BILL REQ. #:  S-5345.1 

Read first time 03/23/12.   Referred to Committee on Ways & Means.

     AN ACT Relating to the disposition of the state's revenues from the tobacco litigation national master settlement agreement; amending RCW 43.79.487; reenacting and amending RCW 74.09.035; adding new sections to chapter 43.340 RCW; and providing for submission of this act to a vote of the people.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   LEGISLATIVE DECLARATION. The legislature declares it to be the public policy of the state and a recognized governmental function to assist in securitizing the revenue stream from the master settlement agreement between the state and tobacco product manufacturers in order to provide a source of revenue for the state and federal basic health plan and other medical care services. The purpose of this subchapter is to issue nonrecourse revenue bonds to make funds available for these medical care services as a bridge to full implementation of the federal affordable care act in 2014. This subchapter, being necessary for the welfare of the state and its inhabitants, shall be liberally construed to effect the purposes thereof.

NEW SECTION.  Sec. 2   DEFINITIONS. The definitions in this section apply throughout this subchapter unless the context clearly requires otherwise.
     (1) "Authority" means the tobacco settlement authority created in this chapter.
     (2) "Board" means the governing board of the authority.
     (3) "Bonds" means bonds, notes, and other obligations and financing arrangements issued or entered into by the authority under this subchapter.
     (4) "Master settlement agreement" means the national master settlement agreement and related documents entered into on November 23, 1998, by the state and the four principal United States tobacco product manufacturers, as amended and supplemented, for the settlement of litigation brought by the state against the tobacco product manufacturers.
     (5) "Sales agreement" means any agreement authorized under this subchapter in which the state provides for the sale to the authority of a portion of the payments required to be made by tobacco product manufacturers to the state and the state's rights to receive such payments, pursuant to the master settlement agreement.

NEW SECTION.  Sec. 3   BONDS NOT DEBT OF STATE. (1) Bonds issued under this subchapter shall be issued in the name of the authority. The bonds shall not be obligations of the state of Washington and shall be obligations only of the authority, payable solely from the special fund or funds created by the authority for their payment.
     (2) Bonds issued under this subchapter shall contain a recital on their face to the effect that payment of the principal of, interest on, and prepayment premium, if any, on the bonds shall be a valid claim only as against the special fund or funds relating thereto, that neither the faith and credit nor the taxing power of the state or any municipal corporation, subdivision, or agency of the state, other than the authority as set forth in this chapter, is pledged to the payment of the principal of, interest on, and prepayment premium, if any, on the bonds.
     (3) Contracts entered into by the authority shall be entered into in the name of the authority and not in the name of the state of Washington. The obligations of the authority under the contracts shall be obligations only of the authority and are not in any way obligations of the state of Washington.

NEW SECTION.  Sec. 4   FINANCING POWERS. In addition to other powers and duties prescribed in this chapter, the authority is empowered to:
     (1) Establish a stable source of revenue to be used for the purposes designated in this subchapter;
     (2) Enter into sales agreements with the state for purchase of a portion of the amounts otherwise due to the state under the master settlement agreement, and of the state's rights to receive such amounts;
     (3) Issue bonds, the interest and gain on which may or may not be exempt from general federal income taxation, in one or more series, and to refund or refinance its debt and obligations;
     (4) Sell, pledge, or assign, as security, all or a portion of the revenues derived by the authority under any sales agreement, to provide for and secure the issuance of its bonds;
     (5) Provide for the investment of any funds, including funds held in reserve, not required for immediate disbursement, and provide for the selection of investments;
     (6) Manage its funds, obligations, and investments as necessary and as consistent with its purpose; and
     (7) Implement the purposes of this subchapter.

NEW SECTION.  Sec. 5   GENERAL POWERS--RESTRICTIONS. (1) The authority has all the general powers necessary to carry out its purposes and duties and to exercise its specific powers under this subchapter. In addition to other powers specified in this subchapter, the authority may:
     (a) Sue and be sued in its own name;
     (b) Make and execute agreements, contracts, and other instruments, with any public or private person, in accordance with this subchapter;
     (c) Employ, contract with, or engage independent counsel, bond counsel, other attorneys, financial advisors, investment bankers, auditors, other technical or professional assistants, and such other personnel as are necessary and recommended by the state housing finance commission staff;
     (d) Invest or deposit moneys of the authority in any manner determined by the authority and enter into hedge agreements, swap agreements, or other financial products, including payment agreements defined under RCW 39.96.020(5). The authority is not a governmental entity for purposes of chapter 39.96 RCW;
     (e) Establish such special funds, and controls on deposits to and disbursements from them, as it finds convenient for the implementation of this subchapter;
     (f) Procure insurance, other credit enhancements, and other financing arrangements for its bonds to fulfill its purposes under this subchapter, including but not limited to municipal bond insurance and letters of credit;
     (g) Accept appropriations, gifts, grants, loans, or other aid from public or private entities;
     (h) Adopt rules, consistent with this subchapter, as the board determines necessary;
     (i) Delegate any of its powers and duties if consistent with the purposes of this subchapter; and
     (j) Exercise any other power reasonably required to implement the purposes of this subchapter.
     (2) The authority does not have the power of eminent domain and does not have the power to levy taxes of any kind.

