Out in the budget-beleaguered states, politicians are again eying distributions from the tobacco master settlement agreement -- 10 years on and still producing cash -- to ease their financial problems. Since it's public revenue raised outside the legislative process, drawing on the dollars appears a politically safe route. You know, "We've balanced the budget without raising taxes!" Or, "The federal government wouldn't help us, so we're forced into this step. At least we didn't raise taxes."
Unfortunately for the borrowers and re-allocators, the financial crisis has made "creative financing" more difficult. From around the states:
- Las Vegas Review Journal: "CARSON CITY -- Lt. Gov. Brian Krolicki said Friday the state blew a chance to gain $600 million when legislators did not consider his tobacco revenue plan during a special session in June...'It would have served us well at this moment to fill the holes in the budget,' Krolicki said."
- Tacoma News Tribune: "Washington receives between $125 million and $160 million a year from the tobacco companies. That's the state's share of the $216 billion nationwide settlement reached in 1998 in which tobacco companies agreed to pay states to settle dozens of lawsuits. Those payments are supposed to continue forever...The state uses just $55 million of that each year to make payments on the 2002 loan. The question is, will the Legislature and governor borrow from the settlement money again?"
- The Lakeland Ledger, Florida: "The state also could borrow up to $1 billion from the Lawton Chiles Endowment Fund, which invests money from the state's tobacco settlement for future use on health programs for children and the elderly.... Sink, though, said the Chiles endowment, unlike the other trust funds, is invested for the long term mostly in stocks and other quities.
- 'You can't just go over there and say 'Send us a billion dollars tomorrow' because they don't have a billion dollars,' Sink said. 'They would have to sell out of their investment.'
- Fitch Ratings: Fitch Places Golden State Tobacco Securitization Corp's Bonds on Rtg Watch Negative
- Triangle Business Journal: "ROCKY MOUNT - The Golden Leaf Foundation, which was set up to help North Carolina overcome the demise of the state's tobacco industry, will not be in a giving mood in 2009 due to a $100 million loan and poor investment returns... Golden Leaf will divert its 2009 share of federal tobacco settlement money to pay down a large portion of the $100 million debt that was taken on to fund construction of a facility for Spirit AeroSystems at the North Carolina Global TransPark, says new Golden Leaf President Dan Gerlach."