Jindal administration says refunding deal is a good one, but the state treasurer disagrees.
A refinancing of Louisiana's tobacco settlement bonds completed Tuesday netted the state $83 million in upfront cash to fund popular higher education scholarships. Administration officials hailed the refunding move as a good deal in the current market, but State Treasurer John Kennedy said the sale was premature.
"I would have waited because I think the market was settling down, but I understand this is what happens when you get yourself in a position where you have to sell in order to balance your budget," Kennedy said Tuesday, echoing concerns he voiced last week when the refinancing seemed imminent.
Kennedy, a frequent critic of the administration's financial moves, said the state "left some money on the table" by not waiting for interest rates to further flatten. Rates spiked in recent weeks after Federal Reserve Chairman Ben Bernanke outlined a plan to reduce bond purchases.
Original savings estimates for the bond refinance made by the state Division of Administration ranged between $75 and $85 million over three years. But when lawmakers signed off on the move last month, the savings estimates were upped to $143 million.
The refinancing completed Tuesday yielded $83 million, $60 million less than estimated in May. Over 70 percent of that cash has already been dedicated to pay for TOPS, or Taylor Opportunity Program for Students, scholarships in next year's budget, causing Kennedy to express concerns about the final numbers.
"This is a classic example of why you shouldn't balance the budget with smoke and mirrors. Sometimes the mirror breaks, and when that happens, funding for important priorities goes up in smoke," he said.
Division of Administration Commissioner Kristy Nichols disagreed Tuesday, saying the savings were in line with estimates released in February. She added the move was "a smart financial deal for the state."
"By acting today we took the prudent step to capture as much savings as possible and before a potential rise in interest rates," Nichols said in a statement Tuesday. Nichols acts as head of the Tobacco Settlement Finance Corporation, which controls the bonds in question.
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. The bonds yielded from a partial sale of that settlement in 2001 and put into a trust fund pay for higher education scholarships through TOPS.