Juneau -- The Alaska House of Representatives Friday passed House Bill 281, sponsored by the House Finance Committee, and House Bill 287, sponsored by the House Rules Committee.

HB 281 authorizes the sale of bonds totaling approximately $269 million for construction and maintenance of public school facilities, in addition to capital improvements to both the University of Alaska and State harbors. These bonds would be paid for with a portion of Alaska's share from the Master Settlement Agreement (MSA) with Phillip Morris and other tobacco companies. HB 287 appropriates the funds to pay for the bonds. The House has provided a reserve of the first $1.4 million earnings each year to fund tobacco cessation and education programs.

"There is a limited pool of investors willing to purchase these bonds, which will provide immediate funds for vital capital improvements and deferred maintenance needs across Alaska," said Representative Eldon Mulder (R-Anchorage), Co-Chair of the House Finance Committee. "By approving these bonds, the Legislature takes advantage of a limited 'window of opportunity' for the State to utilize a portion of its share of the settlement while transferring the risk to willing investors."

The $269 million bonding level of the bonds was determined after exhaustive research into the anticipated revenue, potential list of investors, and other factors affecting the bond market. In addition, the Legislature weighed credit concerns regarding payments under the MSA, including possible bankruptcy of tobacco companies, uncertainty of future tobacco consumption, legal risks inherent to the MSA, the effects of other litigation, the increasing market shares of tobacco companies not covered in the agreement, and the overall health of the tobacco industry.

"There are numerous factors at work here which make this bonding method attractive, but the main one is there is no guarantee we'll keep getting the money every year," Mulder said. "The House Finance Committee has taken a giant step by securitizing the income stream and putting it to work providing much needed educational facilities."

HB 281 passed the House 25-13. HB 287 passed the House 26-12. Notice of reconsideration was filed on both bills.