MISSOURIANS FOR TAX JUSTICE OPPOSES
USE OF STATE BONDS FOR A QUICK FIX
TO MISSOURI'S REVENUE NEEDS

February 14, 2003
FOR IMMEDIATE RELEASE

The "tobacco bond solution" is a quick-fix for the state's budget and revenue problems that will not serve Missouri taxpayers well, Missourians for Tax Justice said in a statement issued today.

The statewide citizens' group opposes any use of bonds to pay for current, on-going expenses. "Issuing bonds secured by future tobacco settlement money is particularly ill-advised and unsound," Pat Martin, chairperson, said.

"The Republican leadership's plan passed by the Missouri House this week is as objectionable as the governor's proposal," Martin said. "Using bonds to plug budget holes creates long term obligations for short term gain. It would take 37 years to pay off the bonds backed by future tobacco money. And of course, Missouri would then get less than the full value for the tobacco settlement money. It would be reduced to 50 cents on the dollar or less. Some people think it could be as low as 20.3 cents on the dollar," Martin said.

The House-passed plan agrees to using $150 million of the proposed $480 to $490 tobacco bond money to meet some of the budget shortfall for the current fiscal year. "If the majority of state legislators and the governor are determined to borrow money for current expenses, there is a far better way to do it," Martin said.

"A proposal to use the state's Rainy Day Fund to borrow the $150 million was made in the Senate this week. Taxpayers would certainly be better off owing $150 million over three years using the Rainy Day Fund, than over 37 years. Using the Rainy Day Fund is a far better option than the 'tobacco' bond proposal," stated Martin.

Missourians for Tax Justice opposes the tobacco bond plan for other reasons as well, Martin said. They are:

1) Efforts to make Missouri's tax system more fair (and produce more revenue) will be hindered by a "borrow and spend" mentality which allows elected officials to avoid fiscal reality.

2) The governor's tobacco bond plan has included using a big chunk of the bond money on three capital projects (three buildings), but ignores the shortfall in revenue for human needs programs, such as the state-financed General Relief program.

The General Relief program serves the poorest of Missouri's poor. Recipients are unemployable, usually disabled, and most are waiting to qualify for other disability programs. The cut in General Relief assistance checks to $9.00 per month means many more people will face increased hunger, have their utilities turned off, and become homeless. "What is happening with the General Relief program is a conspicuous symbol of how Missouri cares for the poor," Martin said.

3) To meet the state's general revenue shortfall, the bond plan diverts the anticipated revenue from the national tobacco settlement from its intended purposes to reduce addiction to tobacco and reimburse the state for the cost of medical care resulting from tobacco use. Bonding against future tobacco revenue turns an asset into a debt.

In addition, if the tobacco settlement money is not received, the state will have to pay off the bonds with general revenue funds (revenue from state sales and income taxes, fees, etc.).

4) The bond plan shifts the tax burden for today's needs to future tax payers to pay off the bonds over the next 37 years.

5) Education is an essential need and a primary responsibility of state government, but there are other absolutely essential needs that are a matter of life and death for the people who are affected. Those needs are ignored in the tobacco bonds proposals.

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