A group of Democratic legislators on Friday challenged Treasurer Brian Krolicki's claim that Democrats are to blame for the Millennium Scholarship's financial woes.
Krolicki has said in several forums that lawmakers "left $200 million on the table" by refusing to "securitize" the tobacco money that pays for the scholarship program in 2001 and 2003.
Securitize means to sell the tobacco settlement proceeds for a lump sum of money about half the total the payments would bring in 20 years. But that transfers all risk the payments might decrease or end to the buyer. The state, then, invests that lump sum and, according to Krolicki, makes a profit by earning more than the state would have gotten the other way.
Krolicki said settlement payments are declining because of reduced smoking and other issues at the same time Nevada is running out of money because so many university students are using the scholarship funds.
When he made the same claim in Senate Finance Committee Friday, Minority Leader Dina Titus, D-Las Vegas, said Krolicki's consultant on the tobacco funding program disagrees with him and that "securitizing" would actually have cost Nevada money.
She said securitization was "creative bookkeeping that would have cost money and the same is true of bonding." That was a reference to Krolicki's new proposal to raise $100 million for the scholarship program by selling bonds.
The exchange prompted her, Assembly Ways and Means Chairman Morse Arberry, D-Las Vegas, and Vice Chairwoman Chris Giunchigliani, D-Las Vegas, to issue a statement charging Krolicki is wrong according to two consultants.
Giunchigliani said the lawmakers asked James Diffley of Global Insight, the firm which consults for Nevada and 20 other states on the tobacco money, to evaluate Krolicki's claims. Diffley's letter states that Krolicki's estimates are "not substantiated." In a three-page analysis, he said Krolicki estimated interest from securitizing in 2003 would have brought in $40 million but failed to point out that Nevada received $44.8 million in payments from the tobacco settlement during that time. He said Krolicki's long-term calculations of costs make the same mistake as well.
Another analysis from Goldman Sachs indicates the state would have ended up with about $8.6 million less had it securitized the tobacco settlement money.
Giunchigliani also said that Krolicki used only a three-year period for his analysis, although the tobacco settlement is spread over a 20-year period. And she said he used 1999 numbers that fail to take into account what happened to interest rates and securities markets after Sept. 11.
"It's time for the treasurer to stop playing politics with the future of the children of our state," she said. "Outside analysis shows clearly that his figures are wrong. Taking a substantially reduced amount of money from the tobacco companies and investing it in Wall Street, especially during the months after Sept. 11, would have been a gamble that would definitely not have paid off."
Arberry said it's inexcusable for Krolicki to keep pushing securitization. He said lawmakers were right to be leery of the idea even before Sept. 11.
n Contact reporter Geoff Dornan at nevadaappeal@sbcglobal.net or 687-8750.
