Since my last guest column in the August 2001 edition of Nevada Business Journal, our world has been forever altered. On that tragic day in September, an incomprehensible act of terror caused reverberations that continue to be felt to this day. While the nation remains in mourning for the tremendous loss of family, friends and colleagues, we also face the persistent economic challenges that were exacerbated by the events of that day. After several years of economic health, we now live in a world of dropping stock markets, higher unemployment and an uncertain economy.
Shortly after the Sept. 11 attacks, many states saw the first tangible signs of an economic downturn. Nevada was especially hard hit with our reliance on tourism, and our state found itself facing a budget revenue shortfall for the first time in many years. In the months that followed the attacks, Wall Street credit agencies adjusted the credit “outlooks” of several tourism-dependent states from stable to negative. Nevada was among this group. While this did not change our credit rating, which is so important for the state’s financial transactions, it reflected the anticipated decrease in tourism and related revenues.
As Nevada’s state treasurer, part of my responsibility is to ensure the fiscal health and stability of our state. Over the past 12 months, I have worked closely with Governor Kenny Guinn and the executive branch to ensure continued confidence in the state’s ability to meet all of its financial obligations. Our efforts were rewarded in June of this year when Moody’s Investors Service upgraded Nevada’s credit outlook from negative to stable, citing strong and effective fiscal management by the state’s executive branch as a key contributor to the improved outlook. In addition, Nevada carries a below-average state debt burden, historically has low debt levels and, with the continuing rebound of the tourism and gaming industries, a strengthening economy. I am pleased to be able to say that despite the tumultuous financial climate of the past 12 months, our state has remained on the right track.
One of my greatest achievements this year was being able to help balance the state’s fiscal year 2002 budget. Through an innovative plan, my office was able to deliver almost $32 million to assist in offsetting the state’s expected budget shortfall. The bulk of the $32 million comes from entering into an agreement that will allow the state to benefit from more efficient cash management in its debt service accounts. This gave Nevada $20 million in additional revenue. Interest earned from a consolidated bond interest and redemption account will add $9 million, and $1 million in interest will come from a municipal bond bank debt service account.
Looking forward to the next year, my primary goal for the 71st session of the Nevada Legislature will be to pass tobacco securitization legislation proposed by my office last session. The so-called Tobacco Securitization bill is intended to secure the estimated $1.2 billion Nevada is scheduled to receive from the Tobacco Master Settlement Agreement through 2025. This strategy would allow Nevada to transfer the risks of receiving future tobacco industry payments to investors willing to assume those risks, thereby preserving these monies, which fund such programs as the Millennium Scholarship Program and SeniorRx.
I am even more committed to securing passage of this legislation in the next session, since we received less money last year than we were expecting, based on the settlement formula. In fact, new lower base figures were issued in 2001 as a result of the downward trend in monies received through the settlement. And as part of this new legislation, I will include a provision that will ensure that these monies are only spent on the programs for which they were intended.
Sept. 11, 2001 was a day of emotional extremes for me. While it was certainly a tragic and devastating day for all Americans, it is also one of the proudest days in my life. One of the greatest honors in public service is to be chosen by your colleagues to be their national leader, and on that day, I was elected president of the National Association of State Treasurers. The financial challenges facing states are substantive, and I look forward to meeting these challenges head on.