Tobacco securitization may work in Wisconsin
The state Committee on Human Services and Aging held an informational public hearing on tobacco securitization at the Capitol yesterday.
â€œWe didnâ€™t take any action today,â€ said state Sen. Dave Hansen, D-Green Bay. â€œIt was strictly a testimony.â€
Representatives from the Department of Administration, Legislative Fiscal Bureau and National Council of State Legislators spoke for the majority of the two-hour hearing. The committee is expected to meet within the next few weeks to decide what recommendation it will give the Joint Finance Committee.
Tobacco securitization is a plan in Gov. Scott McCallumâ€™s state budget proposal that deals with the money the state is to receive from the settlement with major tobacco companies. The plan calls for the state to sell the settlement money to bond dealers to get money up front, as opposed to receiving payments over a 25-year period.
If the money is taken up front, the state will get roughly one-third or one-fourth of the projected $5.5 billion in settlement money.
McCallum calls the move â€œsound fiscal management.â€
â€œBy turning the bulk of their immediate payment over to the Wisconsin investment Board to invest, Wisconsin can turn an expected $5.6 billion in payments over the next 30 years into about $6.8 billion over that same period,â€ McCallum said.
The plan is an option for reducing the state deficit, but some legislators, such as Sen. Judy Robson, D-Beloit, chair of the committee, are not sure it is the best option.
â€œIâ€™m really very lukewarm on the idea,â€ she said. â€œWe would get some fast money, but itâ€™s selling off our future.â€
Other legislators say the tobacco-securitization plan may have to be used.
â€œWeâ€™re in a terrible financial situation,â€ said Sen. Robert Wirch, D-Kenosha. â€œItâ€™s one of the options weâ€™re exploring. Itâ€™s too early to say itâ€™s the answer, but it is a key option.â€
Four other states have implemented tobacco-securitization plans, the National Council of State Legislators said at the hearing.
Robson said the success of such plans in those states has been mixed.
â€œNot a lot of states have done it,â€ she said. â€œThose who have [sold their settlement money] have only sold parts of it â€” 20 percent, 40 percent.â€
No state has yet sold all of its settlement money, but Wisconsin and a few other states are considering it. Although the hearing was open to the public, the 50 to 60 people who attended were mainly legislators.
â€œWe havenâ€™t heard much from the public yet,â€ Robson said.
Wirch said people will become more involved once they learn more about the securitization proposal.
â€œTheyâ€™re not as aware of the financial mess as legislators are,â€ he said.
Hansen said people are concerned that if the proposal passes, securitization will not go as it is planned.
â€œSome people think if the moneyâ€™s there, the government will spend it. Thatâ€™s a concern,â€ he said.