Wednesday, 11 March 2015 13:47
Kennedy urges Jindal admin not to burn Louisiana tobacco settlement
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As the Louisiana legislative session approaches with a $1.6B budget shortfall, State Treasurer John Kennedy urged the Division of Administration Wednesday to reconsider selling the remaining portion of the state's tobacco settlement.

 

"Any farmer knows it's a bad idea to sell your seed corn because then you can't plant next year's crop," said Treasurer Kennedy. "By selling the rest of the tobacco settlement, we'll be adding to the structural deficit in the budget. We should fix the budget, not sell off yet another taxpayer asset like a junkie selling his TV or smartphone to buy another fix."

Treasurer Kennedy led the effort to sell 60 percent of the state's tobacco settlement income stream to investors in 2001 to hedge against the possibility of tobacco companies declaring bankruptcy. The money went into a trust fund that earns money for health care, education and TOPS.

In the past few years, the state has sold property, spent all the money in the Medicaid Trust Fund for the Elderly, raided the Artificial Reef Fund, taken money out of the state employee health insurance claims fund and declared numerous tax amnesties in order to generate one-time cash to fix holes in the budget, which has caused a $1.6 billion structural deficit. Moody's and Standard & Poor's have put Louisiana on negative credit watch as a result. The Division's new proposal would sell the remaining portion of the tobacco settlement in order to generate $750 million for spending. The settlement stems from tobacco companies' settlement of lawsuits over states' smoking-related health care costs.

"My fear is that all $750 million of this money will be spent. Everyone will want a piece of the pie," said Treasurer Kennedy. "That will only add to our structural deficit, and, besides, what will we do next once the money is gone? We've got to stop thinking about the next election and begin thinking about the next generation. Hocking the family silver to pay the rent is not the answer. Don't hold this fire sale."

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