No fiscal woe seen in ban on smoking

Publication Date: 2005-03-23

• Author:JOSEPH PICARD
• Publication:Asbury Park (NJ) Press

To balance the state budget last year, New Jersey borrowed $1.2 billion by issuing bonds that were to be paid off with proceeds from the increased tax on cigarettes. However, if the Legislature bans cigarettes in bars, casinos and restaurants, will that tax revenue decline, forcing the state to default on those bonds?

State officials said revenue could decline under the proposed ban, but a default is not likely. Under the worst-case scenario, the bonds would not be paid off as early as the state had hoped, but officials insist they will still be paid off on time.

The bonds, sold in October 2004 in an effort to balance a $28 billion state budget, mature in 30 years. The state had intended to pay them off in 20 years, but the proposed ban on smoking in public places could push back the payoff date.