Jun 27, 2013 14:51 Jindal tobacco plan hits stumbling block Jindal tobacco plan hits stumbling block Future revenue would be reduced BY MICHELLE MILLHOLLON| Capitol news bureau June 27, 2013 Comments Rising interest rates could spell a $65 million savings loss for a refinancing built into the state’s operating budget, the Jindal administration acknowledged Wednesday. The loss would not affect the $25 billion state spending plan for the fiscal year that starts next week — assuming current projections hold. However, it would mean fewer dollars for the budget in future years. State Treasurer John Kennedy said the Jindal administration needs to sit down with legislators at a public meeting and talk about the change. His concern, he said, is that the administration will move forward in an unfavorable market because the state budget relies on the refinancing occurring. “The Legislature and the public need to know about this. They haven’t told anybody,” Kennedy said. Commissioner of Administration Kristy Nichols, the governor’s chief budget adviser, said she spoke to key legislators personally and apprised them of the situation. She said she sees no need for a public meeting to debate the issue. “(It’s) still significant savings and a good deal,” she said. Federal Reserve Chairman Ben Bernanke triggered the market fluctuation last week by suggesting the federal government might remove what amounts to training wheels on the national economy. The federal government has been deliberately keeping interest rates down while the economy rebounds. Now those wheels could come off. Bernanke’s comments increased the cost of borrowing money during a week in which the Jindal administration was courting potential investors for a refinancing of the state’s tobacco settlement. In 1998, the major tobacco companies agreed to pay states more than $200 billion to settle lawsuits filed over the health-care costs related to smoking. The money was to be paid over 25 years. The state used part of the settlement in 2001 to borrow nearly $1.1 billion for an upfront infusion of cash. The borrowing, or bonds, will be repaid over years. Tobacco settlement proceeds pay for several expenses, including the free college tuition program known as TOPS. When interest rates fell earlier this year, the Jindal administration proposed refinancing the tobacco bonds to generate an expected $140 million in savings over three years. Legislators put $67 million from the anticipated savings into next year’s budget. The Jindal administration didn’t get to the market before Bernanke made his comments, prompting a flurry of conference calls among state officials this week on constantly changing numbers. Nichols said the expected savings plummeted from $140 million to $65 million and then rose to between $75 million and $85 million within a couple of days. Kennedy, who already opposed the refinancing option chosen by the governor, said the savings now could be as little as $66 million. Kennedy, who oversees that state’s finances, said it would be a rookie move to go to the market next week when many institutional investors are on vacation for the Fourth of July. Nichols said the first of July traditionally is a good time for financial transactions. “Our strategy is to analyze the market and get advice on a daily basis or as needed,” she said.