Senate Bill 1998

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    Florida Senate - 2000                                  SB 1998

    By Senator Horne





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  1                      A bill to be entitled

  2         An act relating to the Tobacco Settlement

  3         Financing Corporation; declaring legislative

  4         intent; creating s. 215.5603, F.S.; creating

  5         the Tobacco Settlement Financing Corporation;

  6         providing definitions; providing membership,

  7         powers, duties, and functions of the

  8         corporation; providing powers of the Department

  9         of Banking and Finance with respect to the

10         corporation; amending s. 17.41, F.S.;

11         authorizing the sale of the state's right,

12         title, and interest in the tobacco settlement

13         agreement; amending s. 215.5601, F.S.;

14         redesignating recipients of funds; changing the

15         amounts transferred to the Lawton Chiles

16         Endowment Fund; providing an effective date.

17

18         WHEREAS, The State of Florida is dependent upon future

19  payments from the tobacco industry pursuant to a 1997 lawsuit

20  settlement, and

21         WHEREAS, it has been determined that the settlement

22  proceeds will be used to provide a perpetual source of funding

23  for health and human service programs for Florida's disabled,

24  children, and elderly, and

25         WHEREAS, there is considerable uncertainty as to the

26  amount of future payments under the settlement agreement and

27  the future ability of the tobacco industry to make the

28  payments required by the lawsuit settlement, and

29         WHEREAS, future funding for vital services to Florida's

30  most vulnerable residents can be secured by selling a portion

31  of the state's right, title, and interest in and to the

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  1  tobacco settlement payments and depositing the sale proceeds

  2  into the Lawton Chiles Endowment Fund to earn interest, NOW,

  3  THEREFORE,

  4

  5  Be It Enacted by the Legislature of the State of Florida:

  6

  7         Section 1.  Legislative intent.--The Legislature

  8  intends to insulate future funding for health care programs

  9  for children and the elderly from the risk of nonpayment of

10  amounts due under the tobacco settlement agreement. The

11  Legislature therefore intends to transfer that risk via the

12  sale of any or all of the state's right, title, and interest

13  in and to the tobacco settlement payments to a nonprofit

14  corporate entity.

15         Section 2.  Section 215.5603, Florida Statutes, is

16  created to read:

17         215.5603  Tobacco Settlement Financing Corporation.--

18         (1)  DEFINITIONS.--As used in this section, the term:

19         (a)  "Bond" means any bond, debenture, note,

20  certificate, or other obligation of financial indebtedness

21  issued by the corporation under this section.

22         (b)  "Corporation" means the Tobacco Settlement

23  Financing Corporation created by this section.

24         (c)  "Department" means the Department of Banking and

25  Finance or its successor.

26         (d)  "Purchase agreement" means a contract between the

27  corporation and the state, acting by and through the

28  department, in which the state sells to the corporation any or

29  all of the state's right, title, and interest in and to the

30  tobacco settlement agreement, including, but not limited to,

31  the moneys to be received thereunder.

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  1         (e)  "State" means the State of Florida.

  2         (f)  "Tobacco settlement agreement" means the

  3  settlement agreement, as amended, entered into by the state

  4  and participating cigarette manufacturers in settlement of

  5  State of Florida et al. v. American Tobacco Co., Case No.

  6  95-1466AH (Fla. 15th Cir. Ct. 1996).

  7         (2)  CORPORATION CREATION AND AUTHORITY.--

  8         (a)  The Tobacco Settlement Financing Corporation is

  9  created as a special purpose, not-for-profit, public benefits

10  corporation, for the purpose of purchasing any or all of the

11  state's right, title, and interest in and to the tobacco

12  settlement agreement and issuing bonds to pay the purchase

13  price therefor which shall be used to provide funding for the

14  Lawton Chiles Endowment Fund. The corporation is authorized to

15  purchase any or all of the state's right, title, and interest

16  in and to the tobacco settlement agreement and to issue bonds

17  to pay the purchase price therefor. The proceeds derived by

18  the state from the sale of any or all of the state's right,

19  title, and interest in and to the tobacco settlement agreement

20  shall be used to fund the Lawton Chiles Endowment Fund. The

21  fulfillment of the purposes of the corporation promotes the

22  health, safety, and general welfare of the people of the state

23  and serves essential governmental functions and a paramount

24  public purpose.

