ST. PAUL, Minn. (AP) — Minnesota finance officials said Thursday they’ve completed the sale of $757 million in bonds using the state’s future tobacco lawsuit settlement dollars as the repayment stream — a move that comes with substantial costs.

The sale finalized this week will generate a one-time infusion to temporarily close a state budget gap. But principal and interest costs will top $1.2 billion over the next two decades. It will leave a $60 million to $80 million annual hole in the budget for years to come.

All told, the state will give up $1.21 billion in settlement payments tied to a 1998 court case with cigarette makers. Interest on the new debt approaches $460 million.

Democratic Gov. Mark Dayton and the GOP-led Legislature authorized the sale as part of a summer budget agreement that ended a nearly three-week government shutdown. Dayton saw it as a way to prevent deeper spending cuts, while Republicans favored it over raising taxes or more IOUs to schools.

The sale nets $640 million for the budget fix. The rest of the proceeds will go into a special account to cover the cost of issuing the bonds and create a reserve fund that can be used for repayment.

The bonds are considered riskier than standard government bonds issued for construction projects, which are usually backed up by state taxing authority. Uncertainty over the financial stability of tobacco companies and declining smoking rates could cause drops in the settlement dollars Minnesota is due to get because the annual checks are based partly on cigarette sales.

The National Conference of State Legislatures says about 20 states have borrowed against their settlement money, some more than once.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

Comments (16)
  1. j speedbag 64 says:

    so basically we completely wasted all of the money

    1. Reality sucks says:

      and… we completely wasted that money on anything and everything that it was not originally (or in any legal sense) intended for.

      1. llp says:

        yep it protects the 1%

        1. Brian says:

          Exactly. Way to go, GOP. Nice work in protecting a select few of Minnesota’s richest citizens and balancing the budget on the backs of the remaing tax payers. This plan you forced down our throats really worked well. Can’t wait to start diggin out of this $60-80 million hole you’ve put us in. I’m sure you’ll be there in the future to throw more dirt on our heads as were digging, though

  2. TFerguson says:

    i’m sure glad this is more fiscally responsible than surtaxes on marginal income.

  3. Plan ahead or be left behind says:

    This “rerouting” of the tobacco money was no different than the legislature giving the state a “loan” from the education fund to cover day to day operational expenses. Not a cent of that money has been repaid yet.

    Both of these actions were taken to keep state government running while the legislature continued to postpone dealing with the (at the time) $5 billion budget deficit. Nothing has been done to resolve that deficit yet either and it’s growing on a daily basis – estimated to be approaching at least $5.6 billion now.

    If those two things weren’t bad enough for the state’s economy, Zygi Wilf is getting frighteningly closer and closer to conning the governor, various boards and commissions, and the state legislature into giving — NOT LOANING – GIVING — him almost 3/4 of a billion dollars for a new stadium that he WANTS, not NEEDS. Whether that money comes out of tax revenues, increased gaming options, or any source other than private financing, the people of the state of Minnesota will be paying for that stadium. You’re being hoodwinked if you believe building the Wilfs a stadium will create a significant number of good paying, lasting jobs, or that it will bring irreplaceable revenues to the state, or will in any meaningful way benefit the people of the state of Minnesota. It will not; it will only benefit the team owners and, indirectly, the players – most of whom are already multimillionaires.

    There is no free lunch. If we keep spending, going further and further into debt, and making stupid decisions, the state of Minnesota will be in more shambles that the Vikings football team is.

    1. So you're not a fan says:

      I can get behind your rant in regard to financing. That doesn’t mean I’m behind you as far as being a Vikings fan–and the revenue the Vikes undeniably bring in. I want MN to keep an NFL team. I don’t care what it costs. We waste a lot of money here and another lot of money over there. This is a WANT. Not a need. But some of us WANT it real bad. I don’t care about the museums or the arts but after all of this, I certainly will support the “artsies” WANTS in the future too. SKOL!

