Anticipated savings from a major refinancing of Louisiana's tobacco settlement bonds could be half of original estimates, state officials confirmed Wednesday. But, Gov. Bobby Jindal's administration said they will not delay the move, which they still estimate to yield at least $75 million in savings. "This is a classic example of why you shouldn't balance the budget with smoke and...
Anticipated savings from a major refinancing of Louisiana's tobacco settlement bonds could be half of original estimates, state officials confirmed Wednesday. But, Gov. Bobby Jindal's administration said they will not delay the move, which they still estimate to yield at least $75 million in savings.
"This is a classic example of why you shouldn't balance the budget with smoke and mirrors," Kennedy said Wednesday, referring to the $60 million from the bond deal that is meant to fund higher education scholarships. "Sometimes the mirror breaks, and when that happens, funding for important priorities goes up in smoke."
Original estimates put the savings for the tobacco settlement bond refinancing at $143 million. But current estimates, due to rising interest rates, have halved the savings to between $66 million and $85 million.
The lower yield would not match what the administration expected to gain from the refinancing in its first year, around $67.2 million. But Division of Administration Commissioner Kristy Nichols said the administration does not plan to change course on the refinancing.
She said the refinancing, which the administration still expects to yield between $75 million and $85 million in savings, is "still a great deal for the state."
"This transaction is very marketable," she added, saying over 30 institutional buyers are interested at his time. She called the rising interest rates an "abnormal snag;" the administration has been advised that there is a window of one to two weeks to do the refinance.
Kennedy has called for a public meeting of the Tobacco Settlement Financing Corporation, which Nichols heads. If she doesn't call a meeting, Kennedy said he would call a special meeting of the State Bond Commission, according to Deputy Treasurer Jason Redmond.
Nichols said a meeting is not necessary at this time.
Louisiana is one of many states that settled lawsuits for claims of smokers' deaths and health costs against tobacco companies in 1998 in return for installments of money each year.