25         (b)  The corporation shall be governed by a board of

26  directors consisting of the Governor, the Treasurer, the

27  Comptroller, and the Attorney General, or their respective

28  designees, until January 7, 2003, at which time the board

29  shall include the Chief Financial Officer or the Chief

30  Financial Officer's designee, in place of the Treasurer and

31  the Comptroller or their designees. The executive director of

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  1  the State Board of Administration shall be the chief executive

  2  officer of the corporation and shall direct and supervise the

  3  administrative affairs and operation of the corporation. The

  4  corporation shall also have such other officers as are

  5  determined by the board of directors.

  6         (c)  The corporation shall have all the powers of a

  7  corporate body under the laws of this state, including, but

  8  not limited to, the powers of corporations under chapter 617,

  9  to the extent not inconsistent with or restricted by the

10  provisions of this section, including, but not limited to, the

11  power to:

12         1.  Adopt, amend, and repeal bylaws not inconsistent

13  with this section.

14         2.  Sue and be sued.

15         3.  Adopt and use a common seal.

16         4.  Acquire, purchase, hold, lease, and convey real and

17  personal property, contract rights, general intangibles,

18  revenues, moneys, and accounts as is proper or expedient to

19  carry out the purposes of the corporation and this section and

20  to assign, convey, sell, transfer, lease, or otherwise dispose

21  of such property.

22         5.  Elect or appoint and employ such officers, agents,

23  and employees as the corporation deems advisable to operate

24  and manage the affairs of the corporation, which officers,

25  agents, and employees may be employees of the state or of the

26  state officers and agencies represented on the board of

27  directors of the corporation.

28         6.  Make and execute any and all contracts, trust

29  agreements, trust indentures, and other instruments and

30  agreements necessary or convenient to accomplish the purposes

31  of the corporation and this section.

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  1         7.  Select, retain, and employ professionals,

  2  contractors, or agents, which may include the Division of Bond

  3  Finance of the State Board of Administration, as are necessary

  4  or convenient to enable or assist the corporation in carrying

  5  out the purposes of the corporation.

  6         8.  Do any act or thing necessary or convenient to

  7  carry out the purposes of the corporation.

  8         (d)  The corporation is authorized to enter into one or

  9  more purchase agreements with the department pursuant to which

10  the corporation purchases any or all of the state's right,

11  title, and interest in and to the tobacco settlement agreement

12  and to execute and deliver any other documents necessary or

13  desirable to effectuate such purchase. The tobacco settlement

14  agreement moneys received pursuant to the purchase agreements

15  may be used for the costs and expenses of administration of

16  the corporation.

17         (e)  The corporation may issue bonds payable from and

18  secured by amounts payable to the corporation pursuant to the

19  tobacco settlement agreement. The corporation is additionally

20  authorized to issue bonds to refund previously issued bonds

21  and to deposit the proceeds of such bonds as provided in the

22  documents authorizing the issuance of such bonds. The

23  corporation is authorized to do all things necessary or

24  desirable in connection with the issuance of the bonds,

25  including, but not limited to, establishing debt service

26  reserves or other additional security for the bonds, providing

27  for capitalized interest, and executing and delivering any and

28  all documents and agreements. The term of any such bonds shall

29  not exceed 40 years. The corporation may sell bonds through

30  competitive bidding or negotiated contracts, whichever method

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  1  of sale is determined by the corporation to be in the best

  2  interest of the corporation.

  3         (f)  The corporation does not have the power to pledge

  4  the credit, the general revenues, or the taxing power of the

  5  state or of any political subdivision of the state. The

  6  obligations of the department and the corporation under the

  7  purchase agreement and under any bonds shall not constitute a

  8  general obligation of the state or a pledge of the faith and

  9  credit or taxing power of the state. The bonds shall be

10  payable from and secured by payments received under the

11  tobacco settlement agreement, and neither the state nor any of

12  its agencies shall have any liability on such bonds. Such

13  bonds shall not be construed in any manner as an obligation of

14  the state or any of its agencies, the department, the State

15  Board of Administration or entities for which it invests

16  funds, or board members or their respective agencies.

17         (g)  Notwithstanding any other provision of law, any

18  pledge of or other security interest in revenues, money,

19  accounts, contract rights, general intangibles, or other

20  personal property made or created by the corporation or

21  department resulting from the authority of this section shall

22  be valid, binding, and perfected from the time such pledge is

23  made or other security interest attaches without any physical

24  delivery orf the collateral or further act, and the lien of

25  any such pledge or other security interest shall be valid,

26  binding, and perfected against all parties having claim of any

27  kind in tort, in contract, or otherwise against the

28  corporation irrespective of whether such parties have notice

29  of such claims. No instrument by which such a pledge or

30  security interest is created nor any financing statement need

31  be recorded or filed.

