Rendell Seeks Tobacco Bonds for Medical Fund
BYLINE: Jonna Stark
As fiscal 2008 budget deliberations continue in Pennsylvania, lawmakers are also considering another proposal by Gov. Edward G. Rendell - a $500 million tobacco settlement bond sale to finance medical research.
The Democratic governor wants the state to securitize 9.5% of its annual tobacco payments to seed the Jonas Salk Legacy Fund, which would help foster research and advances in biotechnology, pharmaceuticals, and medical devices, according to Pennsylvania's Department of Community and Economic Development.
The fund is named after Jonas Salk, who created the polio vaccination in 1955 while at the University of Pittsburgh.
"The governor firmly believes that the Jonas Salk investment is necessary to keep Pennsylvania competitive in the emerging bioscience research industry," Rendell's spokesman Michael Smith said.
Supporters of the research fund are trying to drum up bipartisan support for the bill, which has been the subject of hearings, but has not yet been referred to committee.
Under the bill, the commonwealth would use part of the money it receives annually under the 1998 Master Settlement Agreement made between cigarette companies and 46 states. While the tobacco settlement revenues may vary each year, Pennsylvania received $334.9 million for fiscal 2007, according to Department of Community and Economic Development spokesman Kevin B. Ortiz.
Pennsylvania would leverage about $35 million, or 9.5%, of its tobacco settlement dollars, for a $500 million bond issuance. That money would be used up front and distributed over the next five years. Subsequently, over the next 20 or 25 years, Pennsylvania would pay back those bonds using no more than 9.5% of its tobacco settlement dollars.
Dennis Yablonsky, secretary of the economic development department, said the plan is especially appealing because it "doesn't cost the Pennsylvania taxpayers a nickel."
If the bill passes and the $500 million is pumped into the state's medical research field, it could have a tremendous impact on the economy, officials said. Already, 84,000 Pennsylvanians are employed in research companies and institutions, Ortiz said, and investments by the fund could boost those numbers.
"The fund will help Pennsylvania attract new top research talents and create 12,000 direct jobs, with another 1,700 involved with commercialization and health venture investments activities over a five-year period," Smith said.
Yablonsky said the fund would also help 2.2 million square feet of new research space.
The proposal includes capital to support bioscience research facilities, construction, and research faculty recruitment, as well as seeding and sustaining health venture investments and regional biotechnology research centers.
"The key to being competitive is attracting the best researchers," Yablonsky said. Pennsylvania is already ranked fifth in the nation for National Institutes of Health research, he said, adding: "But we want to do better. We've been investing in this industry for a number of years, and Gov. Rendell wants to accelerate it."
Yablonsky said the state is working "very closely" with its medical research institutions, and eight of the 10 largest institutions in the state have "publicly stated their support for this program," including the University of Pittsburgh Medical Center, Carnegie Mellon University, Penn State University, the University of Pennsylvania, Temple University, Drexel University, Thomas Jefferson University, and Children's Hospital of Pennsylvania.
Although Rendell proposed the fund last year in his fiscal 2007 budget address, the proposal was never submitted as a bill. "It did get good response last year, but for various reasons, most of which were political, it did not come up for consideration," Yablonsky said.
While state officials have talked to a number of Wall Street firms about the proposal, they have not selected specific managers or bond counsel for any possible deal. If the bill passes - which supporters hope would be by the end of June, after the legislature approves the budget - state officials would like to move forward quickly, Yablonsky said.
State Sen. Jim Ferlo, D-Pittsburgh, who helped introduce the Rendell bill, said he's eager to see the fund approved and the development occur in the commonwealth.
"We have so many assets," and the fund will help "grow Pennsylvania economically," he said. "We have all the working parts - this is almost putting great oil on an already existing, great machine."