Selling bonds to deal with debt service

  • Updated: January 27, 2009 - 9:08 PM

Twice before, Gov. Tim Pawlenty has turned to tobacco to help balance the state's books. In 2003, he tapped a billion-dollar endowment left over from the 1998 tobacco lawsuit settlement to help resolve a large budget shortfall. In 2005 he proposed a "health impact fee" on cigarettes to help end a partial state government shutdown and reach an agreement on that year's budget. This year, tobacco again plays a role in the proposed budget solution. Here's how:

• Nearly $1 billion would be raised from the sale of bonds to be repaid with money that Minnesota receives each year under the 1998 tobacco suit settlement. The annual amount is about $200 million, though it can change with inflation and the volume of tobacco sales.

• Under the Pawlenty proposal, about half of the yearly tobacco payment to the state would be used to pay off the bonds.

• The lump sum gained from the bond sale would be applied to the state's overall debt service payments, currently projected at $1.067 billion for the 2010-11 biennium.

JIM KERN

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