Lump-sum payment of tobacco funds may be sought

Jennifer Knight

Monday, April 7, 2003 | 11:09 a.m.

State Treasurer Brian Krolicki was expected to urge lawmakers today to break Nevada's tobacco money habit by accepting a lump-sum payment for its share of the $206 billion tobacco settlement.

Nevada may not receive a crucial payment from tobacco company Philip Morris this month, which jeopardizes health-care programs and the Millennium Scholarship money that pays for students to go to college, he said.

"Nevada has become addicted to tobacco money," Krolicki said. "It's becoming an unholy alliance. We are in the position right now where we are dependent on these companies to fund some very wholesome programs. It has become an untenable position."

The state receives about $50 million a year toward the $1.26 billion it is owed through 2025 by four tobacco companies that lost a class-action lawsuit brought by Nevada and 45 other states to recoup Medicaid costs for tobacco-related illnesses. The settlement took place in 1998.

Philip Morris, the largest contributor to the settlement fund, says it cannot afford its $2.5 billion payment to the states this month if an Illinois judge forces it to pay a $12 billion bond to appeal a case.

"We do not have the financial resources nor is there anyone who could sell us a bond of that size," Brendan McCormick, a Philip Morris spokesman, said.

Krolicki said the uncertainty of getting that money just shows how unstable that source of revenue is. Krolicki is proposing to create a more secure form of revenue by turning over the state's settlement money to a nonprofit corporation that will sell bonds to investors.

The bonds would generate a lump sum of about $400 million for Nevada to spend on its health care and scholarship programs, he said.

Krolicki floated that proposal in 2001 but it failed in the Assembly.

Assemblywoman Chris Giunchigliani, D-Las Vegas, opposed the measure because she worried that if the tobacco money went away, the state would be unable to make its bond payment.

"It's coming home to bear what many of us feared in the first place," Giunchigliani said. "We're funding (permanent) programs out of soft tobacco money. Those kinds of soft dollars should be used in ways that you don't have to rely on them."

Krolicki said he still thinks the tobacco industry will make good on its settlement despite Philip Morris' announcement last week. He says his main point is that Nevada should lose its dependence on those companies.