MISSISSIPPI LEGISLATURE
2005 Regular Session
To: Appropriations; Ways and Means
By: Representative Watson (By Request)
AN ACT TO AMEND SECTIONS 43-13-401, 43-13-403, 43-13-405, 43-13-407 AND 43-13-409, MISSISSIPPI CODE OF 1972, TO CREATE A TOBACCO SETTLEMENT REVENUE MANAGEMENT AUTHORITY, WHICH SHALL BE A PUBLIC CORPORATION TO RECEIVE ALL OF THE STATE'S FUTURE TOBACCO SETTLEMENT PAYMENTS AND TO ISSUE BONDS OF THE AUTHORITY PAYABLE FROM AND SECURED SOLELY BY THE STATE'S TOBACCO RECEIPTS; TO PROVIDE FOR THE TRANSFER OF THE PROCEEDS OF THE BONDS TO THE HEALTH CARE EXPENDABLE FUND; TO PROVIDE FOR THE TRANSFER OF THE UNEXPENDED BALANCE OF THE HEALTH CARE TRUST FUND TO THE HEALTH CARE EXPENDABLE FUND; TO PROVIDE FOR A BOARD OF DIRECTORS FOR THE AUTHORITY, WHICH SHALL BE THE SUCCESSOR TO THE BOARD OF DIRECTORS FOR THE HEALTH CARE TRUST FUND AND EXPENDABLE FUND; TO PROVIDE FOR THE ASSIGNMENT OF FUTURE TOBACCO SETTLEMENT PAYMENTS TO THE AUTHORITY; TO PRESCRIBE THE POWERS AND RESPONSIBILITIES OF THE AUTHORITY AND THE BOARD; TO PROVIDE FOR THE ISSUANCE OF THE BONDS; TO PROVIDE FOR THE MAINTENANCE OF ACCOUNTS AND THE ISSUANCE OF AN ANNUAL REPORT; TO PROVIDE FOR THE TAX EXEMPT STATUS OF INTEREST FROM THE BONDS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 43-13-401, Mississippi Code of 1972, is amended as follows:
43-13-401. It is declared by the Legislature that the funds received by the State of Mississippi from tobacco companies in settlement of a certain lawsuit brought against those companies by the State of Mississippi, or as a result of the settlement of any lawsuit brought against tobacco companies by another state, should be applied toward improving the health and health care of the citizens and residents of the state. It is the intent of the Legislature by this article to provide the manner and means necessary to carry out those purposes. The Legislature has considered the financing techniques employed and to be employed by other jurisdictions to convert future tobacco settlement payments receivable into current assets and thereby to reduce exposure to payment risks, and declares it to be prudent and in the best interest of the State of Mississippi to employ those financing techniques.
SECTION 2. Section 43-13-403, Mississippi Code of 1972, is amended as follows:
43-13-403. When used in this article, the following definitions shall apply, unless the context requires otherwise:
(a) "Authority" means the Tobacco Settlement Revenue Management Authority established in Section 43-13-409.
(b) "Board" means the governing board of the Tobacco Settlement Revenue Management Authority established in Section 43-13-409.
(c) "Bonds" means special source bonds, notes, or other evidences of indebtedness of the authority payable solely from and secured solely by the state's tobacco receipts, issued under the authorizations contained in this article.
(d) "Health Care Trust Fund" means the trust fund established by Section 43-13-405 for the deposit of the funds received by the State of Mississippi as a result of the tobacco settlement, including income from the investment of those funds.
(e) "Health Care Expendable Fund" means the fund established by Section 43-13-407 for the annual transfer of certain funds from the Health Care Trust Fund that are available for appropriation by the Legislature.
(f) "Income" means all interest and dividends derived from the investment of any tobacco settlement funds and any capital gains from the sale or exchange of those investments.
(g) "Tobacco settlement" means the settlement of the case of Mike Moore, Attorney General ex rel. State of Mississippi v. The American Tobacco Company et al. (Chancery Court of Jackson County, Mississippi, Cause No. 94-1429) and the settlement of any case brought against tobacco companies by another state.
