News: LA Getting less money

?
Panel backs sale of tobacco deal

By JOHN LAPLANT, Advocate Capitol News Bureau
Feb 13, 2007

The Blanco administration wants to sell the state’s remaining tobacco settlement to speed up the fight against coastal erosion and help pay ordinary state expenses.

Tobacco Settlement Financing Corp. — made up largely of state officials — also decided Monday to refinance the tobacco-settlement revenue it sold in 2001.

The panel voted 6-1 to hire Wall Street investment giant Bear Stearns as senior manager to handle the complex deal.

Only State Treasurer John Kennedy voted against the sale, arguing that the issue was hastily added to the panel’s agenda and that “we’re not sure we’re getting the best price.”

The two-part deal could raise an estimated $1.5 billion to $1.8 billion for state government, according to Barbara Goodson, assistant commissioner of administration for management and finance.

“We’re doing it for the long-term safekeeping of the money, to basically protect the future,” Goodson said.

Goodson said about $350 million would go to coastal erosion efforts, as ordered by the state constitution. The state needs billions to restore its receding coastline.

The rest would go into another constitutional fund that invests the tobacco windfall and spends only the interest on education and health programs.

Goodson said experts advised the panel that this is a good time to make such a deal to maximize the state’s return.

She said the arrangements still requires approval by two other panels and the full Legislature.

Kennedy said he is not convinced this is the best time to make such a deal with the taxpayers’ money. He said the only experts who talked to the panel are from investment firms that will make money off the deal.

“I asked to wait to hear from other experts,” Kennedy said.

“I don’t understand why the governor’s in such a hurry,” he said.

He noted that some states are selling their tobacco-settlement money to shore up sagging state budgets, but Louisiana government has a large budget surplus.

In 1998, major tobacco companies agreed to pay the states more than $200 billion over 25 years to settle lawsuits claiming that smoking costs the states massive sums for health care. Louisiana’s share was about $4 billion.

In 2001, Louisiana sold investors 60 percent of its future tobacco-settlement revenue.

Investors paid the state $1.2 billion — about half what they expect to get back from the tobacco companies over time. However, if the tobacco companies fail to pay for some reason, such as bankruptcy or another court ruling, then the investors — not the state – will lose money.

Goodson said some tobacco companies are making noises about protesting their payments, making future revenue less certain.

Selling off the projected revenue will reduce the state’s risk, giving it certain cash now in exchange for less certain revenue over time, Goodson said.

The corporation — mostly state officials — voted Monday to refinance and add 10 years to the payout period for the 2001 bond sale because of low current interest rates, Goodson said.

The panel also voted to sell bonds to investors for the remaining 40 percent of the promised cash from the tobacco companies.

Goodson said the state Bond Commission and Joint Legislative Committee on the Budget must review the deal, and the full Legislature would have to approve it in a mail ballot. She said all that will take about two months.

---

I’d just love to see the antis argument against selling the tobacco settlement money to use for home owners relief because of the devastation from Katrina! They can only sit by and pray it doesn’t happen or maybe they can protest the sale and come off as the biggest selfish arrogant nannys that they are.
– A Newsletter Reader

****************

10/9/2006

The following is a statement from Governor Blanco regarding the insurance crises. There are two insurance issues. One is homeowners and the other is casualty insurance. Governor Blanco does not make it clear whether the insurance relief she is providing deals with one or the other or both. Homeowner’s insurance is extremely difficult to obtain but casualty insurance for businesses have become virtually not affordable. Governor Blanco does state in her release that “Tomorrow, I?m meeting with the companies that insure Louisiana?s insurance companies. I?m urging them to provide insurance companies the backup they need to continue operating in Louisiana. Stay tuned for an update on this effort.”, but she non-specific as to which insurance policies or type of coverage (whether homeowners or casualty insurance) she is referring. An attempt has been made to contact her office for clarification.

Here is the statement from Governor Blanco:

We need insurance rate relief and we need it now! Last year?s 15% assessment that caused a one-time rate hike blew a hole in the pocketbooks of our citizens. That bombshell added insult to injury. This was a bull?s eye hit to personal finances in a year of unprecedented suffering. Today I promise real relief to our people in the form of money in the bank. We?re going to refund every penny of that 15% rate spike to the people of this state.

What does this mean for the average policy holder who paid the hike? It means you can expect a check reimbursing you for this one-time assessment after the first of the year.

For example, a policyholder with a $1,000 dollar a year policy who experiences the increase can expect a check in the ballpark of $100 to $150 dollars. I?ve called on the Department of Revenue to issue these checks.

I?m not about to sit back and hope the insurance situation resolv:es itself. I?m acting on an aggressive plan that will refund, restore, and renew our push for affordability.

Today I?m committing to refund the 15% increases in one-time checks to our people;

Next, I?ve pledged to restore affordability to the best of my ability.

I?ve stated my intention to cover hundreds of millions of dollars of the Citizens dept obligation to drive rates down for the foreseeable future;

Finally, I?ve promised to renew our efforts to retain, attract and bring back insurance companies to Louisiana.

Tomorrow, I?m meeting with the companies that insure Louisiana?s insurance companies. I?m urging them to provide insurance companies the backup they need to continue operating in Louisiana. Stay tuned for an update on this effort.

You may ask how we intend to finance this aggressive plan for rate relief. Here?s my answer:

I?m prepared to devote a significant portion of the surplus to rate relief. This comes on top of the $50 million already appropriated to the disaster fund.

