Krolicki: Tobacco settlement sale ‘proof’ available

Friday, Nov. 19, 2004 | 11:22 a.m.

CARSON CITY -- State Treasurer Brian Krolicki says he has proof that he was right when he told lawmakers that Nevada could have made nearly $200 million more in interest since 2001 if it had sold off its tobacco settlement money.

Krolicki's plan was rejected twice by the Assembly last year.

In an October letter, Assemblyman Morse Arberry Jr., chairman of the Ways and Means Committee, asked Krolicki to supply back up information to show that the state could have made $200 million by following Krolicki's advice and selling off the debt and investing the proceeds.

"The Assembly leadership challenged me," Krolicki said today. "They should be careful what they ask for."

The tobacco money supports the Millennium Scholarship program, a health insurance system for low-income elderly and other programs.

When the tobacco settlement was reached, the state expected about $1.28 billion over 20 years.

Krolicki, in a letter sent to Arberry on Wednesday, provides estimates from Lehman Bros. and Goldman Sachs that the state could have made anywhere from $191.9 million to $195.3 million extra since 2001 if his plan had been followed.

In addition, the treasurer noted, cigarette sales are decreasing, so the money coming to the state from tobacco companies is decreasing. He said it has been declining at an average rate of 2 percent a year.

Arberry could not be reached for a reaction this morning.

Arberry asked for information after Krolicki told the the University and Community College System regents that the state would have been better off if it had sold off the debt at a reduced price and re-invested the money.

Part of the money from the tobacco settlement goes to finance scholarships for students who graduate from Nevada high schools with a B average or better.

Arberry said his first letter to Krolicki, on Oct. 21, was not answered. Arberry sent a second letter to Krolicki on Nov. 10, chiding him for failing to provide the information.

Arberry told Krolicki said, "I do not understand why this information is not available. I am also troubled that it is necessary to request this information a second time." He said the information should have been available since Krolicki's statement to the regents was made Aug. 19.

He said he wanted Krolicki to support information detailing the assumptions, bond sale timelines, calculations and any other information needed to fully understand how the estimated was derived that $200 million was lost because the the state not securitizing its tobacco settlement proceeds be provided by Nov. 17."

Krolicki has suggested another plan, using money in the unclaimed property fund to invest and help support the Millennium Scholarships and other programs.