Pol wants tobacco cash in lump sum

Delegate’s proposal viewed warily

‘‘We have to embark on another wave of massive school construction,” he said. ‘‘We can’t do it in dribs and drabs over the next 40 or 50 years. Our schools are falling apart.”

Schuh (R-Dist. 31) of Gibson Island, a financial advisor, said his plan would eliminate the risks of nonpayment and reduced value over the remaining 15 years of the settlement. ‘‘It allows us to capture that revenue today for certain needs and allows us to have certainty for money that we will eventually get.”

About half of the 50 states have securitized their tobacco restitution payments, said Arturo Perez, a fiscal analyst for the National Conference of State Legislatures.

The lump sums they received vary, Perez said. Ohio received about $5 billion from its auction last fall.

Four major tobacco companies agreed to pay 46 states and six U.S. territories a projected $206 billion in restitution money over the next 25 years to compensate for medical costs associated with smoking-related diseases, although the agreement calls for the payments to be made in perpetuity. Four states brokered separate deals.

The concept is similar to lottery payoffs that allow the winner to choose an annuity payment or a lump sum up front.

Critics argue that securitizing the payments would cost Maryland money over the long term.

‘‘We have an opportunity to collect all of it. Why would we give some of it away?” said former Charles County delegate Van T. Mitchell, who chaired the House Health and Human Resources Subcommittee, which oversaw the program. ‘‘You’re going to have certain pressures on the budget in the out years just like this year and you’re going to have that revenue source year after year for the next 15 years.”

Cashing in now would transfer the risk to bond traders and get current value for payments that could decline in 15 years, Schuh argued.

‘‘Instead of sitting around waiting to collect $150 million over the next [15] years, we could collect all or part of that money today at a discount,” he said.

It’s unclear how much the lump sum would net the state until the bonds are auctioned off. Budget analysts are aware of the bill and are working to determine its impact, said Amber Teitt, a fiscal analyst with the Department of Budget and Management.

Maryland’s annual payment varies, but is slightly more than $170 million in the current fiscal year and the one that begins July 1. The revenue is distributed to eight different programs such as cancer screenings and treatment, tobacco cessation, drug addiction and education. More than half of the money goes to Medicaid reimbursement.

Under Schuh’s proposal, funding for those programs would be held harmless for the next six years and any additional dollars would be spent on school construction.

Public health advocates blasted the proposal as undermining the settlement’s goal to boost aid for health care programs.

‘‘It’s a terrible idea,” said Vincent DeMarco, president of the Maryland Citizens’ Health Initiative. ‘‘We’re well below where we need to be on funding tobacco prevention programs at the CDC [Centers for Disease Control and Prevention] level and securitizing just ruins the state’s ability to use this money for health care over the years.”

Every fiscal proposal is worth considering, said House Appropriations Chairman Norman H. Conway (D-Dist. 38B) of Salisbury and House Speaker Michael E. Busch (D-Dist. 30) of Annapolis.

‘‘That’s why we should have a committee hearing on it,” said Busch. ‘‘There’s enough information around from other states to make a decision on it.”

But with only three weeks left until Sine Die, the bill has not been assigned to a committee, much less received a hearing date.

Some lawmakers say it’s not sound fiscal policy to sell off guaranteed money for a lower sum total.

‘‘It sounds like we’re cashing in on future receipts so we can enjoy the benefits now,” said Del. John L. Bohanan Jr. (D-Dist. 29B) of California. ‘‘How many times have we had pots of money sitting there and raided it to balance the budget? We’ve done that consistently over the last seven years and that’s a huge pot of money there. I wouldn’t call that prudent.”

But if the additional money can help Maryland ride out the economic storm, it might be a wise approach, said Del. Gail H. Bates (R-Dist. 9A) of West Friendship. ‘‘It is a stopgap.”