Next, I?m asking the legislature and the citizens of this state to help me expedite relief by selling the remaining tobacco settlement money.

People have had their eyes on the tobacco settlement money for years. Several months ago, I received a call from the State Treasurer suggesting that we use the tobacco settlement to fund a housing program. I said, “Thanks, but no thanks.”

I was in the fight of my life with the White House to secure the federal funding we needed for our housing program. As I told the Treasurer, Mississippi had received full funding for housing from the feds, and I wanted no less. I was determined to secure the federal funding because I knew there would be other important uses for the tobacco settlement. This is one of them.

I?m calling on the legislature and the people to adopt a Constitutional Amendment that will devote the additional tobacco settlement to fund the entire Citizens Debt obligation. Doing this will help to shore up long-term rate relief.

Louisiana, rate relief is on the way! I urge the legislature to join with me.

Together, we will move forward with this plan to refund, restore and renew affordable insurance to the people who need it most.

Thank you.

8/4/2005
By MELINDA DESLATTE
The Associated Press

BATON ROUGE, La. (AP) — With the number of smokers decreasing nationwide and the market share of certain tobacco companies declining, Louisiana has received $60 million less than expected so far from its annual payments as part of the national tobacco settlement.

State Treasurer John Kennedy said that indicates Louisiana followed the right path in selling off 60 percent of the state’s share of the tobacco settlement early, for part of its projected worth.

And state officials are starting to consider whether they should sell the remaining 40 percent — a move that would end Louisiana’s link to the fate of the tobacco companies but could give the state less cash than it might receive through annual payments. A panel will start the initial discussion of the prospect at a meeting next week.

Louisiana is one of 46 states that settled lawsuits with tobacco companies in 1998 in return for installments of money. The $206 billion settlement requires cigarette companies to make the payments as reimbursement for health care costs related to tobacco use. Louisiana was to get more than $4.6 billion over 25 years.

So far, Louisiana has brought in $1.6 billion from the tobacco settlement — including nearly $1.1 billion received in a lump sum in 2001 when the state sold 60 percent of its tobacco settlement to get upfront cash rather than risk tobacco companies going belly-up later and not paying their bills.

The mechanics of the sale involved selling bonds to investors. The investors pay the state an upfront price for the bonds — in this case, about 53 cents on the dollar — then collect the monthly installments from the tobacco companies. If the tobacco companies cannot continue the annual installments that retire the bonds, the state isn’t held responsible.

Louisiana continues to take in the money from the regular payments for the remaining 40 percent.

The payments from the tobacco companies are tied to a series of variables, including the number of cigarettes smoked and a provision that allows the companies in the settlement to lower their payments if they lose market share to companies not in the settlement. Both of those factors have caused Louisiana and other states to receive less than projected in the initial agreement, Kennedy said.

The state started bringing in less than expected even before it sold part of the settlement and has received less than expected all but two years of the seven years of payments made since 1999, according to a summary from the treasurer’s office.

“In hindsight, it’s pretty clear that we were smart in selling 60 percent,” Kennedy said. “You just don’t know at what point, if there ever will be one, that the tobacco companies won’t make a payment. We sold 60 percent so we don’t have that risk anymore on that portion.”

Twenty states have sold at least part of their tobacco settlements for upfront cash, with five states selling their entire settlements to investors, according to data from the Campaign for Tobacco-Free Kids.

Louisiana has invested nearly all of its tobacco settlement money into trust funds for education and health care, using the interest earnings from those funds each year for programs like the state’s free college tuition program known as TOPS. Many other states have been criticized for using their tobacco settlement earnings simply to plug budget holes.

But now, state officials are trying to determine whether Louisiana should sell its remaining 40 percent and stop worrying about the annual tobacco payments entirely. The special agency set up to sell the tobacco settlement bonds to investors in 2001 has scheduled a meeting for Thursday to start talking about whether the state should sell.

The Legislature already has authorized such a sale, but it still would require approval from the state Bond Commission, headed by Kennedy and made up of lawmakers, representatives of the governor’s office and other state officials.

The Campaign for Tobacco-Free Kids and the American Lung Association both say states’ selling their shares of the national tobacco settlement aren’t getting enough for the sales.

The organizations — which have complained particularly about states selling their shares to plug budget holes — said the winners in the deals are the financial firms that make the arrangements. The Campaign for Tobacco-Free Kids also questioned whether states would be free of obligations to investors who buy the settlement bonds if the values significantly dropped.

Before any determinations are made, Kennedy said Louisiana needs to get assessments from bond experts about how much could be earned from such a sale — in other words, whether the state would lose too much money or get a pretty good deal.

“We’re bringing in less so that would suggest that you might want to sell, but on the other hand, because we’re bringing in less, you have to look at the price of the bonds,” Kennedy said.

8/4/2005

Louisiana is one of 46 states that is sharing in a $206 billion settlement with tobacco companies, negotiated in 1998 to end lawsuits involving health care costs related to tobacco use.

A look at the settlement:

_Louisiana’s share over 25 years was projected at more than $4.6 billion.

_In 2001, Louisiana sold 60 percent of its tobacco settlement to investors for an upfront sum of nearly $1.1 billion.

_The state continues to receive payments from the tobacco companies for the remaining 40 percent, but those payments are coming in at less than projected in the original settlement.

_Louisiana has received nearly $60 million less than was expected in seven years of payments from 1999 to 2005.

_Most of the money goes into trust funds, and the interest earned from those funds pays for education and health care programs.

http://www.nola.com/