The state of Minnesota’s sale of Tobacco Settlement Revenue Bonds yesterday is yet another example of Republicans’ irresponsible budget tactics that are dragging down Minnesota’s economic recovery, State Senator Richard Cohen, DFL-St. Paul, said today.
“Selling these bonds was a bad idea to begin with because we knew we would be spending money we didn’t have,” Sen. Cohen said. “As it turns out, Minnesotans actually will be spending over $1 billion more than we have in the bank just to get a one-time infusion of cash. It’s like playing with fake money, and it’s a bad precedent – something all three major credit-rating institutions already recognized when they downgraded Minnesota’s credit ratings this year.”
In accordance with the final 2012-2013 budget agreement, the state sold $757 million in bonds yesterday, backed by tobacco settlement payments expected to be paid to Minnesota in future years. Only $640 million of the revenue is available on a one-time basis to help the current budget. The other $117 million will be used to pay costs associated with issuing bonds and supporting future debt service.
In total, Minnesotans will pay $1.2 billion in debt service over the next 20 years to receive $640 million in one-time revenue to temporarily fix today’s budget. It’s yet another layer of bad budgeting that Republicans insisted upon to end this year’s special session, Sen. Cohen said.
“First, we learned property taxes will increase because of Republicans’ elimination of the Homestead Credit,” he said. “Then, we saw a record number of schools asking voters for more money this fall, partially because of continued school payment delays by the state. Now, we’re seeing millions of dollars in interest payments added onto the backs of all Minnesotans. This is no way to fix a budget deficit, and it’s certainly no way to get a struggling economy moving again.”
Sen. Cohen again stressed that Governor Mark Dayton’s original budget plan would have provided more long-term stability to Minnesota’s economy. The plan that Republicans rejected would have asked those making more than $1 million a year to pay closer to their fair share in taxes to help solve the deficit. Instead, every Minnesotan now will be paying more under the Republicans’ budget and the state will very likely face another deficit next year.