BATON ROUGE, La. (AP) — Treasurer John Kennedy balked Wednesday at Gov. Bobby Jindal's proposal to sell the last piece of Louisiana's tobacco settlement for upfront cash to pay for Louisiana's free college tuition program called TOPS.
Kennedy said the governor has used too many quick fixes to patch each year's budget together, and he said a tobacco settlement sale would be more of the same as the state faces a $1.6 billion shortfall next year. The Republican treasurer called the idea the equivalent of "hocking the family silver to pay the rent."
"I think they're desperate. You don't make a major financial decision like this when your back's against the wall and you're desperate for money. This is a very valuable asset to the state," he said. "It's another short-term gimmick."
Commissioner of Administration Kristy Nichols, the governor's chief budget adviser, said the idea being considered would bring in $50 million in new revenue annually for up to eight years to pay for TOPS — not just a one-year infusion of cash.
"That's not even on the table for us," Nichols said. "We are not considering a sale where all of the proceeds would be used in year one."
The sale would need legislative and other approvals. The Tobacco Settlement Financing Corp. board will consider the idea first, at its meeting next week.
Louisiana is one of many states that settled lawsuits for claims of smokers' deaths and health costs against tobacco companies in 1998 in return for installments of money each year.
The state sold 60 percent of its settlement to investors for $1.2 billion through a bond sale in 2001, rather than risk tobacco companies going belly-up later and not making their settlement payments. The dollars were socked into a trust fund, with interest earnings used annually to help fund TOPS, along with other health and education programs.
The Jindal administration proposal would be structured differently. It would spend all the dollars that are received over seven to eight years — eliminating the yearly revenue stream after that.
Nichols said the state would receive an estimated $750 million or more through the sale.
About $100 million would be spent per year, under the Jindal administration plan. Half of the money would pay for items that already get dollars from the annual settlement payments, including TOPS and health care programs. The remaining $50 million each year would also be steered to TOPS, until the dollars are depleted, Nichols said.
She said with tobacco use going down, the long-term value of the settlement is at risk and the state should explore a sale while interest rates are low.
Kennedy challenged those assumptions. He also disagreed with selling the settlement for a few years of revenue, rather than a long-term trust fund. He equated the idea to Jindal-backed sales of state property and other one-time budget maneuvers that have drawn criticism from national credit rating agencies.
"We should fix the budget, not sell off yet another taxpayer asset like a junkie selling his TV or smartphone to buy another fix," Kennedy said.