Proposal seeks lump-sum payment of tobacco deal

By Emily Richmond (contact)

Thursday, April 5, 2001 | 10:43 a.m.

State Treasurer Brian Krolicki wants Nevada to take a lump-sum payment for its share of a $206 billion tobacco settlement rather than wait for yearly allotments that could decrease if sales of tobacco products decline nationwide.

Nevada, along with 45 other states, participated in the Master Settlement Agreement with the nation's four largest tobacco companies. Nevada's share comes to about $1.26 billion in annual payments through 2025. The annual amounts depend on inflation and nationwide tobacco sales.

"I would rather manage the money over a period of time without the risks associated with the tobacco market," Krolicki told the Sun.

Krolicki is seeking support from the state Legislature to approve a financial strategy known as "securitization."

The payment would be turned over to a specially created nonprofit corporation, which in turn would sell bonds to investors.

Securitization could generate between $350 and $425 million immediately for the state to spend on programs, including the Millennium Scholarships, Krolicki said.

Krolicki said securitization would eliminate what he called "the hypocrisy factor."

"The more we advocate that people quit smoking, the less money there is for the state," Krolicki said. "It's an unfortunate reality that's in the back of a lot of people's minds."

Students who take part in the scholarship program, created to boost Nevada's dismal rate of enrollment in higher education, shouldn't have to worry whether enough people will continue smoking to fund the program, Krolicki said.

Qualified students can receive up to $10,000 for tuition at state colleges and universities.

Mike PeQueen, senior portfolio manager at Prudential Securities in Las Vegas, said while he hasn't read Krolicki's proposal the concept of securitization is fiscally sound.

"A bird in the hand is worth two in the bush," PeQueen said. "And it's usually more beneficial to have money up front to invest yourself and draw interest, rather than being at the mercy of someone else doling it out."

Although Nevada continues to have the most smokers of any state, cigarette consumption nationwide has dropped by 42 percent in the past decade, and the American Cancer Society is seeking another 50 percent reduction over the next 10 years, Krolicki said.