Bob CollinsAs part of the quick-fix solution to Minnesota’s budget shortfall, lawmakers last spring decided to sell the state’s tobacco settlement — the windfall it made from its lawsuit against the tobacco industry in 1998 — in the form of bonds. The state has now sold its windfall.
Basically, the state is playing the part of the people yelling out the window.
Anytime you sell future earnings, you’re going to lose in the long run. The companies that bought the “bonds” have agreed to give the state a pile of cash now, in exchange for the state giving them two piles of cash later. The state will apply $640 million of the sale to erasing part of the state’s budget deficit. For that, it will pay over $1.2 billion over 20 years, MPR’s Tom Scheck reports.
Almost from the time the tobacco case was settled, politicians have fought over how the money would be used. Originally, Gov. Ventura and DFLers wanted to set up a public health endowment with $1 billion. The Republicans wanted to give it to taxpayers with a one-time tax cut.
The payments were to come from the tobacco companies into perpetuity and go into the state’s General Fund. The first payment was about $100 million. By halfway through the last decade, it was estimated to be twice that. The state got about $169 million in 2011.
There were also six one-time payments between September 1998 and January 2003. They were to go to two endowment funds and one legislative account. They funded the Tobacco Use Prevention and Local Public Health Endowment, the Medical Education Endowment, and an Academic Health Center Account within the Medical Education Endowment, according to the House Research Department.
Over that time, adult smoking in Minnesota dropped from about 22 percent immediately after the tobacco settlement, to about 17% in 2007.
