Scholarship program faces uncertain future

Wednesday, Feb. 5, 2003 | 11:25 a.m.

CARSON CITY -- Gov. Kenny Guinn's much-heralded Millennium Scholarship program may be in financial trouble within three years, state Assemblymen said today. Tobacco settlement funds are used to pay for the college scholarships, but Assemblyman Morse Arberry, D-Las Vegas, chairman of the Ways and Means Committee, told State Treasurer Brian Krolicki that "if we continue the way we're going, we're going to have to infuse new revenues" by 2006.

That could mean the state would have to pick up the costs of the program, which are expected to be in excess of $30 million annually in a couple of years.

But Krolicki, the administrator for the 4-year-old program, said the tobacco funds would carry the scholarship program through the end of the decade.

There are more than 12,000 students who are receiving the scholarships with an estimated $19.5 million to be paid out this year. The budget estimates 15,867 students will qualify for the scholarships, at a cost of $25.4 million next fiscal year and 18,176 students costing $31.4 million in fiscal 2005.

Arberry was joined by Assembly members David Goldwater, D-Las Vegas, Chris Giunchigliani, D-Las Vegas, in the peppering of Krolicki with questions and criticism about the financial projections for the program.

The state was estimated to receive $1.25 billion over 25 years from the tobacco companies. But Krolicki said that is based on the amount of smoking by Americans. That number is going down and it could be decreased in the future by rising cigarette taxes.

Mark Stevens, legislative fiscal analyst for Arberry's committee, said his staff had met with the treasurer's staff on the matter.

Stevens said his staff estimates the fund will not be self-sufficient after 2006. He said he thought the staff of Krolicki agreed with that date. But Krolicki maintained that there would be enough money until "the end of the decade."

Krolicki said he was not aware that his staff agreed with the legislative staff.

Giunchigliani asked Krolicki to supply more figures and an actuarial study of the tobacco fund. Arberry said, "We need proof."

Krolicki is pushing a securitization plan for the tobacco money, the selling off of debt owed Nevada to a financial firm for a lower figure. The state could receive $900 million instead of the $1.2 billion.

Krolicki said that could be invested and would be a safer course then depending on the revenue from the tobacco companies.

But Goldwater suggested the state might have lost money under this arrangement because of the decline in the stock market in since Sept. 11, 2001.

Krolicki said the money from a securitization plan would be better invested "in a diversified portfolio" rather than relying on the tobacco companies.

Giunchigliani wondered why anybody would buy the Nevada debt with the tobacco companies facing a loss of revenue.