Posted on 03/18/2008 10:45:23 AM PDT by Diana in Wisconsin
A plan by Gov. Jim Doyle to get cash upfront to help fix the state's broken budget will cost the state $94 million in payments from tobacco companies over the long haul, an independent analysis has found.
The Democratic governor is also asking lawmakers to use more of the money generated by the plan to pay for maintaining state health programs for the poor.
Doyle has long criticized a decision by his predecessor, Scott McCallum, and a past Legislature to borrow against future payments by tobacco companies to help solve budget crises in 2001 and 2002.
The analysis released by the Legislature's nonpartisan budget office last week showed the cost to taxpayers of Doyle doing a miniature version of the same thing. That cost is also rising for the state because of a credit crunch on Wall Street that makes it more difficult to borrow money, officials said.
"I don't call that anything other than essentially what McCallum did," Todd Berry, president of the Wisconsin Taxpayers Alliance, said of Doyle's refinancing plan. "We were told we weren't going to repeat the tobacco problem."
Doyle announced the financing plan last year but has since taken the proposal a step further after learning the state would finish the current two-year budget $527 million in the hole if nothing is done.
Doyle said Friday his administration was making the best of a bad situation to raise money for health-care costs and smoking cessation efforts.
"I want to make sure that we don't do the thing that we did originally before I was governor," Doyle said of the tobacco payments. "We have to be responsible about this and use what proceeds we can gather from the tobacco settlement to help fight against tobacco use and the effects of tobacco-related illnesses."
As attorney general, Doyle helped win a settlement with tobacco companies over the costs of smoking. The settlement called for yearly payments from the companies to the state in perpetuity.
Under a plan authorized by lawmakers and McCallum, the state in 2002 borrowed against that future stream of tobacco company money, receiving $1.6 billion upfront and diverting the annual payments — potentially worth more than $5 billion — to pay off the loans, the so-called tobacco bonds. McCallum, a Republican, originally called for using part of the $1.6 billion to fight the effects of tobacco use, but in the end, it all went to plug a state budget hole.
Doyle now wants to refinance those loans, receiving a lower interest rate and extending the payments, to free up $68 million a year for the state through 2020 that could be used to balance the budget and cover health-care costs.
The cost to taxpayers comes because Doyle's plan would delay by a decade the time it takes the state to pay off its debt on the tobacco bonds and start receiving the hundreds of millions of dollars in tobacco company payments free and clear.
Currently, the state is expected to pay off those bonds by 2017. But under the Doyle plan, the state wouldn't pay them off until 2027, according to the analysis by the Legislative Fiscal Bureau.
Over the next two decades, that delay in receiving payments from the tobacco companies will cost the state $94 million in today's dollars, the Fiscal Bureau report found.
Worse conditions
Previously, Doyle and aides said the financing deal wouldn't cost taxpayers anything. Doyle's budget director, Dave Schmiedicke, said the large cost now reflects worsening conditions on Wall Street that have made it more difficult for states to borrow money.
Doyle doesn't need approval from the Legislature to refinance the tobacco bonds but does need approval to spend the money.
In his budget repair bill, Doyle last week also proposed taking an additional $15 million a year from a special endowment that was intended in large part to help smokers quit the habit. Instead, Doyle wants to use almost all of the money for the endowment's other purpose — maintaining Medicaid health programs for the poor.
The endowment is supposed to receive $68 million a year generated by the refinancing. Under Doyle's new proposal, $65 million of that would go to Medicaid each year.
Schmiedicke said Doyle wasn't backing off from a plan, passed as part of the budget in October, to spend $5 million more a year to help people quit smoking. But that $5 million increase for smoking cessation is already much less than the $20 million more a year Doyle proposed when he unveiled the refinancing plan in January 2007. Schmiedicke said the difference reflected compromises made with lawmakers to get the budget approved.
Whatever Doyle and the Legislature do with the tobacco bonds, they won't be able to make the same move again. That's because the original financing deal with the bonds only allows for one refinancing, the Legislature's budget office found.
What a relief for we taxpayers! *SMIRK*
I gotta move out of this state.
Is it O.K. for me to feed that monkey on your back? He won’t bite will he? He seems cute enough, but does appear to have a rather strong hold on youse. Cute hat he’s wearing too. What with the logo “This is a great conservative cause”
what would government do if everyone stopped smoking, institute an air tax ?
If the state wins a lawsuit against tobacco companies because they knew there were selling a product that causes health issues why then can’t a smoker sue the state for allowing that product to be sold knowing it is harmful? And, why should tax dollars subsidize the crop that causes enough health problems that constitute a lawsuit? Only in America!
Yep. If tobacco is such a horrible, deadly, LEGAL adult product, why not just ban it?
(Hint: Tax Dollars to be collected by the States...) ;)
Nanny State Ping!
As attorney general, Doyle helped win a settlement with tobacco companies over the costs of smoking. The settlement called for yearly payments from the companies to the state in perpetuity.
If he "helped" with this settlement he knows this is NOT TRUE. The payments were for 25 years, ending in 2023 and the money IS NOT coming from the companies. The deal the AG's cut with the companies allowed the companies to immediately tack on 45cents per pack so that only smokers, not tobacco compaies, pay the settlement.
Furthermore, the "settlement" was only with the 5 major companies, but because of the huge increase in price many smokers started switching brands and thus the settlement payments startd declining as did the market share of the major companies. What has now happened is that the biggies, actually primarily Philp Morris, have gone to various legislatures and had bills passed forcing the little guy (even ones not in operation at the time of the MSA) to pay into the entire fiasco.
Michigan admitted the same thing..........
Why don’t you stick a sock in it?
LOL! Thanks, Gabz. I was going to get back to him on that comment, too.
I thought we had rid ourselves of the Smoke Gnatzies around here. They annoy even those of us that DON’T smoke. Clueless. *SHAKES HEAD*
Clueless is an understatement. There are still quite a few that do not understand how NON-smokers see the sham that is so quaintly known as “Tobacco Control.”
Thanks for the ping!
Only such a screwed up system that our politicians could create would cause a windfall of money recieved into a state become a liability. why do people stand for this nonsense?!
Thieves falling out over their stolen loot. Ya gotta love it.
I see one of our finest ‘convenient conservatives’ (AB)has returned. A true piece of work.
They are already getting to that - the EPA air standard dropped, not as much as the environmentalist want, but it's going to cost everyone
figures..thanks for the info
What makes you think you are, have been or will be doing that?
Control freaks never cease to amaze me.
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