NEW SECTION.  Sec. 6   AUTHORIZATION OF THE SALE OF RIGHTS IN THE MASTER SETTLEMENT AGREEMENT. (1) The governor is authorized to sell and assign to the authority all of the state's right to receive a portion of the state's annual share of the revenue derived from the master settlement agreement for litigation brought by the state against tobacco product manufacturers. The portion of the state's share sold and assigned shall be determined by the governor in an amount necessary to generate net proceeds to the state for deposit to the basic health plan stabilization account under RCW 43.79.487 up to three hundred fifty million dollars. The attorney general shall assist the governor in the review of all necessary documentation to effect the sale. The governor and the authority are authorized to take any action necessary to facilitate and complete the sale.
     (2) The sale made under this section is irrevocable so long as bonds issued under this subchapter remain outstanding. The portion of the revenue sold to the authority shall be pledged to the bondholders. The sale and assignment shall constitute and be treated as a true sale and absolute transfer of the revenue so transferred and not as a pledge or other security interest granted by the state for any borrowing. The characterization of such a sale as an absolute transfer shall not be negated or adversely affected by the fact that only a portion of the revenue from the master settlement agreement is being sold and assigned, or by the state's acquisition or retention of an ownership interest in the portion of the revenue from the master settlement agreement not so assigned.
     (3) In addition to such other terms, provisions, and conditions as the governor and the authority may determine appropriate for inclusion in the sale agreements, the sale agreements shall contain (a) a covenant of the state that the state will not agree to any amendment of the master settlement agreement that materially and adversely affects the authority's ability to receive the portion of the state's share of master settlement agreement payments that have been sold to the authority; (b) a requirement that the state enforce, at its own expense, the provisions of the master settlement agreement that require the payment of the portion of the state's share of master settlement agreement payments that have been sold to the authority; and (c) a covenant that the state shall take no action that would adversely affect the tax-exempt status of any tax-exempt bonds of the authority.
     (4) On or after the effective date of the sale, the state shall not have any right, title, or interest in the portion of the state's share of the master settlement agreement revenue sold and such portion shall be the property of the authority and not the state, and shall be owned, received, held, and disbursed by the authority or its trustee or assignee, and not the state.
     (5) The terms of the state's sale to the authority of a portion of the master settlement agreement revenue shall provide that the portion shall be paid directly to the authority or its trustee or assignee. The revenue sold and assigned shall not be received in the treasury of the state and shall not be or deemed to be general state revenues as that term is used in Article VIII, section 1 of the state Constitution.

NEW SECTION.  Sec. 7   BONDS. (1) The authority may issue its bonds in principal amounts which, in the opinion of the authority, are necessary to provide sufficient funds for achievement of its purposes under this subchapter, the payment of debt service on its bonds, the establishment of reserves to secure the bonds, the costs of issuance of its bonds and credit enhancements, if any, and all other expenditures of the authority incident to and necessary to carry out its purposes or powers. The authority may also issue refunding bonds, including advance refunding bonds, for the purpose of refunding previously issued bonds, and may issue other types of bonds, debt obligations, and financing arrangements necessary to fulfill its purposes or the purposes of this subchapter. The bonds are investment securities and negotiable instruments within the meaning of and for the purposes of the uniform commercial code.
     (2) The authority's bonds shall bear such date or dates, mature at such time or times, be in such denominations, be in such form, be registered or registrable in such manner, be made transferable, exchangeable, and interchangeable, be payable in such medium of payment, at such place or places, be subject to such terms of redemption, bear such fixed or variable rate or rates of interest, be taxable or tax exempt, be payable at such time or times, and be sold in such manner and at such price or prices, as the authority determines. The bonds shall be executed by one or more officers of the authority, and by the trustee or paying agent if the authority determines to use a trustee or paying agent for the bonds. Execution of the bonds may be by manual or facsimile signature, provided that at least one signature on the bond is manual.
     (3) The bonds of the authority shall be subject to such terms, conditions, covenants, and protective provisions as are found necessary or desirable by the authority, including, but not limited to, pledges of the authority's assets, setting aside of reserves, and other provisions the authority finds are necessary or desirable for the security of bondholders.
     (4) Any revenue pledged by the authority to be received under the sales agreement or in special funds created by the authority shall be valid and binding at the time the pledge is made. Receipts so pledged and then or thereafter received by the authority and any securities in which such receipts may be invested shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act. The lien of any such pledge shall be valid and binding as against all parties having claims of any kind against the authority, whether such parties have notice of the lien. Notwithstanding any other provision to the contrary, the resolution or indenture of the authority or any other instrument by which a pledge is created need not be recorded or filed pursuant to chapter 62A.9A RCW to perfect such pledge. The authority shall constitute a governmental unit within the meaning of RCW 62A.9A-102(a)(45).
     (5) When issuing bonds, the authority may provide for the future issuance of additional bonds or parity debt on a parity with outstanding bonds, and the terms and conditions of their issuance. The authority may issue refunding bonds in accordance with chapter 39.53 RCW or issue bonds with a subordinate lien against the fund or funds securing outstanding bonds.
     (6) The board and any person executing the bonds are not liable personally on the indebtedness or subject to any personal liability or accountability by reason of the issuance thereof.
     (7) The authority may, out of any fund available therefor, purchase its bonds in the open market.

