Tobacco fund may be lost in future
CARSON CITY (AP) - State officials face the same choice that confronts many lottery winners: take a smaller wad of cash upfront or wait and hopefully collect a larger amount spread out over 20 or 25 years.
State Treasurer Brian Krolicki says that in the case of the $1.2 billion in tobacco settlement money projected to come to Nevada through 2025, it's time to take the money and run.
Otherwise, he said, Nevada's share of the national settlement could be at risk because of future lawsuits against tobacco manufacturers and a decline in smoking among consumers.
Krolicki will propose to the 2001 Legislature that the long-term tobacco payments scheduled for Nevada be sold to investors in exchange for an upfront, lump-sum payment estimated at $350 million to $450 million.
"We would be managing money, not managing tobacco industry risk," he said. "The predictability of having the cash is in Nevada's best interest."
Assemblywoman Barbara Buckley, D-Las Vegas, one of the key lawmakers who worked on the tobacco issue in the 1999 Legislature, said any such proposal would have to be given serious and thorough study.
"We would really need to weigh the benefits and the downside of enacting such a proposal," she said. "While the risk of a challenge to the settlement or a bankruptcy might be removed, it also means we would only get about 40 percent of the sum.
"We would lose millions and millions of dollars that we could use to stop people from smoking and to improve the health of children and people with disabilities," Buckley said.
Investing the lump sum would generate some additional income, but only if there was no effort to spend it instead, she said, adding that such a large amount of money might be too big a temptation for some elected officials to resist.
Krolicki said there are investors who are willing to acquire the long-term payments from the tobacco companies to the states and assume the risk that the payments could be reduced because of lawsuits or other factors.
Gov. Kenny Guinn is supportive of the idea as long as it makes good fiscal sense for Nevada, Krolicki added.
Nevada's tobacco money is being spent on health-related programs and the Millennium Scholarship program for high school graduates to attend college in Nevada.
Nevada in 1998 joined with 45 other states in an agreement with tobacco companies for payments for smoking-related illnesses for Medicaid patients. The total payment to the states as a result of the agreement was estimated at $206 billion over 25 years.