Win or lose, tobacco companies are reaping hundreds of millions of dollars thanks to a California proposal that they spent a fraction of that amount to get on the ballot this fall.

The measure known as Proposition 31asks voters whether the 2020 legislative ban on flavored tobacco products, including e-cigarettes and menthols, should be supported.

But here’s the thing: The No on Prop. campaign. 31 secured a nearly two-year pause on the ban when it collected 623,000 signatures to force the legislature’s case to a vote in the next general election. That delay cost Big Tobacco about $20 million, half paid to a firm to collect signatures.

Qualifying a referendum on the ban cleared the way for manufacturers to continue selling flavored tobacco products to Californians, including everything from mango-flavored vape pens to menthol cigarettes until voters weigh in this November.

With the state’s ban on pause, tobacco companies will earn about $830 million in revenue from sales of menthol cigarettes alone starting in 2021, said Mike Roth, a spokesman for the Yes on Prop campaign. 31, which supports the original ban. The group based that on state and federal tobacco sales data. The sales ban in Senate Bill 793 would have gone into effect on Jan. 1, 2021, but has been put on hold until at least mid-December, when the state must certify election results.

Representatives of the No on Prop campaign. 31 would not respond to questions from the Bay Area News Group when asked how much money the tobacco companies are making from the maneuver.

Campaign spending has slowed to a trickle since 2020. That suggests, observers say, that Big Tobacco isn’t spending much to win an election that polls suggest is likely a lost cause. Instead, it mostly worked to delay the inevitable.

“They’ve probably done over a billion in the last couple of years,” said Jerry Hill, a former state senator from San Mateo who sponsored the bill, SB 793, which would ban the sale of flavored tobacco products. “They didn’t need to spend any more money.”

It is not the first time that a referendum – even a failed one – has turned out to be so lucrative. The plastic bag industry sponsored a ballot measure during the 2018 election cycle that paused the plastic grocery bag ban that former Gov. Jerry Brown signed into law. The proposal, championed by the plastic bag industry, lost in the polls, but manufacturers made millions during the period they delayed the law’s impact.

Local exceptions continue to ban the sale of flavored tobacco in some California cities, including San Jose, Oakland and San Francisco.

But maintaining the menthol market in California is a particularly valuable prize for cigarette manufacturers, as menthol sales made up 36% of the total US cigarette market as of 2018.

This is a particularly controversial part of the market. The health consequences of menthol cigarette use, including premature death, disproportionately affect black Americans.

Carol McGruder, who is involved in the Yes on Proposition 31 campaign and co-chairs the African American Tobacco Control Leadership Council, said black communities have been targeted by the tobacco industry for decades. She says tens of thousands of black Americans die each year from smoking-related causes, including many from problems related to menthol cigarettes.

“These are the mothers, fathers, grandfathers of our families, and it’s causing generational harm,” McGruder said.

A study by Dr. David Mendes and Dr. Tui Le of the University of Michigan School of Public Health found that smoking-related causes were responsible for 157,000 deaths in black Americans from 1980 to 2018.

More than 7 in 10 black teens ages 12-17 who smoke use menthol cigarettes, according to the California Assembly Health Commission.

“Big tobacco companies will stop at nothing to keep selling their poison to kids to hook another generation of addicts,” Roth said, referring to the successful effort to stop the ban.

Beth Miller, a spokeswoman for No on Proposition 31, responded to the accusation in a statement, saying that “as of 2016, it is illegal to sell any tobacco or vapor products to anyone under the age of 21, flavored or not.”

So far, neither side of the tobacco debate has come close to the massive total spending on television ads and record donation draws of the groups involved in the dueling battle over Propositions 26 and 27 to legalize sports gambling in California.

The biggest contributors to the Yes on Prop campaign. The 31 include former New York Mayor Michael Bloomberg, Kaiser Health and the California Teachers Association. This year, the committee raised a total of over $3 million.

Most of the money raised by the No on Prop campaign. 31, come from big tobacco companies and their associates. Major supporters include RJ Reynolds Tobacco Company and Philip Morris USA. The two companies and their affiliates have donated over $10 million each, mostly in the form of loans.

The No on Prop. campaign. 31 declined to comment when asked why she received many of her contributions as loans.

But campaign finance experts found it unusual. “It’s really weird,” said Anne Ravel, a South Bay-based attorney and former chair of the Federal Election Commission.

Ravel pointed out that tobacco farmers could simplify the loans after the elections.

“My guess is that they think it’s going to look less worrisome to a lot of people that they’re going to get their money back,” she said, “and therefore they’re not really evil by spending a bunch of money on their behalf.”

Win or lose, here’s how tobacco companies are reaping millions in California off Prop. 31 fight

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