Tobacco task force lacks membership
TALLAHASSEE -- The sense of urgency that prompted the Legislature to authorize a task force that would study ways to protect the state's income from tobacco companies has apparently disappeared since the end of the legislative session.
Facing a Nov. 1 deadline for its preliminary report, the task force is still lacking its full membership and has yet to schedule a meeting.
State officials fear that lawsuits or decreased smoking could bankrupt tobacco companies and jeopardize the annual payments ranging from $423 million to $766 million that Florida is due under the terms of its 1997 settlement of a suit against the industry.
But the situation may be too volatile for any action at the moment, officials say.
A $145 billion punitive damage verdict against tobacco companies in Miami last month made it more important -- and more difficult -- for the state to find a way to make sure it continues to collect the annual payments.
Although the verdict could be overturned on appeal, it raises a threat that could be unsettling to potential buyers of bonds backed by the tobacco settlement income.
Tobacco companies agreed in 1997 to make annual payments totaling $13 billion over the next 25 years in exchange for Florida dropping a lawsuit to recover the costs of treating smoking-related illnesses in Medicaid patients.
Gov. Jeb Bush pushed hard this year for legislation that would allow the state to sell bonds backed by future revenues from the payments, thus spreading the risk to investors in a process called securitization.
But all he got was creation of a task force to make recommendations about what to do and a state corporation that will handle the bond sales if the Legislature authorizes it.
Bush emphasized the need to be ready to act quickly to take advantage of favorable market conditions. But so far, neither the task force nor the corporation has begun work.
House Speaker John Thrasher, R-Orange Park, who has three appointments to the task force and two to the corporation, has yet to make any of them.
"We are proceeding cautiously and we are talking with several individuals, and I fully expect a decision to be made soon," Thrasher spokeswoman Katie Baur said last week.
Senate President Toni Jennings, R-Orlando, still has to make one appointment to the task force.
Bush, who is chairman of both the task force and the corporation, has not pressed to get them up and running.
Elizabeth Hirst, the governor's press secretary, said the legislation accomplished the most urgent need by setting a $100 million limit on the appeal bond that tobacco companies have to post while appealing the verdict. That assures that the companies will not go bankrupt before a final court decision on their appeal.
Hirst said the Miami verdict shows why the state needs to avoid being dependent on the success of the tobacco business to pay for its health and human services programs.
"The governor also wanted the state to be ready to go to market with a deal when market conditions are favorable," Hirst said. "The taxable bond market has not been with us since before the end of the session."
The slow pace suits Sen. Locke Burt, R-Ormond Beach, who has doubts about what can be accomplished.
Burt, who was appointed to the task force by Jennings, said he still holds to the Senate view that a tax on all cigarette companies would be the best way of ensuring that the state continues to get its income even if some of them go bankrupt.
The House favored bonding half of its revenue stream from tobacco companies, getting about $2.7 billion immediately instead of a larger amount over time.
"The task force was kind of a political compromise," Burt said.
Burt said that while most lawyers seem to feel the punitive-damage verdict will eventually be overturned on appeal, it is problematic for any attempts to issue bonds now.
"It certainly didn't make things easier," Burt said.
Burt said rising interest rates have also raised the cost of bonds.
And he is not even sure that issuing bonds would really shift the risk to investors. If the tobacco companies defaulted on the bond payments, Burt said, there would be enormous pressure on the state to step in and bail out the bondholders.
House Speaker-designate Tom Feeney, R-Oviedo, said the appeal is likely to take three or four years. Feeney said he would be willing to consider other options such as the Senate plan even though the House rejected it this year.
"I'd say everything is on the table," Feeney said.
Sen. Charles Clary, R-Destin, who is on the corporation, said the state should move while the tobacco companies are still solvent.
"By the time you can safely say there's a serious danger, it's too late," Clary said.