More state cuts possible without tobacco deal

JEFFERSON CITY, Mo. -- Missouri would have to make more budget cuts if it cannot meet a July 29 deadline to issue $50 million in promissory notes for the sale of tobacco settlement bonds, state officials said Tuesday.

While optimistic that the state will be able to meet the deadline, members of the Tobacco Settlement Financing Authority are concerned about the timetable.

If the notes are not issued in time to meet the Internal Revenue Service tax-exempt deadline, the state would have to cut other parts of the budget to pay off existing debt.

Lawmakers passed legislation allowing bonds to be sold against a portion of the state's expected $4.5 billion of tobacco settlement proceeds over 25 years. Since then, state officials have been pushing the process forward -- selecting a financial adviser Tuesday.

"Meeting the 29th date is not a guaranteed figure," said Mark Kaiser, assistant director of the division of accounting within the Office of Administration. "It's a very tight schedule. Everything has to fall into place just right. We can't have a bad break."

Gov. Bob Holden, the chairman of the authority, said that tough choices would have to be made if the deadline is not met.

"We would have with withhold or cut additional moneys," Holden said. "We don't have to make additional cuts in the budget. It can be done, but we don't have a lot of leeway."

Kaiser expressed optimism that the deal can be completed in the time, but there are market forces which could cause delays and lead to failure.

Meanwhile, the tobacco authority selected Public Financial Management of Iowa and Columbia Capital Management of St. Louis as the financial advisers to the state. Their job is to complete a process in one month that normally takes about two months.

The partnership's bid, which beat out three others, was $320,000 if the deal is completed on time. If not, the companies would get only expenses.