LANSING – Securitizing the state’s tobacco settlement money for a third time was an option proposed during a Wednesday legislative Quadrant meeting on how to solve the current year deficit in the general fund, Gongwer News Service learned.
A House source, speaking on condition of anonymity, confirmed securitization of the state’s remaining tobacco settlement money was brought up by Democrats as an option to resolving the current year budget deficit, although a spokesperson for House Speaker Andy Dillon (D-Redford Twp.) would neither confirm nor deny the idea was discussed in the meeting.
Abby Rubley said Dillon would not negotiate the budget in the press.
Lawmakers first securitized tobacco dollars in 2005 when they created the 21st Century Jobs Fund with $400 million.
But the Legislature and governor reached in that piggybank again in 2007 when the state faced an $800 million budget deficit in the 2006-2007 fiscal year, securitizing some $415 million in tobacco dollars.
Majority Republicans in the Senate have proposed using the surplus in the School Aid Fund to cover the general fund deficit, and Governor Jennifer Granholm has said she would assent to this proposal. But several majority Democrats in the House have reacted coldly to the idea, saying the money for K-12 schools should be protected.
Matt Marsden, spokesperson for Senate Majority Leader Mike Bishop (R-Rochester), said Mr. Bishop and the Senate GOP is wary of securitizing tobacco settlement money, in which the state would get a lump sum payment in exchange for selling the rights to a portion of its tobacco settlement revenues.
“It’s clear that securitzation is a dump of money up front with a tremendous debt burden in the years to come,” he said. “Obviously, it’s not something we think our membership is going to be very supportive of.”
Asked if the idea is a nonstarter, Marsden said, “The talks are going to continue. I’m not going to say something’s a nonstarter.”
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