Support is growing at the state Capitol for a plan that would reduce Colorado’s dependence on a shaky and controversial revenue source – the 1998 multistate tobacco settlement – while creating a rainy-day fund to soften the blows of future economic downturns.
Major tobacco companies agreed in 1998 to reimburse states for the health-care bills of poor people with smoking-related illnesses.
Colorado is slated to receive some $5.5 billion by 2045 under that settlement. But there are a lot of “ifs” in that projection. Last week the big tobacco companies won an arbitration ruling that they are losing market share to small competitors who don’t make the payments. Big tobacco thus wants to reduce the $6.5 billion payment due the states later this month by $1.1 billion. Such a cut would drop Colorado’s 2006 take by $15 million, to $75 million.
The ruling underscores the shaky nature of the money, two-thirds of which supports health and anti-smoking programs in the state. But it also shows states taking big tobacco’s money are in some ways rooting for big tobacco’s success. As former state Sen. Norma Anderson wryly noted: “Smoke ’em up. It’s for the children.”
As far back as 2000, state Treasurer Mike Coffman proposed eliminating both the financial risk and moral dilemma by “securitizing” the settlement – trading future payments for a lump sum.
Various efforts to do so foundered in the legislature, but four new options were unveiled recently by the treasurer’s office. The most ambitious would pledge all future revenue for as long as it takes to amortize about $1.6 billion. The smallest, and most politically attractive, would trade about 35 percent of the annual revenues for $575 million now. That plan lets the various programs now supported by the tobacco payments go on receiving them while only securitizing the share now going to the state general fund.
House Speaker Andrew Romanoff is interested in such a deal to create a rainy-day fund. Raising the state’s current inadequate 4 percent reserve to a more reasonable 10 percent of the $6.8 billion general fund would take $408 million. As a bonus, there would be enough left over to pay the $150 million the state owes local school districts after settling a 1998 lawsuit that charged the state neglected school construction in poor districts.
The Denver Post has supported securitization since the idea was launched in 2000. This year, it looks like a good idea whose time has finally come.
