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Guide to Amendments

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THE TOBACCO SETTLEMENT FUNDS PROPOSAL Amendment "#2" October 23, 1999 "TOO" IMPORTANT TO IGNORE!

Fall 1999 voters were asked to vote for or against 16 proposed changes in the State Constitution. Ten of the amendments appeared on the October 23, 1999 ballot. The other six appeared on the November 20,1999 ballot. One of the amendments on the October ballot related to how Louisiana will handle the billions of dollars the state expects to receive from the settlement of a lawsuit against major tobacco companies. It is a far-reaching proposal. Following is a review of the tobacco settlement funds amendment, amendment #2 on the October 1999 ballot.

THE SETTLEMENT

Last year, Louisiana and 45 other states settled suits against major tobacco companies. The states claimed the tobacco companies were responsible for the impact of tobacco use on the states and their citizens. Rather than fight it out in court, the tobacco companies agreed to a settlement that requires the companies to pay Louisiana and the other states billions of dollars each year, with the payments continuing in perpetuity.

THE $$$$

What does this mean to Louisiana? It means Louisiana expects to get at least $4.6 billion dollars over just the next 25 years as its share of a national settlement with tobacco companies, with more dollars scheduled to come to the state even after that.

The tobacco settlement is not a one time bonus. Louisiana will not get one big check from the tobacco companies. Instead the money will come to Louisiana each year, with the state getting about $160 to $180 million a year. It is as if state government just got a pay raise, one that the state reasonably should be able to depend on as income for decades to come. The question is what will we do with the extra cash?

THE TOBACCO $$$$ QUESTION

At the 1999 Regular Session, state lawmakers wrestled with that question. They finally approved a proposed change in the State Constitution to restrict the use of the tobacco settlement money beginning with the 2000-2001 state budget year.

The proposed constitutional amendment will be Amendment #2 on the October 23^rd statewide ballot. It is a lengthy proposition, written in legally required yet sometimes confusing language. However, the impact of the amendment on the future of the state is far reaching and well worth your time to learn about before you walk into the voting booth. You might say Amendment #2 is just too important to ignore!

THE TOBACCO $$$$ PLAN

Amendment #2 requires the state to put the money it gets from the tobacco settlement each year into two different accounts with an option for a third account as a financing and investment tool. One is a trust fund, a kind of restricted savings account, that will grow each year with only a portion of the interest spent each year to support specific education and healthcare programs. The second is a special fund, more like a checking account, from which the state can draw money directly each year to finance specified healthcare, research and education services. The optional third account is known as a leverage fund in financing circles and would not affect how the money could be spent.

• The MILLENNIUM TRUST - When fully implemented in three years, at least 75% of the tobacco settlement money Louisiana gets each year will go into the trust. The State Legislature can increase the percentage to the trust all the way up to 100% with a two-thirds vote. The monies in the trust are divided equally into three funds.

• The TOPS FUND is designed to insure dollars will be available in future years to pay for the popular Tuition Opportunity Program for Scholars or TOPS. The TOPS Fund is restricted to support of state financial assistance programs for students attending Louisiana colleges, universities and vocational schools.

• The EDUCATION EXCELLENCE FUND provides funding to local schools for pre-kindergarten through 12th grade education programs, with a focus on remediation needs, early childhood education and at-risk student programs. Monies from this fund must be used on classroom instruction, not on pay raises or construction and cannot replace existing state or local school funding. This fund gets an extra 10% of the settlement money each year for the first three years.

• The HEALTH EXCELLENCE FUND is earmarked to support children’s healthcare programs and related initiatives as well as innovations in advanced health care sciences and chronic disease management.

The State Treasurer will invest the money in the Millennium Trust, with more money to invest and earn interest as the Millennium Trust grows each year. Only the interest earnings from the investment of the funds will be available to finance the state and local education and health care needs.

• The LOUISIANA FUND - When fully implemented, up to 25% of the tobacco settlement money Louisiana gets each year will go into this special fund. The state can spend directly from the fund to support new and existing state services in the areas of healthcare, education, medical research, disease management and anti-smoking programs. The first couple of years, a higher percentage of the tobacco settlement money will go into the Louisiana Fund to get a jump start on addressing specific problems facing the state in healthcare, education and children’s programs.

• The MILLENNIUM LEVERAGE FUND - The State Legislature, with a two-thirds vote, could opt to put all or some of the tobacco settlement money the state gets each year in this fund. This optional trust fund is a cash management tool and is aimed at getting the most from the tobacco settlement dollars coming to the state through revenue bond sales and investments. It is an investment tool that some believe could increase the amount of money available to support programs in the Millennium Trust and the Louisiana Fund. It does not affect how the money is spent. The legislature has set up a special task force to look into this option.

Why should we put the Tobacco Settlement Funds Plan in the State Constitution?

State lawmakers wanted to restrict the use of the billions of dollars coming to Louisiana. They wanted to make sure the creation of the trust fund and the limitations on the use of the money could not be easily undone. And, they wanted to give voters in Louisiana a say on how the tobacco settlement money is spent. Placing the tobacco settlement fund plan in the State Constitution does all three. If voters approve the proposed change in the State Constitution, the tobacco settlement funds plan cannot be undone without changing the constitution again which requires a two-thirds vote of the State Legislature and another statewide election for voter approval. A simple law creating a trust fund and restricting use of the tobacco settlement funds could be changed or repealed from year to year with a simple majority vote of the legislature and no vote of the people.

What happens if Amendment #2, the proposed change in the State Constitution detailing the tobacco settlement funds plan, is not approved by voters?

If voters do not approve the change in the State Constitution, the money from the tobacco settlement coming to Louisiana each year will go into a special Louisiana Fund, created by a new state law earlier this year, that kicks in only if the constitutional amendment is defeated. The law, which could be changed from year to year, restricts use of monies in the Louisiana Fund to some of the same things as the constitutional amendment, but not all of them. There would be no trust fund to provide long term funding for things like TOPS, education enhancements and healthcare services.

You may contact your state senator or call the Senate Public Information Office at 225-342-9737. You may also visit the Senate home page on the Internet at senate.legis.state.la.us where you can view or print a copy of Act 1392 of the 1999 Regular Session which details the proposed change in the State Constitution.

Prepared by the Senate Public Information Office