NEW SECTION.  Sec. 8   LEGAL INVESTMENTS. Bonds issued under this subchapter are hereby made securities in which all insurance companies, trust companies in their commercial departments, savings banks, cooperative banks, banking associations, investment companies, executors, trustees and other fiduciaries, and all other persons whatsoever who are now or may hereafter be authorized to invest in obligations of the state may properly and legally invest funds, including capital in their control or belonging to them.

NEW SECTION.  Sec. 9   LIMITATION OF LIABILITY. Members of the board and persons acting in the authority's behalf, while acting within the scope of their employment or agency, are not subject to personal liability resulting from carrying out the powers and duties conferred on them under this subchapter.

NEW SECTION.  Sec. 10   BANKRUPTCY. Prior to the date that is three hundred sixty-six days after which the authority no longer has any bonds outstanding, the authority is prohibited from filing a voluntary petition under chapter 9 of the federal bankruptcy code or such corresponding chapter or section as may, from time to time, be in effect, and a public official or organization, entity, or other person shall not authorize the authority to be or become a debtor under chapter 9 or any successor or corresponding chapter or sections during such periods. This section shall be part of any contractual obligation owed to the holders of bonds issued under this subchapter. Any such contractual obligation shall not subsequently be modified by state law during the period of the contractual obligation.

NEW SECTION.  Sec. 11   DISSOLUTION OF THE AUTHORITY. The authority shall dissolve no later than two years from the date of final payment of all of its outstanding bonds and the satisfaction of all outstanding obligations of the authority, except to the extent necessary to remain in existence to fulfill any outstanding covenants or provisions with bondholders or third parties made in accordance with this subchapter. Upon dissolution of the authority, all assets of the authority shall be returned to the state and shall be deposited in the state general fund, and the authority shall execute any necessary assignments or instruments, including any assignment of any right, title, or ownership to the state for receipt of payments under the master settlement agreement.

Sec. 12   RCW 43.79.487 and 2011 c 5 s 711 are each amended to read as follows:
     The basic health plan stabilization account is created in the state treasury, to consist of such revenues, appropriations, and transfers as may be directed by law. Moneys in the account may be spent only after appropriation. Expenditures from the account may be used solely for the support of the basic health plan under chapter 70.47 RCW and medical care services under RCW 74.09.035(1) (a) and (c).

