Krolicki returning with tobacco securitization deal

State Treasurer Brian Krolicki will take his plan to "securitize" Nevada's tobacco settlement back to the 2003 Legislature.

The plan would sell Nevada's tobacco payments over the next 15 to 20 years to a private investor in trade for a lump sum payment immediately. He estimated Nevada would get a check for between $400 million and $500 million. In return, the buyer would get the right to invest the state's annual tobacco payments totaling $1.1 billion over 20 years.

He took the idea to the 2001 Legislature, but it went nowhere as Assembly Democrats in particular asked why the state would want to give away half the value of its settlement to a private investor. They said the state could do better by investing the money as it comes each year.

Krolicki said it only sounds like the state is giving away half the money. He said his office could more than make back that amount by properly investing the check it receives.

And he argued that, by staying with the annual payments, the state is essentially investing in the four major tobacco companies.

"If I had a billion dollars to invest today for the taxpayers and I put it all in four tobacco companies, I'd be run out of office," he said. "I don't know how this is any different."

He said that is precisely why more states are moving to "securitize" their tobacco money.

He said he will take the argument back to the 2003 Legislature.

At the same time, however, Krolicki admits it might be dangerous to put that huge pile of money in front of politicians hungry for a quick fix to Nevada's budget woes.

That's why his securitization plan will be accompanied by a proposed constitutional amendment that would lock in the money for its existing uses -- state health programs, anti-smoking programs and the Millennium Scholarships. He said too many states have grabbed their tobacco money to solve short-term budgetary problems. He said he believes lawmakers will strongly support that proposal.

Krolicki said the idea is to protect Nevada's settlement money, leaving the investment house buying the rights the risks of reduced payments or even something that could cause the money to disappear altogether.

A prime risk, Krolicki said, is future litigation against the tobacco companies. Some of the suits tobacco companies are facing demand hundreds of millions in damages

"We do not need to be subject to future litigation risks," he said. "We need to lock in and ensure that the bulk of the monies under the (master settlement agreement) do arrive."