SECTION 3. Section 43-13-405, Mississippi Code of 1972, is amended as follows:
43-13-405. * * * In accordance with the purposes of this article, there is established in the State Treasury the Health Care Trust Fund. On July 1, 2005, the entire unexpended balance of the Health Care Trust Fund shall be transferred into the Health Care Expendable Fund. * * *
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SECTION 4. Section 43-13-407, Mississippi Code of 1972, is amended as follows:
43-13-407. (1) In accordance with the purposes of this article, there is established in the State Treasury the Health Care Expendable Fund. * * *
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* * * All income from the investment of the funds in the Health Care Expendable Fund shall be credited to the account of the Health Care Expendable Fund. Any funds in the Health Care Expendable Fund at the end of a fiscal year shall not lapse into the State General Fund.
(2) The funds in the Health Care Expendable Fund shall be available for expenditure under specific appropriation by the Legislature beginning in fiscal year 2000, and shall be expended exclusively for health care purposes.
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SECTION 5. Section 43-13-409, Mississippi Code of 1972, is amended as follows:
43-13-409. (1) (a) There is created the Tobacco Settlement Revenue Management Authority, a public body corporate and politic and an instrumentality of this state, with the responsibility of effecting the public purpose of this article.
(b) The purpose of the authority is to receive all of the state's tobacco receipts, to issue bonds of the authority payable solely from and secured solely by the state's tobacco receipts or any tobacco receipts reserve fund created from it for the purposes authorized in this article, and to manage and dispose of the state's tobacco receipts for the purposes and in the manner authorized in this article.
(c) Upon termination of the existence of the authority, title to all property, real and personal, owned by it, including net earnings, vests in the state.
(2) The authority shall be governed by a board of directors. The Board of Directors for the Health Care Trust Fund and Health Care Expendable Fund shall be the board of directors for the authority, and members appointed before the effective date of this act shall succeed to membership to the board of directors of the authority. The board of directors shall consist of thirteen (13) members as follows:
(a) Seven (7) voting members as follows: the State Treasurer, or his designee, the Attorney General, or his designee, and one (1) member from each congressional district to be appointed by the Governor with the advice and consent of the Senate. Of the members appointed by the Governor, one (1) member shall be appointed for an initial term that expires on March 1, 2000; one (1) member shall be appointed for an initial term that expires on March 1, 2001; one (1) member shall be appointed for an initial term that expires on March 1, 2002; one (1) member shall be appointed for an initial term that expires on March 1, 2003; and one (1) member shall be appointed for an initial term that expires on March 1, 2004. Upon the expiration of any of the initial terms of office, the Governor shall appoint successors by and with the advice and consent of the Senate for terms of five (5) years from the expiration date of the previous term. Any member appointed by the Governor shall be eligible for reappointment. Each member appointed by the Governor shall possess knowledge, skill and experience in business or financial matters commensurate with the duties and responsibilities of the board of directors in administering the Health Care Trust Fund and the Health Care Expendable Fund.
(b) Two (2) nonvoting, advisory members of the Senate shall be appointed by the Lieutenant Governor, and one (1) nonvoting, advisory representative of the health care community shall be appointed by the Lieutenant Governor, who shall serve for the length of the term of the appointing official and shall be eligible for reappointment.
(c) Two (2) nonvoting, advisory members of the House of Representatives shall be appointed by the Speaker of the House, and one (1) nonvoting, advisory representative of the health care community shall be appointed by the Speaker of the House, who shall serve for the length of the term of the appointing official and shall be eligible for reappointment.
(d) Any person appointed to fill a vacancy on the board of directors shall be appointed in the same manner as for a regular appointment and shall serve for the remainder of the unexpired term only.
(2) (a) Nonlegislative members of the board of directors shall serve without compensation, but shall be reimbursed for each day's official duties of the board at the same per diem as established by Section 25-3-69, and actual travel and lodging expenses as established by Section 25-3-41. Legislative members of the board of directors shall receive the same per diem and expense reimbursement as for attending committee meetings when the Legislature is not in regular session.
(b) The State Treasurer shall be the chairman of the board of directors. The board of directors shall annually elect one (1) member to serve as vice chairman of the board. The vice chairman shall act as chairman in the absence of or upon the disability of the chairman or if there is a vacancy in the office of chairman.
