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Lawmakers start a partisan debate about bonds

January 29, 2003
By: Jason McLure
State Capital Bureau

JEFFERSON CITY - A day after Gov. Bob Holden warned of dire consequences to education if the legislature failed to agree to borrow $373 million to close this year's deficit, members of both parties blamed each other for failing to cooperate to resolve the budget crisis.

Rep. Chuck Graham, D-Columbia, said the Republicans were trying to reap political benefit by delaying approval of the governor's proposed bond sale.

"I think they like the governor being the one to have to make the cuts," said Graham. "I don't think they have the guts to make the cuts which is ironic because they're the ones who this fall said government is too big, but they won't tell you one thing they're going to cut."

Senate President Pro Tem Peter Kinder, R-Cape Girardeau, said the governor should have talked to legislators before issuing his ultimatum Tuesday. Republicans have said they need time to study the governor's proposal to issue 'hybrid' bonds backed in part by the state's future revenue from the tobacco settlement.

Republicans are examining a number of potential weaknesses in the governor's plan. First and foremost, the governor may not have support from key members of his own party. Holden's plan requires the approval of the Board of Public Buildings, a panel which includes Holden and fellow Democrats Lt. Gov. Joe Maxwell and Attorney General Jay Nixon.

Yet neither Nixon nor Maxwell have committed to voting for the governor's plan, and Kinder said his party would be wasting their time with the proposal until they do.

Kinder and House Speaker Catherine Hannaway also question the constitutionality of the governor's plan. They've sent a letter to the Attorney General asking him to determine whether the Missouri constitution allows the state to borrow such a large sum without a vote of the people.

And while the bonds have been marketed as "tobacco securitization", Republicans have expressed concerns that Missouri taxpayers could get stuck repaying the bond if tobacco revenues fail. This could happen either because one of the tobacco companies in the settlement is driven out of business by a large jury award against them, or if the city of St. Louis wins its suit against the tobacco companies. If the latter occurs, any award to St. Louis could be deducted from the state's share of the tobacco settlement.

Earlier this month the legislature's Advisory Committee on Tobacco Securitization, a bipartisan committee formed to study the issue, cautioned against issuing the bonds in part because "...the best deal for today's taxpayers needs to be balanced with the best interests of the taxpayers of tomorrow."

That committee also criticized the bond issue for jeopardizing the state's AAA bond rating. That rating, the highest possible, is based in part on Missouri's reputation for balancing spending with revenues. If the state is seen to be borrowing irresponsibly, credit-rating agencies may downgrade the state, potentially costing the state millions in higher interest payments.

Senate Minority Leader Ken Jacob, D-Columbia, was a member of the committee and signed off on its criticisms of "hybrid" tobacco bonds. Yesterday (Wednesday) he spoke in favor of the governor's plan.

Jacob said Republicans need to take action on the governor's proposal or present their own substitute for education cuts.

"You won the election based on cuts," said Jacob. "Look if you [Republicans] think the schools shouldn't be cut, you have an alternative, what is it?"

Melissa Maynard and Sara Bondioli contributed to this report