Thursday, September 02, 1999
Deters: Turn tobacco pact into cash
Would sell Ohio's share to investors
BY MICHAEL HAWTHORNE
Enquirer Columbus Bureau
COLUMBUS — Ohio Treasurer Joseph Deters has a get-rich-quick scheme for the state's $9.9 billion share of the legal settlement with tobacco companies.
Under the plan floated by Mr. Deters, a Cincinnati Republican, the state would get $4.1 billion up front by selling its projected take from cigarette makers to investors.
But Gov. Bob Taft and Republican legislative leaders aren't biting. They contend the proposal would be a financial boon to investors and municipal bond firms, giving challengers a hot-button issue against incumbent legislators during next year's elec tions.
In a letter to Mr. Taft, Mr. Deters said the state would be better off taking what it can get now because the future of the tobacco industry is uncertain. States could get less under the settlement if the industry's market share drops at any time during the next quarter century.
“We should not be in bed with the tobacco companies for 25 years,” Mr. Deters said in an interview. “It would be inconsistent for the state to essentially become dependent upon the industry's continued profitability.”
Besides the huge initial payment, the state would reap annual payments from investors totaling $3.5 billion over 30 years, Mr. Deters said. There also would be a $436 million final payment.
States are to receive annual payments for at least 25 years. Ohio's first check, for $120 million, is ex pected by next summer.
Scott Milburn, Mr. Taft's spokesman, said the governor opposes Mr. Deters' plan because about $1.9 billion would be paid to investors and bond firms.
“That's $2 billion that would come out of efforts to help stop teens from smoking, help tobacco farmers find new crops and help build school buildings,” Mr. Milburn said, referring to likely uses for the tobacco payments.
States face a dilemma. On one hand, they sued cigarette makers ostensibly to recover the cost of treating citizens with smoking-related illnesses. Yet under the way the settlement was brokered, the windfall promised to states depends on the ability of manufacturers to continue selling cigarettes.
Senate President Richard Finan, R-Evendale, said it would be unwise politically to take $4.1 billion up front and count on private investors to deliver the rest of the money.
“We're going to spend a lot of this on school repairs,” Mr. Finan said. “I can see the campaign ad now, accusing some legislator of voting to take 40 cents on the dollar and suggesting they're in the pockets of the tobacco companies.”
Mr. Deters compared his idea to lottery winners who accept a lump sum instead of cash payments over 20 years. Winners of a $10 million jackpot don't get the entire amount if they want their money up front.
“This is a very common financial tool used every day in the world of finance,” Mr. Deters said. “At least we should talk about it.”
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