(c) All expenses of the board of directors in carrying out its duties and responsibilities under this article, including the payment of per diem and expenses of the nonlegislative members of the board, shall be paid from funds appropriated to the State Treasurer's office for that purpose.
(d) To the extent that administrative assistance is needed for the functions and operations of the authority, the board may obtain this assistance from the Office of the State Treasurer, which must provide assistance requested by the board at no cost to the board or to the authority other than for expenses incurred and paid to entities that are not agencies or departments of the state. The board must retain ultimate responsibility and provide proper oversight for the implementation of this article.
(e) The board shall exercise the powers of the authority. A majority of the members of the board constitutes a quorum for the purpose of conducting all business. The board shall determine the number of personnel it requires, their compensation and duties.
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(3) The state's tobacco settlement payments due to the state after July 1, 2005, and the right to receive them as they are distributed from escrow are assigned to the authority. On or after the date these revenues are pledged, the state shall have no right, title or interest in or to the state's tobacco receipts; and the state's tobacco receipts are property of the authority and not of the state, and must be owned, received, held and disbursed by the authority or the trustee for the holders of bonds and not by the state. The state directs the independent auditor and the escrow agent to make all these payments to the authority in accordance with instructions that may be given by the authority from time to time. The assignment and direction made in this subsection are irrevocable during any time when bonds are outstanding under this article plus one (1) year and one (1) day thereafter and are a part of the contractual obligation owed to the bond holders. On or before the date of delivery of any bonds, the state through the State Treasurer shall notify the independent auditor and the escrow agent that the state's tobacco receipts have been assigned to the authority and shall instruct the independent auditor and the escrow agent that, after the delivery date for bonds and irrevocably during the time when any bonds are outstanding, the state's tobacco receipts are to be paid directly to the authority, or its designee.
(4) In addition to the powers contained elsewhere in this article, the board has all power necessary, useful or appropriate to operate and administer the authority, to effectuate the purposes of the authority, and to perform its other functions including, but not limited to, the power to:
(a) Have perpetual succession;
(b) Sue and be sued in its own name;
(c) Adopt, promulgate, amend and repeal bylaws, not inconsistent with provisions in this article for the administration of the authority's affairs and the implementation of its functions;
(d) Have a seal and alter it at its pleasure, although the failure to affix the seal does not affect the validity of an instrument executed on behalf of the authority;
(e) Enter into contracts, arrangements and agreements with government units and other persons and execute and deliver all financing agreements, including bonds issued to support the borrowing by those government units to pay eligible costs of qualified projects, and other instruments necessary or convenient to the exercise of the powers granted in this article;
(f) Enter into agreements with a department, agency, political subdivision or instrumentality of the United States or of this state or of another state for the purpose of planning and providing for the financing of qualified projects or for the administration of the purposes and programs of this article;
(g) Enter into agreements with the tobacco trust fund for the purpose of managing and controlling the transfer of funds between the authority and the tobacco trust fund and governing the investment and the monitoring and recordkeeping of these funds, for purposes of maintaining the exemption from federal income tax of interest on bonds and for other purposes;
(h) Enter into, amend and terminate agreements in the nature of interest rate swaps, forward security supply contracts, agreements for the management of interest rate risks, agreements for the management of cash flow, and other agreements of a similar nature, with respect to bonds issued pursuant to this article;
(i) Procure insurance, guarantees, letters of credit and other forms of collateral or security or credit support from any public or private entity, including any department, agency or instrumentality of the United States or this state, for the payment of any bonds, including the power to pay premiums or fees on any insurance, guarantees, letters of credit and other forms of collateral or security or credit support;
(j) Borrow money through the issuance of bonds as provided in this article, and through the issuance of notes in anticipation of the issuance of these bonds;
(k) Enter into contracts and expend funds to obtain accounting, management, legal, financial consulting, trusteeship and other professional services necessary or convenient to the operations of the authority; however, all matters relating to the designation and selection of bond counsel to the authority is within the discretion of the State Treasurer;
(l) In order to pay for budgeted items, to expend funds for the costs of administering the operations of the authority;
(m) Direct the escrow agent with respect to the disbursement to the authority of the state's tobacco receipts and receive and accept the state's tobacco receipts;
(n) Enter into contracts or agreements necessary, proper or convenient for the effectuation of the powers and purposes of the board and the authority;
(o) Invest the funds held by the authority under this article in any investment permitted for funds of this state, other than the state's retirement funds, or for funds of the political subdivisions of this state, in revenue bonds of government units, and in general obligations of other states whose general obligation debt is rated not lower than the general obligation debt of this state;
(p) Do all other things necessary or convenient to exercise powers granted or reasonably implied by this article or that may be necessary for the furtherance and accomplishments of the purposes of the authority.
