Economic plan borrows tobacco funds

INDIANAPOLIS -- Some key lawmakers expect Gov. Frank O'Bannon to propose that Indiana borrow against its shares of the national tobacco settlement to pay for economic development programs or help plug the state's budget deficit.\nO'Bannon and Lt. Gov. Joe Kernan were expected to announce a major economic development plan Wednesday afternoon. Their media offices declined to discuss details Tuesday.\nTina Dennis, press secretary to Kernan, would only say that the plan will be the Democratic administration's focus in the upcoming legislative session and "is something we're very excited about."\nBut several lawmakers said they expect it to include borrowing against the tobacco settlement -- also known as "tobacco securitization."\nUnder such a scenario, the state would sell a portion of its future tobacco settlement payments for a lesser lump sum. Bondholders would assume the risk of future payments coming in, but they would reap big dividends if they did.\nThis year, Wisconsin sold its entire settlement for the next two decades for about $1.3 billion, compared with the $5.9 billion the state expected to receive in payments over 25 years. Nearly all of the proceeds were used to plug the state's budget deficit. Several other states or counties have sold off parts of their settlement.