Speaking for Nevada - January 2004

Nevada’s Millennium Scholarship Program

Facing Future Challenges

by Brian Krolicki

Editor’s Note: Nevada Business Journal asked State Treasurer Brian Krolicki to answer the question: "What’s ahead for the Millennium Scholarship program?"

In 2000, young Nevadans for the first time became eligible to receive a state-sponsored scholarship to attend an in-state college or university of their choice. The Millennium Scholarship Program gives the opportunity of higher education to hard-working students across our state. Since its inception three years ago, more than 15,000 Nevadans have utilized this scholarship to attend college.

As state treasurer, I administer this program, which is funded by 40 percent of the estimated $1.2 billion in anticipated annual payments from the 1998 Tobacco Master Settlement Agreement (MSA). The intent is to increase the number of Nevada students who attend and graduate from Nevada institutions of higher education. Although some critics ask what happens if we educate Nevadans and they leave the state, I ask what happens if we don’t educate them and they stay.

Some question using the monies for other than health-related purposes. I believe we are using the money for worthy causes that benefit the long-term future of our state. Sixty percent of MSA funds are used for health-related programs. The 40 percent being used to educate our young people will cultivate a local workforce in order to grow and diversify our economy with an enthusiastic and educated population.

One of my goals in the 2001 and 2003 sessions of the Nevada Legislature was to pass tobacco securitization legislation. This would have allowed Nevada to transfer the risks of receiving future tobacco industry payments to investors willing to assume the risk, thereby preserving these monies, which fund not only the Millennium Scholarship program, but also other worthy programs like SeniorRx.

Nevada has used the monies for the future benefit of its citizens. However, many states have securitized their tobacco payments to balance budget deficits. To ensure that our Legislature would not be tempted to do that, in 2003 I proposed a constitutional amendment that would preserve our tobacco settlement monies for use by the programs for which the funds were intended. I feel strongly that the money should be preserved in an endowment so these programs may last into perpetuity.

My belief in securitization was bolstered during the legislative session. Earlier this year, tobacco giant Philip Morris, reacting to a single adverse judgment against it in another state, hinted that it might have to declare bankruptcy. Here in Nevada, we watched with rapt attention, because Philip Morris accounts for half the monies we receive from the MSA. If it had failed to pay its next installment, which was due within weeks of the judgment, the Millennium Scholarship Program would have collapsed.

This incident with Philip Morris served to underscore the importance of passing tobacco securitization legislation so the state does not remain dependent on the financial strength of the tobacco companies. I am disappointed that the state assembly did not pass these bills, especially after they had passed during each of the past three legislative sessions in the state senate. In fact, in this last session the assembly never even held hearings on the bill.

One question I am frequently asked is, "How long will the funds last?" My usual response is that with three small children under the age of six, my wife is keeping up the pressure to have the funds available when they are ready to attend college. Unfortunately, the answer isn’t that simple. Although in 1998 Nevada’s share of the tobacco settlement was estimated to be $1.2 billion through 2025, the actual amount Nevada receives each year is determined by a complicated formula that takes into account numerous factors, including the volume of national tobacco sales. I find it ironic that states are supposed to use the settlement monies to reduce smoking, yet if fewer people smoke we receive less money to fund our important programs – all the more reason to have previously enacted tobacco securitization legislation. The life of the trust fund will depend on several other factors, including Nevada population growth and the number of students using the scholarship each year.

To extend the life of the trust fund, in the 2003 legislative session I submitted legislation making substantial changes to scholarship eligibility requirements. Grade-point averages to maintain the scholarship in college were increased beginning with the class of 2003 and grade-point averages to initially qualify were increased beginning with the class of 2005. In addition, graduates of the class of 2003 and thereafter have six years to utilize their scholarships instead of eight. This legislation was signed into law by the governor.

Hopefully, the Millennium Scholarship will last for many years to come. Educating our young citizens is not a luxury, but a necessity, if Nevada is to be an economic force in this new millennium.

Brian Krolicki Lt. Governor
The Lt. Governor is also chairman of the Nevada Commission on Economic Development(NCED) and Nevada Commission on Tourism (NCOT).