Before the date that is one (1) year and one (1) day after which the authority no longer has any bonds outstanding, the authority has no authority to file a voluntary petition under Chapter 9 of the United States Bankruptcy Code or corresponding chapters or sections as may, from time to time, be in effect, and neither any public officer or any organization, entity or other person shall authorize the authority to be or become a debtor under Chapter 9 or any successor or corresponding chapter or sections during the periods. The provisions of this paragraph are for the benefit of the holders of any bonds and are a part of the contractual obligation owed to the bondholders, and the state shall not modify or delete the provisions of this paragraph during the periods described in this article.
In the exercise of its powers in this article, the board and the authority may obtain services in accordance with the procedures, guidelines and criteria established by the board for that purpose.
(5) (a) The board may issue bonds in the name of the authority, from time to time, for the purposes and in the manner stated in this section.
(b) All bonds must be secured solely by and payable solely from the state's tobacco receipts, or the portion of the state's tobacco receipts the board determines to pledge for payment.
(c) Neither the members of the board nor any person executing the bonds or any notes are liable personally on the bonds or notes or be subject to any personal liability or accountability by reason of the issuance of the bonds.
(d) The board has no power to pledge the faith, credit or taxing power of this state or any of its political subdivisions in connection with the issuance of the bonds, and each bond must recite on its face that it is a special source bond of the authority issued under and in accordance with this article, that it is secured solely by and payable solely from the state's tobacco receipts, that it is neither a general, legal nor moral obligation of the state or any of its political subdivisions, and that it is not backed by the full faith, credit or taxing power of this state of any of its political subdivisions. Failure to include this language on the face of any bond does not cause the bond to become a general, legal or moral obligation of the state or any of its political subdivisions, or a pledge of the full faith, credit or taxing power of this state or any of its political subdivisions.
(e) Any pledge of the state tobacco receipts made by the authority is valid and binding from the time when the pledge is made. The state tobacco receipts pledged and then or thereafter received by the authority are immediately subject to the lien of the pledge without any physical delivery of the receipt or further act. The lien of the pledge is valid and binding against all parties having claims of any kind in tort, contract, or otherwise against the authority, irrespective of whether the parties have notice of them. Neither the resolution of the authority or any other instrument by which a pledge is created need be recorded or filed to perfect the pledge.
(f) The authority may not issue any bond with a scheduled maturity later than thirty (30) years after the date of issuance.
(g) When issuing bonds for the purpose described in this section or to refund the bonds, the authority may sell bonds either in a negotiated transaction with one or more lead underwriters selected by the board on the basis of criteria to be established by the board, or through a competitive bidding process in accordance with procedures to be established by the board. The determination of whether to sell bonds through negotiation or through competitive bidding must be made by the board.
(h) The authority may not issue any bonds unless the board has first adopted its resolution authorizing the issuance, finding that the issuance and the proposed use of the bond proceeds is in accordance with this article, and setting out the terms and conditions of the bonds and the covenants of the authority with respect to the bonds. These terms must include the issuance date or dates, the maturity date or dates, the principal amount, the interest rates or the means of determining the same, whether fixed or variable, the time, manner and currency for paying interest and principal, the negotiability of the bonds and any restrictions relating to the registration of the bonds; and the covenants may include, without limitation, the establishment and maintenance of dedicated reserve funds for the payment of debt service on bonds if the state's tobacco receipts are inadequate in any year, restrictions on the later issuance of additional bonds or making the later issuance subject to certain conditions relating to available debt service coverage or otherwise, conditions on the timing of the release of all or a portion of the state's tobacco receipts to the General Fund of this state, the enforcement of the master settlement agreement, or any other matter that the board considers appropriate, subject to this section.