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  1         (h)  The corporation may validate any bonds issued

  2  pursuant to this section and the security for payment

  3  therefor, as provided in chapter 75. The validation complaint

  4  shall be filed only in the circuit court for Leon County. The

  5  notice required under s. 75.06 shall be published in Leon

  6  County, and the complaint and order of the circuit court shall

  7  be served only on the State Attorney for the Second Judicial

  8  Circuit. The provisions of ss. 75.04(2) and 75.06(2) shall not

  9  apply to a validation complaint filed as authorized in this

10  subsection. The validation of the first bonds issued pursuant

11  to this section may be appealed to the Supreme Court, and such

12  appeal shall be handled on an expedited basis.

13         (i)  The state covenants with the holders of bonds of

14  the corporation that the state will not limit or alter the

15  authority or the rights under this section vested in the

16  corporation to fulfill the terms of any agreements, including

17  the terms of any purchase agreement, or in any way impair the

18  rights and remedies of such bondholders as long as any such

19  bonds remain outstanding unless adequate provision has been

20  made for the payment of such bonds pursuant to the documents

21  authorizing such bonds.

22         (j)  The corporation shall not take any action that

23  will materially and adversely affect the rights of holders of

24  any bonds issued under this section as long as such bonds are

25  outstanding.

26         (k)  As long as the corporation has any bonds

27  outstanding, the corporation shall have the authority to file

28  a voluntary petition under chapter 9 of the federal Bankruptcy

29  Code or such corresponding chapter or sections as may be in

30  effect, from time to time, and neither any public officer nor

31  any organization, entity, or other person shall authorize the

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  1  corporation to be or become a debtor under chapter 9 of the

  2  federal Bankruptcy Code or such corresponding chapter or

  3  sections as are in effect, from time to time, during any such

  4  period.

  5         (l)  The corporation may contract with the State Board

  6  of Administration to serve as trustee with respect to bonds

  7  issued by the corporation as provided by this section and to

  8  hold, administer, and invest proceeds of such bonds and other

  9  funds of the corporation and to perform other services

10  required by the corporation. The State Board of Administration

11  may perform such services and may contract with others to

12  provide all or a part of such services and to recover the

13  costs and expenses of providing such services.

14         (m)  The corporation shall not be deemed to be a

15  special district for purposes of chapter 189 or a unit of

16  local government for purposes of part III of chapter 218. The

17  provisions of chapter 120, part I of chapter 287, and chapter

18  215 do not apply to this section, the corporation created in

19  this section, the purchase agreements entered into under this

20  section, or bonds issued by the corporation as provided in

21  this section.

22         (n)  In no event shall any of the benefits or earnings

23  of the corporation inure to the benefit of any private person.

24         (o)  There shall be no liability on the part of, and no

25  cause of action shall arise against, any board member of the

26  corporation or any employee of the corporation or the state

27  for any action taken by them in the performance of their

28  duties under this section.

29         (p)  The corporation is exempt from taxation and

30  assessments of any nature whatsoever upon its income and any

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  1  property, assets, or revenues acquired, received, or used in

  2  the furtherance of the purposes provided in this section.

  3         (q)  The corporation and its corporate existence shall

  4  continue until terminated by law; however, no such law may

  5  take effect as long as the corporation has bonds outstanding

  6  unless adequate provision has been made for the payment of

  7  such bonds pursuant to the documents authorizing the issuance

  8  of such bonds. Upon termination of the existence of the

  9  corporation, all of its rights and properties in excess of its

10  obligations shall pass to and be vested in the Lawton Chiles

11  Endowment Fund.

12         (r)  The Auditor General may conduct a financial audit

13  of the accounts and records of the corporation.

14         (s)  If any provision of this section or its

15  application to any person or circumstance is held invalid, the

16  invalidity does not affect other provisions or applications of

17  the section which can be given effect without the invalid

18  provision or application, and under such circumstances the

19  provisions of this section are declared severable.

20         (3)  POWERS OF THE DEPARTMENT.--

21         (a)  The department is authorized, on behalf of the

22  state, to do all things necessary or desirable to assist the

23  corporation in the execution of its responsibilities,

24  including, but not limited to, entering into one or more

25  purchase agreements to sell to the corporation any or all of

26  the state's right, title, and interest in and to the tobacco

27  settlement agreement, executing any administrative agreements

28  with the corporation to fund the administration, operation,

29  and expenses of the corporation from moneys appropriated for

30  such purpose, and executing and delivering any and all other

31  documents and agreements necessary or desirable in connection

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  1  with the sale of any or all of the state's right, title, and

  2  interest in and to the tobacco settlement agreement to the

  3  corporation or the issuance of the bonds by the corporation.

