Senate eyes future tobacco payments

By Bobby Harrison

Daily Journal Jackson Bureau

JACKSON – The Mississippi Senate voted late Saturday night to sell a portion of future payments that the state is to receive from the tobacco companies to solve the $268 million Medicaid deficit.

Under the proposal, the state would sell the first $20 million each year for 20 years from the annual payments the state is receiving as a result of former Attorney General Mike Moore's lawsuit against the tobacco companies. The complex proposal was first revealed late Saturday night as an amendment on the Senate floor.

Senate leaders hoped the proposal – called securitization – would be accepted by the House as a way to deal with the record-setting $268 million deficit. House Speaker Billy McCoy, D-Rienzi, said Saturday night his leadership would study the proposal.

For the first time in memory, the Legislature was in special session Saturday in the middle of the current 2005 regular session. Gov. Haley Barbour called the special session Friday after the House adjourned for the weekend, opting to leave House and Senate leaders to try to reach an agreement that could be voted on Monday.

Medicaid finds more funds

Medicaid Executive Director Warren Jones and Barbour had said for several weeks the agency would run out of money to pay health care providers who treat the 780,000 Medicaid recipients by Friday. On Saturday, Jones revealed the agency still had about $4 million on hand, and nursing home care should not be impacted by the deficit until the end of the month.

House Medicaid Committee Chairman Leonard Morris, D-Sardis, said it is not unusual for there to be a 30-day or more delay in payments made by Medicaid to providers.

Still, Saturday night Barbour said the situation is urgent because “we have providers who for several days have refused to accept Medicaid as payment because the program is running out of money.”

Sen. Hob Bryan, D-Amory, said providers were not accepting Medicaid patients because of “the artificial crisis” created by Barbour when he said the agency would run out of money on Friday.

“There is no crisis except for the one he has created for his own purposes,” said Bryan.

Tobacco money

No one is disputing the fact that Medicaid will run out of money soon. The Senate and the governor have for weeks proposed taking $200 million or more out of the Tobacco Trust Fund to solve the deficit. The trust fund was created from the settlement of Moore's lawsuit.

The plan was for the annual payments from the tobacco companies to be placed in the trust fund and to use the investment earnings from the trust fund to pay for health care needs.

As the state's financial woes have worsened, the Legislature and the governor have dipped into the trust fund several times. If money is removed from the fund to pay the deficit, it would be left with less than $200 million. The trust fund was supposed to have more than $1 billion by now.

The House has agreed to dip into the trust fund for the deficit but has insisted the a cigarette tax hike be used to replenish the fund. The governor and Senate leadership oppose the cigarette tax hike.

On Saturday night, unexpectedly, the Senate leadership opted to abandon the plan to dip into the trust fund and instead give up $400 million of the annual tobacco company payments for the next 20 years to investors, who would pay the state as much as $240 million right now for the money.

“We are selling a fixed stream of revenue for its current value,” said Sen. Charlie Ross, R-Brandon.

Bryan questioned the wisdom of the plan, saying it was the same as borrowing money to pay debt. He also questioned the wisdom of springing the plan on the Senate on a Saturday night without giving members time to study it.

Little defends plan

Senate President Pro Tem Travis Little, R-Corinth, who offered the amendment, defended it as a sound business practice. He pointed out 16 other states have securitized at least a portion of their annual tobacco payments.

“I didn't like in 2000 when we started taking one-time money to pay recurring expenses,” Little said. “That is nothing different than what we are doing now.”

Barbour endorsed the proposal.

“It's not what I would have proposed, but the Senate has come forward with a reasonable, alternative solution,” the governor said. He also criticized Bryan and Sen. John Horhn, D-Jackson, for preventing the legislation, which he called a solution to a crisis, from being taken up by the House before today.

McCoy said he actually studied the process earlier when he served as Ways and Means chairman. He said he had appointed four members to study the Senate proposal but had no intention of moving too quickly on the complex issue.

Meanwhile, the House voted on Saturday to appropriate $50 million in available funds to Medicaid to solve the deficit for the short-term. Doing so gives House and Senate leaders time to agree on a solution.

During the regular session, the Senate killed two earlier House proposals that provided an additional $50 million to Medicaid. The Senate did not take up the third proposal in Saturday's unique special session.

Both the House and Senate are scheduled to meet again today at 2 p.m.