(i) The board may not authorize or cause the authority to enter into any covenant that purports to create a general, legal or moral obligation of this state or any of its political subdivisions or to pledge the full faith, credit or taxing power of the state or any of its political subdivisions; nor may the board authorize or cause the authority to enter into any covenants that purport to create a right on the part of the board, the authority, any bondholder, or any trustee any right to recover funds consisting of the state's tobacco receipts once those funds have been deposited into the General Fund of the state in accordance with the terms of this article. Any covenant in violation of this subsection is void and of no effect.
(j) Subject to the requirements of this section, the board may authorize the issuance of bonds of the authority for the following purposes:
(i) Refunding on a current or advance-refunding basis, any outstanding bonds of the authority; or
(ii) Obtaining funds for delivery to the Health Care Expendable Fund. All proceeds of bonds issued for the purpose described in this section must be delivered promptly to the Health Care Expendable Fund, except as needed to defray the costs of issuance of the bonds or to establish any required reserve fund for the bonds.
(6) The authority and the board shall have no other assets or property except the state's tobacco receipts as received, and the right to receive the state's tobacco receipts.
(7) The authority and the board have no power to incur debt or obligations or in any way to encumber their assets except by the issuance of bonds, including the making of covenants in relation to the issuing of bonds and notes in anticipation of the issuance of the bonds, and the incurring of expenses and obligations as authorized in this section.
(8) All accounts of the authority must be held and maintained separately from all other funds, properties, assets and accounts of this state and its other agencies. The board shall keep an accurate account of all of its activities and all of its receipts and expenditures and annually, in the month of January, shall make a report of its activities to the Legislature, the report to be in a form prescribed by the State Auditor. Audited financial statements must be submitted to the State Auditor by October 15 following the end of the fiscal year.
(9) (a) The bonds and the income from the bonds are exempt from all taxation in the state except for inheritance, estate or transfer taxes, regardless of the federal income tax treatment of the interest from the bonds.
(b) The exercise of the powers granted by this article are in all respects for the benefit of the citizens of this state and for the promotion of their welfare, convenience and prosperity. Property, whether real of personal, tangible or intangible, of the authority and the income and operations of the authority are exempt from taxation or assessment by the state or any of its political subdivisions.
(c) It is lawful for executors, administrators, guardians, committees and other fiduciaries to invest any monies in their hands in bonds. Nothing contained in this section may be construed as relieving any person from the duty of exercising reasonable care in selecting investments.
(10) All of the state's tobacco settlement payments not needed to pay (a) expenses of the authority during the next twelve (12) months, or (b) debt service on bonds during the next twelve (12) months, or fully to fund reserve accounts established by the board with respect to bonds, not less frequently than annually and at a time determined by the board in its resolutions authorizing the issuance of bonds, shall be transferred to the Health Care Expendable Fund. The determination by the board of the amount to be transferred is final and is not reviewable by any court or other body.
(11) At any time when bonds are outstanding and for one (1) year and one (1) day thereafter, the state must not agree to the amendment of the master settlement agreement without the approval of the authority; and this restriction or amendment of the master settlement agreement is a part of the covenant with the bondholders.
(12) The state pledges and agrees with the authority, and the holders of the bonds in which the authority has included that pledge and agreement, that the state shall not limit or alter the rights of the authority to fulfill the terms of its agreements with those bondholders, and shall not in any way impair the rights and remedies of the bondholders or the security for the bonds until the bonds, together with the interest on them and all costs and expenses in conjunction with any action or proceeding by or on behalf of the bondholders, are fully paid and discharged.
(13) This act and all powers granted by this article must be liberally construed to effectuate its intent and their purposes, without implied limitations on them. This article constitutes full and complete authority for all things contemplated to be done in this article. All rights and powers granted in this article shall be cumulative with those derived from other sources and shall not, except as expressly stated in this article, be construed in limitation thereof. Insofar as the provisions of this article are inconsistent with the provisions of any other act, general or special, the provisions of this article are controlling. If any clause, sentence, paragraph, section or part of this article is adjudged by any court of competent jurisdiction to be invalid, this judgment shall not affect, impair or invalidate the remainder of this article but is confined in its operation to the clause, sentence, paragraph, section or part of the article directly involved in the controversy in which the judgment has been rendered.
SECTION 6. This act shall take effect and be in force from and after July 1, 2005.