  4         (b)  The state covenants with the holders of bonds of

  5  the corporation that the state will not limit or alter the

  6  authority or the rights under this section vested in the

  7  department to fulfill the terms of any agreements, including

  8  the terms of any purchase agreement, or in any way impair the

  9  rights and remedies of such bondholders as long as any such

10  bonds remain outstanding unless adequate provision has been

11  made for the payment of such bonds pursuant to the documents

12  authorizing such bonds.

13         (c)  The department is authorized, on behalf of the

14  state, to make any covenant, representation, or warranty

15  necessary or desirable in connection with the sale of any or

16  all of the state's right, title, and interest in and to the

17  tobacco settlement agreement to the corporation or the

18  issuance of the bonds by the corporation.

19         Section 3.  Section 17.41, Florida Statutes, is amended

20  to read:

21         17.41  Department of Banking and Finance Tobacco

22  Settlement Clearing Trust Fund.--

23         (1)  The Department of Banking and Finance Tobacco

24  Settlement Clearing Trust Fund is created within that

25  department.

26         (2)  Funds to be credited to the Tobacco Settlement

27  Clearing Trust Fund shall consist of all annual payments

28  received by the state from settlement of State of Florida v.

29  American Tobacco Co., No. 95-1466AH (Fla. 15th Cir. Ct. 1996).

30  All Moneys received from the settlement and shall be deposited

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  1  into the trust fund and are exempt from the service charges

  2  imposed under s. 215.20.

  3         (3)(a)  The state's right, title, and interest in and

  4  to the tobacco settlement agreement may be sold to the Tobacco

  5  Settlement Financing Corporation created in s. 215.5603.

  6         (b)  All moneys received by the state pursuant to any

  7  residual interest in the tobacco settlement agreement or the

  8  payments to be made under the tobacco settlement agreement

  9  shall be deposited into the Tobacco Settlement Clearing Trust

10  Fund.

11         (4)  Net proceeds of the sale of the tobacco settlement

12  agreement received by the state will be immediately deposited

13  into the Lawton Chiles Endowment Fund created in s. 215.5601

14  without deposit to the Tobacco Settlement Clearing Trust Fund.

15         (3)  The State Board of Administration shall invest and

16  reinvest the moneys in the trust fund in accordance with ss.

17  215.44-215.53. Costs and fees of the State Board of

18  Administration for providing such investment services shall be

19  deducted from the earnings accruing to the trust fund.

20         (5)(4)  The department shall disburse funds, by

21  nonoperating transfer, from the Tobacco Settlement Clearing

22  Trust Fund to the tobacco settlement trust funds of the

23  various agencies in amounts equal to the annual appropriations

24  made from those agencies' trust funds in the General

25  Appropriations Act.

26         (6)(5)  Pursuant to the provisions of s. 19(f)(3), Art.

27  III of the State Constitution, the Tobacco Settlement Clearing

28  Trust Fund is exempt from the termination provisions of s.

29  19(f)(2), Art. III of the State Constitution.

30         Section 4.  Subsections (4), (5), and (7) of section

31  215.5601, Florida Statutes, are amended to read:

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  1         215.5601  Lawton Chiles Endowment Fund.--

  2         (4)  LAWTON CHILES ENDOWMENT FUND; CREATION; PURPOSES

  3  AND USES.--

  4         (a)  There is created the Lawton Chiles Endowment Fund,

  5  to be administered by the State Board of Administration. The

  6  endowment shall serve as a clearing trust fund not subject to

  7  termination pursuant to s. 19(f), Art. III of the State

  8  Constitution and shall be funded by settlement moneys received

  9  from the tobacco industry and by moneys received from the sale

10  of the state's right, title, and interest in and to the

11  tobacco settlement agreement, including the right to receive

12  payments under the agreement. The endowment fund shall be

13  exempt from the service charges imposed by s. 215.20.

14         (b)  Funds from the endowment shall be transferred

15  distributed by the board to The Tobacco Settlement Clearing

16  Trust Fund created in s. 17.41, funds of the state agencies in

17  the amounts indicated by reference to the legislative

18  appropriations for the state agencies, except as otherwise

19  provided in this section.

