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State authority approves borrowing against Pennsylvania tobacco settlement funds

Tuesday, November 21, 2017   (0 Comments)
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Penn Live

 by Charles Thompson

 

State authority approves borrowing against Pennsylvania tobacco settlement funds

 

Pennsylvania's Commonwealth Financing Authority put its stamp of approval Tuesday on a big and controversial patch to the state's deficit-ridden $32.0 billion budget.

The authority voted unanimously to approve borrowing up to $1.5 billion against future revenues from the 1998 multi-state settlement with the nation's major tobacco companies to cover a deficit from the 2016-17 fiscal year.

The borrowing - be it via traditional bond issue or some other means - would be paid back over the next 10-to-30 years, likely meaning a significant portion of Pennsylvania's annual payment will be diverted from the health and research programs it has traditionally supported.

Those funding streams are not affected in the current budget, however.

Gov. Tom Wolf's press secretary, J.J. Abbott, indicated after Tuesday's vote that the administration will now look to the tobacco plan as its preferred method of borrowing to close the budget gap.

To this point, Wolf has kept alive a second track to raise cash for the state: Borrowing against projected future revenues from the Pennsylvania Liquor Control Board and its wholesale and retail alcohol operations.

But Abbott said Tuesday as long as the tobacco borrowing is structured responsibly, the governor will "support this transaction... in place of our proposal to securitize the profits of the Liquor Control Board."


The CFA resolution directs its staff - housed within the state Department of Community and Economic Development - to work with fiscal advisors to determine which of two authorized borrowing methods would be most cost-effective.

The choices, as outlined in the recent state tax code, include a traditional bond borrowing, or what's been described as a sale of a portion of the fund's future revenue.

The final structure of the deal will be chosen by CFA Executive Director Scott Dunkelberger, in collaboration with the governor's office.


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