Tobacco cash plan advances
BATON ROUGE -- The Senate voted overwhelmingly Monday to authorize selling up to 40 percent of the state's $4.6 billion settlement with the tobacco companies.
The sale could yield $600 million to $800 million in cash for the state.
Senate Bill 632 by Sen. Jay Dardenne, R-Baton Rouge, now goes to the House. It has the support of Gov. Foster.
If the bill clears the House by a two-thirds majority, the State Bond Commission will be authorized -- with the concurrence of the Joint Legislative Committee on the Budget -- to sell $1.6 billion in tobacco settlement bonds.
If the tobacco companies go belly up in the next 25 years and cannot continue to pay settlement money to the state, the state will still have its $600 million to $800 million and will not have to pay off the bonds.
"I think this is the most prudent way for us to protect the people's money," Dardenne told the Senate.
If the tobacco companies stay healthy and Americans continue to smoke cigarettes, he said, the investors who buy the settlement will be the winners. If smoking continues and tobacco revenue slackens, the state will come out ahead.
If the sale is made, the proceeds will go into a trust fund that cannot be spent. The annual interest on the fund will be spent on a variety of health and education programs. Both the trust fund and the uses for the money are part of a constitutional amendment passed by the Legislature and ratified by voters in 1999.
"It just makes sense to diversify," Dardenne said. "We won't know for another 25 years whether we made the right decision or not."
The debate lasted for more than two hours. Administration floor leaders fended off most attempts to change the bill.
Sen. Lynn Dean, R-Caernarvon, urged the Senate to authorize the sale of 100 percent of the settlement. That was rejected 5-31.
"We ought to sell the whole thing and then try any way we can to put the tobacco companies out of business," Dean said.
Sen. Foster Campbell, D-Bossier City, wanted to put off any decision until a special session in October. "There's no need for us to rush into anything," he said.
Dardenne argued that there will be no rush, that the state will act only when its fiscal advisers convince the Bond Commission that the time is right to make the sale.
He told the Senate that three states -- Alabama, Alaska and South Carolina -- have already acted to sell their settlements, and Louisiana needs to be poised to act quickly.
On the final vote, only Sens. Campbell, Dean and Joe McPherson, D-Woodworth, voted no.