Bond sale awaiting decision

CARSON CITY -- Gov. Jim Gibbons has not decided whether to back a plan to sell at least $775 million in bonds and use the proceeds to cover expected budget shortfalls, a spokesman said Thursday.

The governor discussed the plan, proposed by Lt. Gov. Brian Krolicki, in a meeting with the lieutenant governor and Attorney General Catherine Cortez Masto.

"There is no rush," Gibbons' press secretary, Ben Kieckhefer, said after the meeting.

The plan to borrow money to cover state government costs would require approval of the Legislature, which does not meet until 2009.

Gibbons opposes calling the Legislature into special session this year to approve the bond sale plan, Kieckhefer said.

The governor and legislators agreed earlier this year on $914 million in state spending cuts because of declining tax revenue.

But concern exists that $1 billion in additional cuts might be needed in the 2009-11 period if the state economy does not recover quickly.

Krolicki has been floating a plan under which the state would sell the bonds and then redeem them over the next 40 years by using annual payments it receives from the tobacco industry.

"We have an extraordinary budget situation, and this money would be available to solve this extraordinary problem," Krolicki said. "I don't see people raising taxes by $1 billion or being able to cut by $1 billion."

About 40 percent of the tobacco settlement payments go to the Millennium Scholarship program. The money helps support the state health care programs, including the SeniorRX program, which reduces prescription drug costs of senior citizens.

In May, Krolicki said the state would need to find other sources of revenue for the programs if his plan for the tobacco payments were put into effect.

But he said Thursday that some of the proceeds from the bond sale could be dedicated to the Millennium Scholarship and other programs.

When he raised the idea of selling off tobacco revenue proceeds at the 2001 Legislature, Krolicki, who then was state treasurer, said a sale would fetch a lump sum of $400 million. The Senate approved his plan, but the Assembly rejected it.

At the time, Krolicki said, he was talking about a 20-year bond, and he was proposing a plan that had not been done elsewhere.

"The market for tobacco bonds has evolved since 2001," he said. "We would have been pioneers. I don't jump for joy over this. But it is safe and secure."

Earlier this week, Masto sent the governor a letter in which she raised reservations about Krolicki's proposal.

She said her office enforces the master settlement agreement with the tobacco industry and is involved in litigation with Phillip Morris, R.J. Reynolds and other tobacco companies.

"At stake is Nevada's future entitlement to tens of millions of dollars in annual MSA (master settlement agreement) payments," she said.

Krolicki said he understands Masto's concerns and realizes appropriate legal steps must be taken before his plan is considered.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.