January 13, 2017

Securitization a non-solution that
would wreck Kansas financially

New KCEG brief outlines serious risks securitization poses to state finances

TOPEKA – For the fourth time in the last year, Gov. Sam Brownback urged lawmakers this week to sell the state’s annual tobacco settlement (also referred to as the Master Settlement Agreement, or MSA) to investors through a process called securitization.  A new brief from the Kansas Center for Economic Growth (KCEG) outlines the severe risks this carries for the Kansas economy.

“The devastating impact securitization would have on investments in young children is well documented, but this is also blatantly dangerous and irresponsible fiscal policy,” said Nate Madden, KCEG Research Analyst. “It could add another disastrous layer to our financial crisis by piling on hundreds of millions to the state’s ‘credit card bill’ at a time when Kansas already owes $4.5 billion in taxpayer-supported debt. Securitization would almost guarantee a fourth credit rating downgrade for Kansas.”

Other states, like New Jersey, securitized their tobacco settlement money and received a credit downgrade almost immediately after doing so. Kansas’ current credit rating already falls among the bottom range of the nation, ahead of only three other states.

Read the policy brief and its accompanying KCEG blog post here.

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ClayRELEASE: Securitization a non-solution that would wreck Kansas financially