LAWRENCE JOURNAL WORLD: Kansas officials discuss selling tobacco settlement payments

March 11, 2016

An investment banking company has briefed Kansas officials on its expertise in tobacco settlement payments as child advocates say the state is pursuing a future sale to help close the budget deficit.

The Topeka (Kan.) Capital-Journal reports that Kansas Action for Children alleged during a Tuesday hearing that Gov. Sam Brownback’s administration was contemplating selling future tobacco settlement payments to generate more than $400 million in one-time cash.

“Tobacco securitization bond proceeds have been used for a variety of purposes; capital projects, working capital, endowments and pension funding,” the presentation document says.

Administration officials say there’s no deal but that discussions have taken place.

The nonprofit group provided a copy of the 26-page presentation Citigroup Inc. gave in October, highlighting the benefits of using the company to securitize. The document says that bond proceeds have been used for capital projects, endowments, pension funding and working capital.

Lawmakers are mulling over legislation that would shift special revenue funds, including the state highway fund and Children’s Initiative Fund, into the state general fund. Proponents argue the proposal would offer greater transparency and accountability over the use of the funds, but opponents say the ultimate purpose is to allow for the securitization of the tobacco funds.

“This development indicates that Senate Bill 463 is not about transparency or prioritizing, as budget director Sullivan suggested,” said Shannon Cotsoradis, CEO of Kansas Action for Children.

“Rather, it is a gateway to a much more reckless budget strategy,” Cotsoradis said. “This proposal could decimate Kansas’ early childhood system indefinitely and wreak even more havoc on the state’s already poor fiscal health. Despite the administration’s claims, it is now apparent this option has been on the table for months.”

Brownback spokeswoman Eileen Hawley on Thursday night said KDFA president Tim Shallenburger, along with Rebecca Floy and Jim McMurray of KDFA and Sullivan attended the presentation.

“There is no deal or pending legislation to sell tobacco settlement money,” Hawley said Tuesday. “Several months ago, a presentation was made to state officials about securitization of future tobacco settlement money to Kansas.”

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