20         (c)  The state agencies shall use the funds from the

21  endowment to enhance or support increases in clients served or

22  in program costs in health and human services program areas.

23         (d)  The Secretary of Health, the Secretary of Children

24  and Family Services, the Secretary of Elderly Affairs, and the

25  Director of Health Care Administration shall conduct meetings

26  to discuss program priorities for endowment funding prior to

27  submitting their budget requests to the Executive Office of

28  the Governor and the Legislature. The purpose of the meetings

29  shall be to gain consensus for priority requests and

30  recommended endowment funding levels for those priority

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  1  requests. An agency head may not designate a proxy for these

  2  meetings.

  3         (e)  Funds from the endowment may not be used to

  4  supplant existing revenues.

  5         (f)  When advised by the Revenue Estimating Conference

  6  that a deficit will occur with respect to the appropriations

  7  from the tobacco settlement trust funds of the state agencies

  8  Fund in any fiscal year, the Governor shall develop a plan of

  9  action to eliminate the deficit. Before implementing the plan

10  of action, the Governor must comply with the provisions of s.

11  216.177(2). In developing the plan of action, the Governor

12  shall, to the extent possible, preserve legislative policy and

13  intent, and, absent any specific directions to the contrary in

14  the General Appropriations Act, any reductions in

15  appropriations from the tobacco settlement trust funds of the

16  state agencies Fund for a fiscal year shall be prorated among

17  the purposes for which funds were appropriated from the

18  Tobacco Settlement Trust Fund for that year.

19         (5)  ADMINISTRATION OF THE ENDOWMENT.--

20         (a)  The board is authorized to invest and reinvest

21  funds of the endowment in those securities listed in s.

22  215.47, in accordance with the fiduciary standards set forth

23  in s. 215.47(9) and consistent with an investment plan

24  developed by the executive director and approved by the board.

25  Costs and fees of the board for investment services shall be

26  deducted from the earnings accruing to the endowment.

27         (b)  The endowment shall be managed as an annuity. The

28  investment objective shall be long-term preservation of the

29  real value of the principal and a specified regular annual

30  cash outflow for appropriation, as nonrecurring revenue. The

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  1  schedule of annual cash outflow shall be included within the

  2  investment plan adopted pursuant to paragraph (a).

  3         (c)  The board shall establish a separate account for

  4  the funds of the endowment. The board shall design and operate

  5  an investment portfolio that maximizes the financial return to

  6  the endowment, consistent with the risks inherent in each

  7  investment, and that is designed to preserve an appropriate

  8  diversification of the portfolio.

  9         (d)  No later than August 15 and February 15 of each

10  year February 15, 2000, the board shall report on the

11  financial status of the endowment to the Governor, the Speaker

12  of the House of Representatives, the President of the Senate,

13  the chairs of the respective appropriations and appropriate

14  substantive committees of each chamber, and the Revenue

15  Estimating Conference. Thereafter, the board shall make a

16  status report to such persons no later than August 15 and

17  February 15 of each year.

18         (e)  Accountability for funds from the endowment which

19  have been appropriated to a state agency and distributed by

20  the board shall reside with the state agency. The board is not

21  responsible for the proper expenditure or accountability of

22  funds from the endowment after transfer distribution to the

23  Tobacco Settlement Clearing Trust Fund a state agency.

24         (f)  The board may collect a fee for service from the

25  endowment no greater than that charged to the Florida

26  Retirement System.

27         (7)  ENDOWMENT PRINCIPAL; APPROPRIATION OF

28  EARNINGS.--The endowment shall receive moneys from the sale of

29  the tobacco settlement agreement following amounts are

30  appropriated from the Department of Banking and Finance

31  Tobacco Settlement Clearing Trust Fund in the amounts and in

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  1  the fiscal years as follows to the Lawton Chiles Endowment

  2  Fund for Health and Human Services:

  3         (a)  For fiscal year 1999-2000, $1.1 billion;

  4         (b)  For fiscal year 2000-2001, at least $200 million;

  5         (c)  For fiscal year 2001-2002, at least $200 million;

  6  and

  7         (d)  For fiscal year 2002-2003, at least $200 million.

  8         Section 5.  This act shall take effect upon becoming a

  9  law.

10

11            *****************************************

12                          SENATE SUMMARY

13    Creates the Tobacco Settlement Financing Corporation to
      purchase all or part of the state's right, title, and
14    interest in and to the tobacco settlement agreement and
      to issue bonds therefor. (See bill for details.)
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