Eight states are using proceeds from the tobacco settlement to reduce state budget deficits, and six more are considering it, according to the National Conference of State Legislatures.How could anyone ever doubt it was all about the money from the start? Thank you for smoking, indeed.
Five of these states have already had their credit ratings lowered by the three main credit agencies or have been placed on alert about the possibility. New Jersey and Wisconsin have been downgraded, while California, Oregon and Washington are on the alert lists. When ratings are lowered, states have to pay more when selling bonds to compensate investors for the additional risk, raising their costs of capital by millions of dollars for projects from roads to schools.
To generate revenue now, these states are selling municipal bonds tied to some or all of the first 25 years of expected payments from the tobacco companies, under a pact signed with 46 states that has been valued at $206 billion. The rating agencies are concerned that states may be opting for a one-time infusion to help reduce a deficit and that such borrowing is a sure sign of fiscal distress.
Thursday, December 05, 2002
Life Imitates Satire 3: In this case actual existing satire. Christopher Buckley wrote a satirical novel entitled Thank You For Smoking concerning the various farces and shenanigans perpetrated by the government and special interests in the name of public health and safety. I haven't read it yet, but I'd be willing to bet there is subject matter along the lines of this article at the NYT about how States are banking heavily on the money from the Big Tobacco settlement. Get this: