LANSING – If the state does decide to securitize a portion of its tobacco settlement monies, the funds should be for economic development purposes only, the two Senate leaders said Thursday. Even then, Senate Minority Leader Bob Emerson (D-Flint) said he needed more convincing of the value of securitization, while Senate Majority Leader Ken Sikkema (R-Wyoming) said he was comfortable with securitizing up to $1 billion of the settlement money.
Speaking at a reporters’ roundtable, Sikkema – who previously had said he was studying the securitization idea – said he was comfortable with using $1 billion of the settlement money to pay for a jobs program instead of issuing general obligation bonds.
But he absolutely opposed using any securitization monies to help stabilize Medicaid funding or to provide a new funding source for the Michigan Merit Scholarship. “Ken Sikkema will not support that,” he said, since securitizing for those purposes would be using the revenues for ongoing functions.
On Wednesday, the House Commerce Committee reported legislation to securitize up to $3 billion of the state’s tobacco settlement money for an economic development project and other purposes. The House delayed an expected vote on those bills and Single Business Tax bills as negotiations with Gov. Jennifer Granholm and others continue on the issues.
Using securitized funds instead of a bond issue to finance the economic development proposal that Ms. Granholm called for last winter, a program to help move the state into high tech industries, has some advantages over a general obligation bond, Sikkema said. It can take place quickly without the requirement of an election that must precede a general obligation bond, he said, and it would save the state the cost of an election.
But a securitized issue also would prove more expensive than a general bond because it is based on the value of the asset and carries a higher interest rate than a general obligation bond, he said.
Emerson said he had told Granholm that if securitization moves forward, the jobs proposal is the only use he would find acceptable.
“I don’t like securitization,? he said. ?I think securitization is a stupid idea because you’re taking a pretty steep discount on your money.”
Emerson said he would not support using securitization for Medicaid, the Merit scholarship, or “any other cockamamie proposal. That’s just taking money from the future.”
Before he would back the proposal, Emerson said, both Treasurer Jay Rising and Budget Director Mary Lannoye would have to convince his caucus, because when he first raised it with the caucus the members were oppose.
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