality were pointed out (Mr. Scott); examples of improving quality while making replacements and of staf.f deployment were- given (Mr. Mozingo). Discussions followed on the efficacy of local political campaign contributions (Mr. Pepples) and financial assistance to distributor associations for their legislative support. THE PUBLIC RELATIONS DIVISION Mr. Sparber reported: . Assigned proj;ects are all under way.

Page 7 . The workplace problem could open relationships with Affirmative Action officers and law enforcement groups. . A supporting economist (Dr. Eva Baker) has been identified. The Chairman asked if one-on-one interviews were being conducted at headquarters of major corporations; Mr. Kloepfer replied affirmatively and stated that the contacts were originating from TI to the Fortune 500 companies. Twenty-eight of the Fortune 100 are considering smoking restriction regulations (Mr. Sparber). All Fortune 500 companies, position known or not known, should be surveyed, Mr. Scott said. The first proposed supporting advertisement was distributed; Mr. Pepples emphasized the importance of the workplace issue and underscored the need for personal contact with companies at the local level by the lobbyists. The recent Japanese study was discussed (Mr. Chilcote); there had been no advanced warning of the article's appearance (Mr. Scott). The importance of scientific analysis and scientific witnesses being available was emphasized by Messrs. Chilcote and Kloepfer. Following discussion of several specific budget items, the recommended 1985 budget was approved. As Chairman, Mr. Scott reaffirmed the schedule of the next meeting at 10:00 a.m. at The Tobacco Institute offices on November 16, 1984. CZ ra ~ 0 ~ Cr UT