Treasurer looking to jump start tobacco-money programs with bonds
State Treasurer Brian Krolicki says it may be possible for Nevada to jump-start its tobacco-money programs, including the state’s Millennium Scholarships, by selling bonds.
“What we’ve got is 25 years of payments that are pretty well identified,” he said. “We could actually sell bonds against those payments.”
He said he asked for the ability to at least look at that idea during the 1999 Legislature, but it was cut from the final version of the measure spelling out how to spend the $1.2 billion Nevada will get in tobacco settlement money over the next 25 years.
Krolicki repeated the idea Thursday before the interim committee studying Nevada health issues, saying he will ask the 2001 Legislature to consider bonding.
He said the idea has two benefits. First, the state would get a large amount of money immediately from the bonds – possibly as much as $750 million – instead of collecting the cash in payments of $40 million to $50 million a year.
The bond money would go into interest-earning funds to pay for millennium scholarships, health programs and the other initiatives decided on by Gov. Kenny Guinn and state lawmakers.
He said that jump-starting those programs would be better than waiting while scholarship money builds up at about $20 million a year.
Instead of using some of the money for scholarships each year, the fund would start with enough cash that interest alone would cover the scholarships and the fund could become permanent.
Second, he said, it shifts the risk that the payments might decrease over the years or even stop if legal problems for tobacco companies continue to mount or Congress goes after a federal settlement that could force tobacco companies into bankruptcy.
“We would have our money in the bank and, if there’s a problem down the road it would be absorbed by the bond holders, not the state of Nevada,” he said.
That idea may appear more attractive since states discovered over the past month that the drop in cigarette sales during the past year may cut the size of their first tobacco settlement checks this April.
But Krolicki said he isn’t advocating Nevada jump into bonding right now, that he wants to examine the idea and work out whether it is financially feasible. He said underwriters are telling his office they think the tobacco payments are secure enough to issue bonds against them.
He said New York City is bonding its tobacco money and he thinks Nevada should at least keep the option open.
“The market is looking at these tobacco-backed bonds to be much more credit worthy than we expected,” he said. “There’s a possibility we could sell the risk.”
He said he will continue investigating the idea and monitor those governments that decide to bond.
“It’s an option my office, the governor and the Legislature should keep open,” he said.