Plan to Cash Out Tobacco Settlement Advances

Mar 18, 2015

The Jindal administration’s plan to sell off the remaining 40 percent of Louisiana’s tax settlement went before the board that oversees the tobacco dollars Tuesday. The administration wants to complete the sale by June 30, the end of the current fiscal year. They’re hoping the money will be available to help with balancing the 2016 budget, which has an anticipated $1.6-billion shortfall.

“You never make a financial decision this important when you’re under this kind of financial pressure,” state Treasurer John Kennedy objected to board members.

The administration was asking for approval of hiring consultants and bankers to facilitate the sale, yet the firms had not been selected through an open bid process — something Kennedy also expressed reservations about.

“I don’t like hand-picking people,” Kennedy observed. “I’m not saying there’s anything untoward in the way you’ve picked ‘em, but I don’t like it. It looks bad.”

The entire plan was presented via power-point, and Kennedy said it didn’t even begin to answer all the questions that should be asked.

“Thirty minutes of a good presentation does not constitute due diligence on a $700-million transaction,” the treasurer warned. He then urged waiting until after the legislature has said whether they even want to sell off the last of the settlement.

But House Speaker Chuck Kleckley echoed the administration’s sense of urgency, noting that the whole deal needs multiple approvals before the legislative session ends.

“You have many, many obstacles. You have many hurdles. This thing’ll be vetted many, many times between now and June 11,” Kleckley said. “I don’t see any reason not to continue.”

Kennedy reminded the board that the settlement provides annual funding for health care and education through 2023, and cashing in the remainder could provide an irresistible temptation to lawmakers struggling with a major budget deficit.

“You dangle $700-million in front of the Louisiana legislature right now, and it’s going to be spent as fast as green grass through a goose,” Kennedy said.

The plan was okayed by the Tobacco Settlement Funding Corporation Board, on a 12-1 vote. Kennedy was the lone nay. The next hearing for the plan is with the state Bond Commission — which is chaired by Treasurer Kennedy.