NOTE:  As provided in LFC policy, this report is intended only for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used for other purposes.

 

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FI S C A L   I M P A C T   R E P O R T

 

 

SPONSOR:

Aragon

 

DATE TYPED:

3/3/03

 

HB

 

 

SHORT TITLE:

Abolish Tobacco Settlement Fund

 

SB

298/aSFC/aHCPAC

 

 

ANALYST:

Smith

 

REVENUE

 

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY03

FY04

 

 

 

42,900.0

37,200.0

 

Recurring

 

General Fund

6,550.0

 

 

Nonrecurring

General Fund

(42,900.0)

(37,200.0)

 

Recurring

 

Tobacco Settlement Permanent Fund

(6,550.0)

 

 

Nonrecurring

Tobacco Settlement Program Fund

(Parenthesis ( ) Indicate Revenue Decreases)

 

SOURCES OF INFORMATION

 

LFC Files

 

SUMMARRY

 

     Synopsis of Bill, as amended

 

Senate Bill 298, as amended, diverts all the tobacco settlement payments from the tobacco settlement permanent fund to the general fund for FY03 and FY04. Beginning in FY05, the diversion ceases and 50 percent of the revenues will again be transferred to the tobacco settlement program fund. Additionally, the unappropriated balance in the tobacco settlement program fund is also transferred to the general fund.

 

SB298/a also specifies that the tobacco settlement permanent fund is a reserve fund and may be expended like other general fund reserve accounts when authorized by the general appropriations act.  No additional appropriations or distributions from the tobacco settlement permanent fund are permitted without a three-fifths vote of the legislature.

 

FISCAL IMPLICATIONS

 

This bill does not actually appropriate the corpus of the permanent fund; it merely enables future transfers and allows the inclusion of the permanent fund in the calculation of reserve levels.

 

OTHER SUBSTANTIVE ISSUES

 

Permanent fund balances are invested by the State Investment Council in a diversified portfolio of stocks and bonds. Annual returns have been mostly negative since inception; cumulative losses total $5.5 million.  Policymakers should anticipate further losses in FY 2003; November fund pricing implies a loss of $5.7 million, or 9.6 percent, since the beginning of the fiscal year.

 

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