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Refinancing may save state $235MAssociated Press
Friday, July 25, 2008
COLUMBIA — South Carolina should save $235 million during the next decade by refinancing bonds tied to a national lawsuit settlement with cigarette companies. State Treasurer Converse Chellis compared it to a homeowner refinancing their home to a 15-year mortgage from one that lasts 30 years. In this case, the bonds would have been paid off in 2019 and now they'll be repaid in 2012. It was good news after economic advisors said this week the state likely will finish the year $100 million short on revenues. |
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Comments
This article has 2 comment(s)
Posted by majorjohnson on July 25, 2008 at 8:07 a.m. (Suggest removal)
This is funny...it's going to SAVE us money. For those who don't know what this is about, we were awarded $2.3 billion dollars over 25 years. We traded that for a one time payment of $913 million dollars (bonds, essentially we borrowed the 913 million and promised to pay the lender the 2.3 billion). So over 25 years we're already losing well over a billion dollars of what we would have. Even saving $235 million means we're losing over a billion still. This is how our government "saves" us money.
Something else, the settlement money can turn out less that the $2.3 billion if smoking is reduced beyond a certain point. That means tax money will have to be used to pay off the bonds if that happens. We gave up a steady income of $92,000,000/year for 25 years in return for a one time payment and lost $1,400,000,000 doing it.
What's more, they put that money into a trust and only use the interest to pay for the programs the funds were supposed to be for and some of those programs they haven't funded for years. On top of that, the interest earned is less than the interest that will be paid on the bonds, so less money is available every year for these programs than would be if they had just taken the payments!
They do draw money out to use for things like budget shortfalls though, so essentially they threw away 1.4 billion dollars and shortchanged the very programs they sued over so they could have a big slush fund to cover their overspending.
Posted by lou9 on July 25, 2008 at 2:23 p.m. (Suggest removal)
For God's sake don't tell Bobby Harrell that the state is going to save money. He will find something to waste it on.