Tobacco funds one step closer to being sold to balance budget |

Tobacco funds one step closer to being sold to balance budget

DENVER – The state Senate approved Senate Bill 268 Friday, clearing the way to securitize 47 percent of the state’s tobacco settlement payments for the next 10 years and leaving tobacco cessation administrators with less than half of their original budget.

As part of the bill’s passage, senators agreed to approve an amendment proposed by Sen. Ken Gordon, D-Denver, that caps the total amount the state can securitize at 60 percent.

In 1995, state Attorney General Gale Norton filed suit against the major tobacco companies to recover Medicaid funds the state spent to take care of ill and dying smokers. According to the Tobacco Control Partners of Colorado, the state and tobacco companies forged an agreement in 1998 that gives Colorado $2.6 billion over a 25-year period.

But serious budget deficits have forced legislators to ax and transfer funds from various departments, including the tobacco funds.

Securitizing funds involves selling tomorrow’s anticipated tobacco funds for a lump sum of money today. If the bill is signed into law, the state will sell $530 million worth of tobacco funds for a lump sum of $313 million. The bonds will be repaid using future proceeds from Colorado’s share of the national agreement with tobacco companies.

The transfers mean tobacco program directors will get half of what was originally promised – about $7.5 million – each year until fiscal year 2011-12.

Senators also approved Senate Bill 282, which would take $9.4 million from next year’s tobacco budget. That money was needed when state economists learned that tax revenues for the first three months of 2003 were $160 million short of projections. That leaves $5.3 million for tobacco prevention and cessation programs next year.

Both bills go to the House next Monday as part of the state budget bill.

Senators also are keeping an eye on a court case in Illinois, where a judge found Philip Morris guilty of misleading smokers about the dangers of “light” cigarettes. The plaintiffs include 1.1 million Illinois smokers who sought $7.1 billion in compensatory damages and $14.2 billion in punitive damages.

The tobacco company was found guilty and ordered to pay $10.1 billion in the class-action lawsuit. Philip Morris plans to appeal the ruling, so the court told the company it would have to post a $12.1 billion bond – the amount of the fine plus interest.

Philip Morris said it might have to file Chapter 11 bankruptcy proceedings if the court insists on that bond. Representatives with the company say the bond is a “physical, financial and practical impossibility.” If the firm were to go bankrupt, it likely would no longer be able to make payments to states.

Jane Stebbins can be reached at (970) 668-3998 ext. 228 or

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