      1. Plan ahead or be left behind says:

        That’s a very thoughtful, respectful, genuine, and honest comment. Thank you. I wish all of us (myself included) could approach this issue as you have.

        Actually, I am a fan, but not a “fanatical” fan. I played HS football and baseball and I was thrilled when the Vikings began here and even more so when Bud Grant introduced me to what it’s like to have true pride in the team. In my opinion, back then sportsmanship, professionalism, and, yes, winning was more important than profits. It seemed like reasonable profits just came if you had the other ingredients. Today the sole focus is profit.

        I also would prefer to have an NFL team in MN although I’m not real excited about the Vikings, perhaps because of who the owners are as much as how poorly the team has done for so long.

        My major problem with the current stadium issue is we simply can’t afford to pay for it right now. I don’t need to itemize the why of it for anybody, we all know the state is broke. Period. Arguing over who’s to blame is a waste of time. However, we can’t ignore it any longer. People say delaying a stadium will only add to the cost and that’s probably correct. But … how much more will it cost us to delay resolving our debt? Which delay is more costly to us? I believe it’s the non-resolution of our debt but I realize I could be wrong, hence my support for a state-wide referendum.

        Until the stadium issue became such a problem I had never given much thought to the concept of using public money to pay for private enterprise. And that is what we’re doing – no point in pretending that’s not true. With all the other economic ills, it’s pretty easy to say “I don’t like that idea.” As much as I don’t want to right now, I will concede there may be legitimate reasons why it might make sense to have the public contribute money to private enterprise. I just don’t think that time is now.

        I believe we need to resolve our very real economic problems before we consider contributing $650++ million in public funds for something on the “want” side of our (and Wilf’s) list.

        I truly wish I could offer a solution but I’m quite sure I’m better at identifying the problems 🙂

        I will say this much about a possible solution though: The times, they are a’changin’ and, despite the NFL’s “rules” and rigidity in trying to keep public ownership of teams out of their equation – allowing more Packer-like teams would definitely be inspirational and make supporting “our team” a whole lot more meaningful. That’s easier to swallow than knowing that a goodly chunk out of every dollar I spend on the Vikings goes into Wilf’s pocket!

        1. So you're not a fan says:

          I would have to research but am certain enough to write it here that MN isn’t in the poorest of economic shape in comparison to other states in the nation. As far as employment, tax revenue, pension liquidity, and outstanding debt, we’re in stable condition in comparison to other states on life support. I’m not saying to go all out and dig a bigger hole, I’m just saying it’s not that bad to find a way to make this work. With the tea partiers that hold office currently, I can’t see how spending could get out of control so if (some) of those guys can get behind it…

          1. Plan ahead or be left behind says:

            I hear ya … but … a sinking ship is a sinking ship, right? Whether it be the SS Minnow (MN) or the Titanic (CA), down is down. I may not like the shape MN is in but I won’t be moving to CA real soon either.

            Hey, you aren’t lookin’ to buy a football team, are ya? 🙂

  4. DougT says:

    Ummm – I am still trying to figure out why any government received this tobacco money in the first place. Did they not collect taxes over the years on the sales of this legal product? What did they do with that money??

    I am thinking they have no right to the “tobacco money” in the first place.

    1. llp says:

      tell that tot the people or died or have canser for tobacco. What a nasty smelly habit

      1. DougT says:

        I have — and they should have sued the state, local and federal government for allowing it to be sold after they knew the dangers – but they still taxied the sale of this product and spent the money on … exactly what? Not health care.

        And come on – how long have mothers told their kids not to smoke? Heck even to government around 1960 marked them as bad for you … So if you started before that you have my sympathy.

        1. llp says:

          still a nasty smell foul habit and the way people smell makes you want to vomit

  5. llp says:

    ever walk down the street and the stench of someone who smokes just takes over.

  6. uggs says:

    I agree with you, but please look at uggs.

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