The unlikely connection between universal pre-K and nicotine taxes in Colorado

At the Isabella Bird Community School in Denver, preschoolers rumble around a playground as John Opp arrives to pick up his 4-year-old daughter, Giuliana, who's been diagnosed with autism.

Opp's family relies on Colorado's new universal pre-K program to help cover her tuition.

"It's kind of scary to think how much farther behind she would be if she didn't have this," he said, noting the support teachers and therapists provide.

"I got a full enough plate as it is," Opp said. "I'd rather not spend time worrying about figuring out what the cost would be. I'm just grateful that we've got some public funding and the more we can get, the better for her."

Colorado voters in 2020 approved raising hundreds of millions of dollars to establish this program, which currently enrolls more than 40,000 children. The money comes from a perhaps surprising and seemingly unrelated source — taxes on cigarettes, vapes, and other tobacco and nicotine products.

So something that's bad for people's health is now helping pay for something that's good for children's development.

While the original proposal passed by a wide margin, voters are being asked to weigh in at the polls on whether to allow the state to keep the full proceeds of the tax.

Vaping sales, in particular, have been stronger than analysts originally anticipated, which means Colorado brought in $23.65 million more than voters were originally told it would in the state's official voter guide. Rules in the state constitution say when that happens, it's up to voters to decide whether the state gets to keep the extra money or must refund it — in this case to tobacco wholesalers and distributors.

How a sin tax became linked to universal preschool

Critics of this funding model argue if Colorado wants to prioritize early childhood education, it should find room for it in the general budget, instead of putting the cost on people addicted to tobacco and nicotine.

Even some supporters of the original tax measure are uncomfortable with what they view as a Faustian bargain.

"I think that is the danger and the peril of entering this more transactional a la carte approach to funding government," said Scott Wasserman, president of the Bell Policy Center, a progressive political think tank in Denver.

Wasserman blames the Taxpayer's Bill of Rights, which says voters must approve all new taxes — something that so far, they've only been willing to do with so-called sin taxes.

"You have to come up with enticing hooks, industries that people think are fair to tax more — or sins that are fair to tax more — with very specific services that people care about," he said. "It is very important to come up with an attractive hook."

Policymakers have increasingly, and perhaps grudgingly, leaned on those attractive hooks to fund other programs. Marijuana taxes support school construction. Gaming revenues go to the community college system.

"I really resent the connection to this form of revenue source, to be honest. I don't like it, but it is what it is," said state Sen. Rachel Zenzinger, who chairs the state budget committee.

Zenzinger said she voted against using tobacco revenues to pay for universal pre-K the first time it was proposed in 2019 because she "felt like it was a regressive tax and that there are some things that we should just try and fund out of the general fund."

However, she later "reluctantly" voted to put the idea on the ballot.

"We do operate under a constrained budget, and we needed a dedicated, new revenue source in order to accomplish our goal of expanding early childhood education," Zenzinger said.

Have public health and early childhood education become competing priorities?

So what happens when a health-conscience idea comes runs into policymakers' other priorities? Colorado watched the answer play out last year when state lawmakers considered a contentious, heavily-lobbied bill to ban flavored tobacco, with the goal of cutting down on youth vaping.

At the time, Gov. Jared Polis, a Democrat, said he opposed the statewide ban, saying it should be up to local officials.

"I support local control on a wide variety of issues," Polis said.

Polis insisted his opposition was not because reduced vaping sales could cut into the funding stream for universal preschool. He noted tobacco and vape taxes also go to support anti-tobacco and addiction recovery programs.

"So it doesn't just go to early childhood [education]. It goes to actually reducing tobacco usage," he said.

House lawmakers easily passed the flavor ban but the bill failed in committee before it could get to the full Senate. One of the decisive votes was cast by Zenzinger.

"I voted against it and I killed it," she told Colorado Public Radio.

Zenzinger, a teacher who is known as a relatively pro-business Democrat, said her vote was not about protecting dollars for universal preschool.

"This was me recognizing that we were coming out of a pandemic and that my business community was suffering," she said. Owners of vape shops had testified the bill would put them out of business.

But opponents of the tobacco flavor ban saw the connection to education funding as a key element in their successful efforts to defeat the bill.

The podcast "Shaping Vaping" from the American Vapor Manufacturers devoted a show last spring to proposed ban.

Joe Miklosi, a lobbyist for the vaping industry group Rocky Mountain Smoke Free Alliance and former Democratic state representative, told listeners that protecting the revenue stream for universal pre-K drove the outcome of the vote on the ban.

"Gov. Jared Polis, kind of a moderate Democrat governor of Colorado, really made it known he didn't like this bill," he said.

Passing the statewide ban, Miklosi said, would cut into tax revenue "for one of [Polis'] top three projects: pre-K childcare."

He said the governor wanted the "sin tax revenue from what the voters voted on in 2020 and didn't want to see that gutted."

When asked to respond to Miklosi's allegations, a spokesman reiterated that Gov. Polis was motivated by his support for local control.

Nonpartisan state analysts estimated the flavor ban would have reduced the taxes going to pre-K and smoking cessation programs by nearly $20 million annually, about ten percent of what the state collected in its first year.

The episode suggests the ways Big Tobacco — or maybe it's Big Vape these days — has become entwined with Colorado politics, as the state has come to rely on taxes paid by Coloradans who are hooked on tobacco and nicotine.

'Moral ambiguity'

Back at the Isabella Bird School, Opp contemplates the ties between his daughter's classroom and Colorado's smokers and vapers. He said there is some "moral ambiguity" in taxing people's unhealthy habits.

"But if they're going to do it, can we make it a positive somehow?"

"At the end of the day, I think we're probably not getting rid of addiction and nicotine," he said. If there's good that can come out of it, such as helping kids like his daughter and others gain access to greater services, he said he can support it.

One backer of both the universal preschool program and last year's flavored tobacco ban said he didn't see conflict between the two.

"If there was a flavor ban tomorrow, I really don't think that it would be that huge of an impact on overall revenue," due to ongoing consumption of nicotine products and population growth, said Jake Williams, CEO of Healthier Colorado. "I don't think that the universal pre-K program would honestly be all that affected."

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