Paying for preschool with a $1 a pack cigarette tax

President Obama’s plan to pay for universal preschool for 4-year-olds by doubling the federal tax on cigarettes was quickly attacked by tobacco companies, which argued Wednesday that it is unfair to saddle smokers with the costs.

In discussing the administration’s proposed 2014 budget, Education Secretary Arne Duncan told reporters that raising the federal tobacco tax by 94 cents would generate $75 billion over the next decade, enough to pay for federal subsidies to states to enroll all low-income and some moderate-income 4-year-olds in quality preschool.

The president’s plan would expand such preschool services to 1.1 million additional four-year-olds from low- and moderate-income families, according to the Education Department.

Duncan called the early childhood education plan “historic,” saying it marked the largest expansion of educational opportunity in generations.

And funding it with an increase in the cigarette tax would also have the public health benefit of discouraging smoking, especially among young people, he said. Health experts estimate the higher tax would discourage as many as 233,000 young people from taking up smoking, he said.

“This is the right thing to use these resources to transform the opportunities for these children forever,” Duncan said. “We think this is the right thing to do.”

It is unclear whether the proposal has support on Capitol Hill, and Duncan said he would lobby hard. “We don’t want to fight, but if we need to fight, it’s absolutely a fight worth having,” Duncan said.

Altria and R.J. Reynolds, the country’s two largest tobacco manufacturers, criticized the plan. “We think it is patently unfair to single out adult tobacco consumers with another federal tobacco tax increase to pay for a broad, new government spending program claimed to have benefits for everyone,” said David Sutton, spokesman for Altria, which makes Marlboro and 14 other cigarette brands.

According to the Centers for Disease Control, the median household income in 2011 for adult smokers was $27,000, compared to $45,761 for non-smokers.

Bryan Hatchell, a spokesman for R.J. Reynolds, questioned the wisdom of paying for preschool with a tax that will drive down cigarette purchases, ultimately reducing the funding stream for the program.

“If you’re successful in driving down smoking, you’re dooming programs to nearly immediate budget shortfalls,” Hatchell said. “This means that states will be left holding the bag for funding, or even more new taxes will have to be imposed in the future.”

The administration said the plan will be a partnership with the states. In the first two years, the federal government would pay 91 percent of the costs, with participating states paying 9 percent. The ratio would gradually shift until the states are paying 75 percent and the federal government 25 percent by the 10th year.

The president’s total education budget calls for a 4.6 percent boost to discretionary spending, to $71.2 billion.

That’s in addition to $14.5 billion the federal government gives to states to help educate poor children and another $11.6 billion sent to states to pay for educating disabled students. Spending for those two categories had been cut 5 percent under sequestration; Obama is seeking to restore funding to 2012 levels prior to the across-the-board cuts.

Obama is proposing several initiatives aimed at improving high school and streamlining federal programs that support education in science, technology, engineering and math. He wants to expand the competitive grants that have become a signature of his education policy, this time creating a college version of Race to the Top, which would award $1 billion in competitive grants to states that make college more affordable.

The budget calls for $300 million for a new program that would reward high schools that work with employers and local colleges so that high school students are learning skills needed for careers and college. In his State of the Union address, the president highlighted an example of this kind of re-engineered high school, P-TECH in New York City. A partnership between IBM, the City University of New York and the public school system, P-TECH is the nation’s first 9-14 school, where students can earn both a high school diploma and an associate degree. New York Gov. Andrew Cuomo (D) plans to open 10 more high schools in his state modeled after P-TECH.

The president wants to consolidate 90 programs that exist among 11 different federal agencies that are aimed at improving STEM education into one initiative managed by the Department of Education with help from the National Science Foundation and the Smithsonian Institution. The new, streamlined $180 million program would focus on four areas: K-12 instruction, undergraduate education, graduate fellowships and less formal educational activities that take place outside classrooms.

In higher education, Obama proposed to hitch federal student loan rates to a market benchmark, ending the current practice of Congress setting the rates. The proposal aims to solve a dilemma lawmakers face: under the law, rates on what are known as subsidized Stafford loans are scheduled to double, from 3.4 percent to 6.8 percent, on July 1. Student advocates say an abrupt rate hike would undermine efforts to make college more affordable at a time of mounting student debt.

Under Obama’s plan, rates for such loans would be tied to the rate of the government’s 10-year Treasury bill. In the short term, student loan rates would remain low. Some student advocates worry, though, that rates could rise in coming years without limit and hit new borrowers sharply in the wallet. Obama officials say the government would cushion the blow of rising rates through programs to ensure that borrowers don’t have to pay more than 10 percent of their discretionary income on loan payments.

The plan calls for such loan rates to be fixed for the term of the loan, meaning that while rates generally would fluctuate with the market, the rate for an individual loan would not change after it is issued.

Last year lawmakers faced a similar quandary over a statute that would have doubled student loan rates. They opted to freeze the 3.4 percent rate for a year with the support of Obama and Republican presidential candidate Mitt Romney.

Nick Anderson contributed to this report.

Lyndsey Layton has been covering national education since 2011, writing about everything from parent trigger laws to poverty’s impact on education to the shifting politics of school reform.
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