Krolicki, lawmakers in flap over tobacco money
September 16, 2004
Assembly Democrats on the Interim Finance Committee say they are outraged by criticism state Treasurer Brian Krolicki leveled against them for not letting him “securitize” tobacco-settlement money.
In comments at the end of the IFC meeting Wednesday, Ways and Means Chairman Morse Arberry, D-Las Vegas, said Krolicki “needs to come here and explain the statements he made.”
But Krolicki, reached by cell phone in Wyoming, was unapologetic.
“In terms of accusing Assembly Democrats of not supporting securitization of the tobacco settlement and leaving on the table $200 million – that’s not an accusation, that’s a fact.
“I will be glad to show them how their decision not to move forward cost the state $200 million,” he said.
The anger erupted after Krolicki deputy Janice Wright told IFC she couldn’t give them any details about the financial status of the Millennium Scholarship program, which is funded entirely by tobacco settlement funds.
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Last month, however, Krolicki told the Board of Regents the scholarship program will have to be scaled back or funded with state money because the state is now getting less tobacco settlement money than originally projected because of declines in smoking.
“I find this absolutely unacceptable,” said Assemblyman David Goldwater, D-Las Vegas, when told there was no information on the program status for lawmakers Wednesday. “He doesn’t seem to have a problem bringing it up in front of the Board of Regents and pointing fingers at this body and every member of this committee for not passing his legislation. He seems to be able to produce himself and his staff for those meetings, but can’t produce some simple projections for these meetings, and quite frankly I’m outraged.”
Arberry joined in the tirade, saying “we were accused, the Assembly, of some mistakes along the way with this Millennium Scholarship.”
He said Krolicki needs to appear before the committee and explain himself and followed that with a threat to Wright:
“So you need to pass this along to him that we don’t like it, and when he comes to us for some support on some issues, then tell him don’t be surprised that we could say no to him, or he could walk in and we walk out and let him testify to an empty room.
“We don’t appreciate what he did to us with the Board of Regents and then not show up today.”
Krolicki said his absence couldn’t have been a surprise, since he notified Arberry and others on IFC well in advance he had a long-standing prior commitment as chairman of the National Association of State Treasurers Corporate Governance Committee.
“I’m not accusing anyone of anything,” he said after being told of the IFC comments. “I’m just saying by not proceeding with securitization, they cost us.”
He said securitization – in which the state would have sold rights to collect annual tobacco money payments to a private firm in trade for a guaranteed up-front payment – was presented to lawmakers in 2001 and 2003, but that the proposal was never acted on in the Assembly.
Opponents there said it appeared the state was just giving away half or more of the total settlement money to a private investor. But that was before the settlement payments began to be reduced and tobacco bonds lost their high rating.
“When I proposed this transaction, tobacco bonds had a credit rating equal to or better than Nevada,” Krolicki said. “Now they’re junk-bond status.”
With tobacco payments reduced, he said, the state stands to lose about $100 million over the life of the settlement, and has already lost about $97 million in interest that could have been made with funds from securitization.
“That’s $200 million,” he said. “That’s the Assembly Democratic leadership’s responsibility. So a constitutional officer’s bill that was passed by the Senate was never allowed a hearing in the Assembly.”
He said, however, little will change between now and the spring so, “I suspect we’ll have many opportunities to discuss this.”
Contact Geoff Dornan at firstname.lastname@example.org or 687-8750.