Trustees of Louisiana’s Tobacco Settlement Financing Corp. on Monday gave preliminary approval to a proposal by Gov. Bobby Jindal to refund $823.1 million of bonds supported by the state’s portion of the 1998 master settlement agreement with cigarette companies.
Commissioner of Administration Kristy Nichols said the refunding should provide savings of $75 million to $85 million. The savings from lower interest rates would be allocated to a program that provides state-funded college scholarships. The program currently receives more than $100 million a year of general fund revenues, she said.
“It makes great financial sense to refinance,” Nichols said at the meeting.
State Treasurer John Kennedy, who is one of the trustees, questioned the refunding, which he said was part of Jindal’s plan to wipe out a projected revenue shortfall in fiscal 2014 of $1.3 billion.
The refunding is valid only if the money is spent appropriately, according to Kennedy. He compared the move to a home-
owner refunding a home mortgage and using the savings for non-essential needs, such as a fishing boat. “The administration is pushing the bass boat option,” he said. “I want to do what’s best for the taxpayers over the long term and not just take all of the candy up front.”
The refunding plan must be approved by the State Bond Commission, which Kennedy chairs, and the Joint Legislative Committee on the Budget.
In 2001, Louisiana securitized 60% of its payments under the Master Settlement Agreement with major tobacco companies, and issued $1.2 billion of taxable and tax-exempt bonds.