Governor signs legislation authorizing sale of bonds

JEFFERSON CITY, Mo. -- Gov. Bob Holden has signed into law a bill allowing Missouri to issue bonds against its share of the national tobacco settlement to help shore up a weak budget.

Under the law, which takes effect immediately, Missouri could sell a maximum of 30 percent of the $4.5 billion in tobacco payments it expects to receive over the next 25 years.

That bond sale could result in as much as a $600 million cash advance, depending on market conditions. State officials hope to secure at least $50 million to help fill gaps in the budget year beginning July 1.

By receiving the upfront payment from bonds, the state would forgo about $1.3 billion in expected settlement payments over the years.

Critics have said the state is squandering future money, but supporters say the bonds will guarantee cash for the state in case tobacco companies are unable to make future settlement payments.

The bill was revived during the recently completed legislative session after other revenue-generating measures failed.

It was passed by the Legislature with less than an hour remaining before the May 17 adjournment.

"I signed this bill expeditiously because the state must move quickly to implement this legislation," Holden said in a statement. "This is a complex transaction that will take time and effort to do correctly. This new tool will be extremely useful as the state navigates its long-term financial course."

The bill was sponsored by Sen. Ken Jacob, who had tried for two years to pass the legislation. "This particular bill is really motivated because of the crisis that we were in," said Jacob, D-Columbia. "This is the prudent thing to do and something that will help us manage the next two or three years without people experiencing great losses in services."

The law limits the bond revenues to being used for one-time expenditures, short-term revenue shortfalls or capital improvement projects. It also creates a board to oversee the tobacco bonds. Revenues would be subject to appropriation, with surplus funds to be deposited in a trust fund.