Lawmakers in New Jersey want to ban menthol cigarettes, but that loss in tax revenue could jeopardize how the state pays hospitals for treating uninsured patients
New Jersey lawmakers want to ban menthol cigarettes, an almost unprecedented public health policy experts believe would hasten declines in smoking and save the state billions of dollars in health costs.
Money generated from cigarette taxes represents a key source of revenue for New Jersey, having generated $611 million in the 2018 fiscal year, according the state‘s annual report. Roughly two-thirds of that revenue is already spoken for because of a 2009 law requiring the first $391.5 million to flow to an off-budget fund that subsidizes New Jersey hospitals for treating uninsured patients, in addition to backing some of the state's Medicaid and Medicaid and Child Insurance programs.
A menthol ban would have the effect of weakening and possibly eliminating that cushion as New Jersey pays down its cigarette tax bonds over the next decade, according to public health specialists, budget experts and ratings agencies interviewed by POLITICO. That complicates the outlook for legislation designed to yield improvements to public health while eliminating long-term health care costs incurred by the state.
“There are ways to deal with any near-term shortfall,” Conaway said in an interview. “The government, writ large — particularly the governor and the Legislature — will explore ways for dealing with the challenges.” A menthol ban could amplify the risk of that happening, said Marcy Block, a senior director at Fitch Ratings who analyzes New Jersey’s cigarette tax revenue bonds, adding that similar efforts have failed in previous legislative sessions.
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