State could make money by refinancing tobacco settlement

The state of Iowa could reap a hundred-million-dollar windfall from a six-year-old tobacco settlement. When big tobacco companies settled a lawsuit with several states Iowa was awarded about two-billion dollars over 25 years. To make sure the cigarette makers wouldn’t go bankrupt and fail to pay off, the state essentially took out a loan for 650-million dollars, and promised to pay it back with the tobacco settlement. Now, state treasurer Mike Fitzgerald says it’s time to rewrite terms of that loan. Like Iowans who can refinance a house, Fitzgerald says we can refinance the tobacco payments, and it could mean as much as another 100-million dollars for the state. That’s because interest rates have dropped since the original arrangement. About Thanksgiving, Fitzgerald says his department will have found out about how much cash the governor and legislature are going to have available to spend when the session begins in January. Fitzgerald cautions that with money available from re-financing at a lower interest rate, the state must begin by refilling reserve funds the lawmakers dipped into to balance the budget in past years. Fitzgerald jokes that the governor and legislators can “sit down and fight over do we want a new destination park in southern Iowa… a school building in Ames, or something in Iowa City.” He says that’s what politics should be about, deciding on things like that after the state has its financial house in order, with a balanced budget and financial reserves filled. Fitzgerald says the extra hundred-Million the state may collect from the tobacco settlement wouldn’t even cover all it’s borrowed from from emergency accounts over the past five years.