We are learning more about Governor Doyle’s plan to fix the massive state budget revenue shortfall.
The governor wants to impose a hospital tax. He also wants to raid the Transportation Fund of $243 million and transfer it to the General Fund.
The Wisconsin State Journal reports another element of the governor’s fix is to use payments that are part of a settlement with tobacco companies. The newspaper reports that part of the governor’s plan will cost the state $94 million.
If you think this sounds familiar, you are right.
The Wisconsin State Journal correctly points out that Governor Doyle’s predecessor, Governor Scott McCallum borrowed against future payments by the tobacco companies to balance the state budget in 2001 and 2002. Governor Doyle, the Attorney general at the time, criticized McCallum. Now it seems Governor Doyle is resorting to the same tactic.
The Wisconsin State Journal reports:
“As attorney general, Doyle helped win a settlement with tobacco companies over the costs of smoking. The settlement called for yearly payments from the companies to the state in perpetuity.
Under a plan authorized by lawmakers and McCallum, the state in 2002 borrowed against that future stream of tobacco company money, receiving $1.6 billion upfront and diverting the annual payments — potentially worth more than $5 billion — to pay off the loans, the so-called tobacco bonds. McCallum, a Republican, originally called for using part of the $1.6 billion to fight the effects of tobacco use, but in the end, it all went to plug a state budget hole.
Doyle now wants to refinance those loans, receiving a lower interest rate and extending the payments, to free up $68 million a year for the state through 2020 that could be used to balance the budget and cover health-care costs.
The cost to taxpayers comes because Doyle's plan would delay by a decade the time it takes the state to pay off its debt on the tobacco bonds and start receiving the hundreds of millions of dollars in tobacco company payments free and clear.
Currently, the state is expected to pay off those bonds by 2017. But under the Doyle plan, the state wouldn't pay them off until 2027, according to the analysis by the Legislative Fiscal Bureau.
Over the next two decades, that delay in receiving payments from the tobacco companies will cost the state $94 million in today's dollars, the (Legislative) Fiscal Bureau report found.”
Here is the entire Wisconsin State Journal article.
