Blanco backs off sale of tobacco settlement money

Gov. Kathleen Blanco reversed course and dropped her support for selling the remainder of Louisiana’s money from a 1998 settlement with the cigarette industry – amid strong opposition to the sale.

Blanco said last week the bond market might improve and allow the state to reap more money on the deal in the future – a complete turnabout, since the governor’s top fiscal adviser the day before held a briefing with lawmakers to urge them to approve selling the money now.

Louisiana is one of 46 states that settled lawsuits with tobacco companies in 1998 in return for installment payments for health care costs related to tobacco use. The state sold 60 percent of its share in 2001 for nearly $1.1 billion in a lump sum. That money went to a trust fund whose interest earnings go to education and health programs.

If it sells the remaining 40 percent, Louisiana would get upfront money, estimated at $1 billion that would go into trust funds for education, health care and coastal protection projects.

Otherwise, the state would continue to receive regular payments for several decades from cigarette companies, which would add up to an estimated $3.5 billion.

The Blanco administration had pushed the idea of a sale since early this year. The idea won approval from the State Bond Commission and the Legislature’s budget committee. A vote had been expected on the matter from the full Legislature.

Last Tuesday, Blanco’s top financial adviser, Jerry Luke LeBlanc, briefed lawmakers on the idea and urged them to support selling the money. LeBlanc argued the sale would quickly generate $330 million that could go toward coastal protection projects, to be matched with $1 billion more in federal matching funds.

He said the administration would closely monitor the tobacco bond markets to ensure the time remained favorable.

“We intend to be fiscally prudent about pulling the trigger on this thing,” LeBlanc said.

But some lawmakers were skeptical, and Blanco spokeswoman Marie Centanni said last Wednesday that a vote would not take place on the idea, as had been planned. Centanni said the administration would continue monitoring the tobacco bond market.

The issue became a political battle for Blanco and Treasurer John Kennedy, a fellow Democrat who ridiculed the idea of a sale. Kennedy maintained that selling now would be foolish because the state would give up a guaranteed $3.5 billion in exchange for $1 billion.

Other opponents said the state didn’t need the upfront money in a record-setting budget year.

Supporters of a sale argued that doing so now would eliminate the risk that the income stream could disappear if cigarette companies go bankrupt due to litigation over smoking-related illnesses. The settlement money is dependent on domestic cigarette sales only.

Sale of the money was also opposed by anti-smoking groups such as the American Cancer Society, the American Heart Association, and the American Lung Association.