A bipartisan budget group in the Suffolk Legislature has launched an effort to sell remaining funds from a federal tobacco settlement in a one-shot deal to bring in at least $30 million to help close the county's budget gap.
The three-member board of the Suffolk Tobacco Asset Securitization Corp., a local development corporation, voted unanimously Friday to seek proposals from Wall Street underwriters who want to handle the deal. The vote came after Presiding Officer William Lindsay (D-Holbrook) sought the board's assistance in selling Suffolk's rights to its remaining revenue from a 1998 settlement of $900 million between tobacco companies and 46 states. States had sued four major tobacco companies to recover costs for medical services for smoking-related illnesses.
The Suffolk proposal calls for the county to sell its rights to the $5 million to $6 million a year the county still gets in tobacco revenue. Backers say the county still would receive about $2.9 million a year in residual settlement revenue, based on actual tobacco use.
Lindsay said he initially was "not sold" on using the tobacco funds. But "we are so broke, we need to come up with money if we are to avoid laying people off," he said. Lindsay added that he does not know if proposals will come in before the legislature's Nov. 9 vote on the 2012 budget. But the legislative working group will include revenue from a possible deal, based on estimates from experts.
The initiative provided the first insight into amendments to County Executive Steve Levy's $2.7 billion budget that the legislature's budget group is hammering out behind closed doors. Lawmakers in both parties estimate the deficit at $135 million, while legislative budget analysts are warning that Suffolk could run out of operating funds by spring.
Levy maintains his budget is balanced through 710 layoffs, sale of the county nursing home and major cuts in county services. The budget contains no increase in county property taxes.
Levy opposes the one-time sell-off of securitization proceeds. "We declined to budget tobacco securitization, and instead sought real, recurring savings such as health care concessions," said Mark Smith, Levy's spokesman. "But if the legislature is going to pursue this option, at the very least it should be tied to union concessions."
Legis. Thomas Barraga (R-West Islip), the first county lawmaker to publicly call for use of remaining tobacco settlement money, reacted positively to the proposal, though he said he was unaware that the budget working group had approached the board to take action.
Comptroller Joseph Sawicki, a Republican, said it is up to the legislature to make a final decision, though he called the securitization proposal "an extremely painless way" to avoid layoffs.