Date: 03/08/2006

Final
BILL SUMMARY for HB06-1163

HOUSE COMMITTEE ON FINANCE

Votes: View--> Action Taken:
Moved amendment L.004. (Rather than selling as muPass Without Objection


02:37 PM -- House Bill 06-1163 - Concerning A Budget Stabilization Fund

Representative Penry, prime sponsor, explained the provisions of House Bill 06-1163 and distributed amendment L.004 (Attachment E) to committee members. Representative Penry asked staff to distribute a memorandum on the fiscal assessment of the amendment (Attachment F). He explained that rather than selling as much of Colorado's future tobacco master settlement payments as is financially feasible, L.004 sells a portion of the state's future payments. In particular, L.004 sells all but an annual amount of $70 million. In order to maximize the return to the state, L.004 specifies that the least risky portion of each year's payment be pledged to the sale and eliminates the limit on the term of securitization. The committee discussed the amendment and bill.

02:46 PM -- The following persons testified:

02:46 PM -- Mr. Ben Stein, Deputy State Treasurer, testified in support of the bill and distributed a handout on securitization of money from the settlement agreement (Attachment G) and an article on tobacco payments to the states (Attachment H) found in the Wall Street Journal. Mr. Stein discussed the handouts and commented on reasons to use moneys from the Master Settlement Agreement to fund a rainy day fund.

Mr. Stein explained that securitization is the structuring of a stream of cash flows into a liquid security for sale to investors. Securitization would yield the state a lump-sum payment of about $759 million if the state pledges about 46 percent of its Tobacco Securitization Revenues. Mr. Stein continued by discussing the transfer of risk from the state to investors under a securitization scenario. Mr. Stein closed by saying that the state could sell rights to the cash flows for 60 years and get about $1.5 billion in up-front money. After some comments, the committee discussed the transfer of risk under the bill and whether the fund should be protected by the constitution.

02:59 PM -- Mr. Russell Heise, RBC Capital Markets, testified in support of the bill.

03:03 PM -- Mr. Tony Milo, Colorado Contractors Association, testified in support of the legislation and discussed the need for a state emergency fund.

BILL:HB06-1163
TIME: 03:06:43 PM
MOVED:Massey
MOTION:Moved amendment L.004. (Rather than selling as much of Colorado's future tobacco master settlement payments as is financially feasible, L.004 sells a portion of the state's future payments. In particular, L.004 sells all but an annual amount of $70 million. In order to maximize the return to the state, L.004 specifies that the least risky portion of each year's payment be pledged to the sale and eliminates the limit on the term of securitization.) The motion passed without objection by those members present.

Representative Vigil, Chairman, took the bill off the table to allow the committee to hear testimony on the remaining rainy day fund bills. All rainy day fund bills will be heard "for action only" on a future date determined by the Chairman of the House Finance Committee.
SECONDED:Judd
VOTE
Benefield
Cloer
Crane
Frangas
Garcia
Harvey
Jahn
Kerr
Marshall
Massey
McCluskey
Judd
Vigil
Not Final YES: 0 NO: 0 EXC: 0 ABS: 0 FINAL ACTION: Pass Without Objection