Sec. 13   RCW 74.09.035 and 2011 1st sp.s. c 36 s 6 and 2011 1st sp.s. c 15 s 3 are each reenacted and amended to read as follows:
     (1) To the extent of available funds, medical care services may be provided to:
     (a) Persons who:
     (i) Are incapacitated from gainful employment by reason of bodily or mental infirmity that will likely continue for a minimum of ninety days as determined by the ((department)) authority. The standard for incapacity in this subsection, as evidenced by the ninety-day duration standard, is not intended to be as stringent as federal supplemental security income disability standards;
     (ii) Are citizens or aliens lawfully admitted for permanent residence or otherwise residing in the United States under color of law;
     (iii) Have furnished the ((department)) authority their social security number. If the social security number cannot be furnished because it has not been issued or is not known, an application for a number shall be made prior to authorization of benefits, and the social security number shall be provided to the ((department)) authority upon receipt;
     (iv) Have countable income as described in RCW 74.04.005 at or below four hundred twenty-eight dollars for a married couple or at or below three hundred thirty-nine dollars for a single individual; and
     (v) Do not have countable resources in excess of those described in RCW 74.04.005.
     (b) Persons eligible for the aged, blind, or disabled assistance program authorized in RCW 74.62.030 and who are not eligible for medicaid under RCW 74.09.510.
     (c) Persons eligible for alcohol and drug addiction services provided under chapter 74.50 RCW, in accordance with medical eligibility requirements established by the ((department)) authority.
     (d) The following persons are not eligible for medical care services:
     (i) Persons who are unemployable due primarily to alcohol or drug addiction, except as provided in (c) of this subsection. These persons shall be referred to appropriate assessment, treatment, shelter, or supplemental security income referral services as authorized under chapter 74.50 RCW. Referrals shall be made at the time of application or at the time of eligibility review. This subsection shall not be construed to prohibit the ((department)) authority from granting medical care services benefits to alcoholics and drug addicts who are incapacitated due to other physical or mental conditions that meet the eligibility criteria for medical care services;
     (ii) Persons who refuse or fail to cooperate in obtaining federal aid assistance, without good cause;
     (iii) Persons who refuse or fail without good cause to participate in drug or alcohol treatment if an assessment by a certified chemical dependency counselor indicates a need for such treatment. Good cause must be found to exist when a person's physical or mental condition, as determined by the ((department)) authority, prevents the person from participating in drug or alcohol dependency treatment, when needed outpatient drug or alcohol treatment is not available to the person in the county of his or her residence or when needed inpatient treatment is not available in a location that is reasonably accessible for the person; and
     (iv) Persons who are fleeing to avoid prosecution of, or to avoid custody or confinement for conviction of, a felony, or an attempt to commit a felony, under the laws of the state of Washington or the place from which the person flees; or who are violating a condition of probation, community supervision, or parole imposed under federal or state law for a felony or gross misdemeanor conviction.
     (e) For purposes of determining whether a person is incapacitated from gainful employment under (a) of this subsection:
     (i) The ((department)) authority shall adopt by rule medical criteria for incapacity determinations to ensure that eligibility decisions are consistent with statutory requirements and are based on clear, objective medical information; and
     (ii) The process implementing the medical criteria shall involve consideration of opinions of the treating or consulting physicians or health care professionals regarding incapacity, and any eligibility decision which rejects uncontroverted medical opinion must set forth clear and convincing reasons for doing so.
     (f) For purposes of reviewing a person's continuing eligibility and in order to remain eligible for the program, persons who have been found to have an incapacity from gainful employment must demonstrate that there has been no material improvement in their medical or mental health condition. The ((department)) authority may discontinue benefits when there was specific error in the prior determination that found the person eligible by reason of incapacitation.
     (2) Enrollment in medical care services may not result in expenditures that exceed the amount that has been appropriated in the operating budget. If it appears that continued enrollment will result in expenditures exceeding the appropriated level for a particular fiscal year, the ((department)) authority may freeze new enrollment and establish a waiting list of persons who may receive benefits only when sufficient funds are available.
     (3) Determination of the amount, scope, and duration of medical care services shall be limited to coverage as defined by the authority, except that adult dental, and routine foot care shall not be included unless there is a specific appropriation for these services.
     (4) The authority shall enter into performance-based contracts with one or more managed health care systems for the provision of medical care services under this section. The contract must provide for integrated delivery of medical and mental health services.
     (5) The authority shall establish standards of assistance and resource and income exemptions, which may include deductibles and co-insurance provisions. In addition, the authority may include a prohibition against the voluntary assignment of property or cash for the purpose of qualifying for assistance.
     (6) Residents of skilled nursing homes, intermediate care facilities, and intermediate care facilities for persons with intellectual disabilities, as that term is described by federal law, who are eligible for medical care services shall be provided medical services to the same extent as provided to those persons eligible under the medical assistance program.
     (7) Eligibility for medical care services shall commence with the date of certification for medical care services, date of eligibility for the aged, blind, or disabled assistance program provided under RCW 74.62.030, or the date or eligibility for alcohol and drug addiction services provided under chapter 74.50 RCW.

NEW SECTION.  Sec. 14   CODIFICATION. Sections 1 through 11 of this act shall be added as a new subchapter in chapter 43.340 RCW.

NEW SECTION.  Sec. 15   SEVERABILITY. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION.  Sec. 16   REFERENDUM. The secretary of state shall submit this act to the people for their adoption and ratification, or rejection, at the next general election to be held in this state, in accordance with Article II, section 1 of the state Constitution and the laws adopted to facilitate its operation.