A series of events, capped by an Illinois court's demand that cigarette maker Phillip Morris post a $12 billion bond to appeal a jury verdict, have left Nevada's Millennium Scholarship program in financial trouble.
Treasurer Brian Krolicki told the Senate Government Affairs Committee Phillip Morris has announced it may not be able to make its annual payment because of the court bond.
That would take $16 million -- half of Nevada's annual tobacco payment -- out of the scholarship program, Krolicki said Monday.
The program provides college funding of up to $2,500 a year for four years to Nevada high school graduates with a 3.0 grade-point average or better. If Phillip Morris doesn't make the payment, he said, it could cripple the program, which serves more than 24,000 students.
Krolicki told lawmakers the market interest in buying the right to those payments from Nevada has slumped because of the Illinois ruling, so "securitization" would probably get the state only about $350 million cash.
He said if lawmakers had agreed to sell the state's right to the tobacco payments two years ago, the state could have received more than $450 million.
The idea is to take a smaller, but guaranteed, amount and let the buyer take the risk that payments might be cut or stopped.
"It's one of the most profound missed opportunities," Krolicki told lawmakers. "But if I could do this tomorrow, I probably would not."
He said both the market and Phillip Morris would have to recover to make securitization a good idea again.
As a result, Krolicki said, the Millennium Scholarship program won't last as long. Before the Illinois case, he said securitizing could have provided cash for full payments to students through 2016. Now, without securitization and because of the case, he said the program will have to be reduced by 2007.
Nonetheless, he asked the committee to support giving him the power to sell the tobacco payments for a lump sum, should the market recover enough to make it worthwhile.
The committee took no action on the plan.