Tobacco Bonds To Pay Bills For State

SPRINGFIELD, Ill. (CBS) - The State of Illinois is in a dire budget crunch, but for now, $1.5 billion worth of bonds will pay much of the bills.

Governor's Office of Management and Budget director David Vaught said Wednesday that the state had successfully sold $1.5 billion in tax-exempt tobacco revenue bonds.

This was the first time the state has ever sold such financial instruments.

Vaught said the resulting revenue will enable the state to pay all its outstanding bills for the current fiscal year by mid-December.

The tobacco bonds are being sold through a special purpose corporation called the Railsplitter Tobacco Settlement Authority. They are backed by payments from the 1998 Master Settlement Agreement between participating tobacco product manufacturers and 46 states for medical costs associated with diseases caused by tobacco use.

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