Introduced Version




HOUSE BILL No. 1404

_____


DIGEST OF INTRODUCED BILL



Citations Affected: IC 4-4-33; IC 6-1.1-21-10; IC 8-9.5-9-2; IC 8-9.5-9-8.

Synopsis: Securitization of tobacco settlement payments. Establishes the tobacco settlement corporation. Permits the corporation to purchase up to 50% of the state's right to receive payments under the tobacco master settlement agreement and to issue bonds payable from those payments. Provides for distribution of the bond proceeds to school corporations, state universities, and local units of government to reverse the effects of reductions of various distributions and appropriations in the 2001 budget. Authorizes the corporation to enter into certain swap agreements with respect to the obligations that it issues.

Effective: Upon passage.



Espich


    January 12, 2006, read first time and referred to Committee on Ways and Means.




Introduced

Second Regular Session 114th General Assembly (2006)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts between statutes enacted by the 2005 Regular Session of the General Assembly.

HOUSE BILL No. 1404


    A BILL FOR AN ACT to amend the Indiana Code concerning state offices and administration and to make an appropriation.

Be it enacted by the General Assembly of the State of Indiana:

SOURCE: IC 4-4-33; (06)IN1404.1.1. -->     SECTION 1. IC 4-4-33 IS ADDED TO THE INDIANA CODE AS A NEW CHAPTER TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]:
     Chapter 33. Tobacco Settlement Corporation
    Sec. 1. As used in this chapter, "board" refers to the governing board of the corporation.
    Sec. 2. As used in this chapter, "bonds" means bonds, notes, and any other obligations and financing arrangements issued or entered into by the corporation under this chapter and any such bonds, notes, obligations, or other financing arrangements entered into to refund the foregoing, whether on a current or an advance basis.
    Sec. 3. As used in this chapter, "corporation" refers to the tobacco settlement corporation established by this chapter.
    Sec. 4. As used in this chapter, "financing costs" means capitalized interest, capitalized operating expenses, debt service reserves, operating reserves, and any cost of issuance, credit

enhancement, swap agreement under IC 8-9.5-9, or item of expense directly or indirectly payable or reimbursable by the corporation and related to the authorization, sale, or issuance of the bonds, including, but not limited to, underwriting fees and fees and expenses for professional consultants and fiduciaries.
    Sec. 5. As used in this chapter, "master settlement agreement" has the meaning set forth in IC 24-3-3-6.
    Sec. 6. As used in this chapter, "net proceeds" means the amount of proceeds remaining after each sale of bonds that is not required by the corporation to pay financing costs.
    Sec. 7. As used in this chapter, "qualifying statute" has the meaning set forth in the master settlement agreement. For purposes of this chapter, IC 24-3-3 is the qualifying statute.
    Sec. 8. As used in this chapter, "residual interests" means the income of the corporation that exceeds the corporation's obligations to fund any reserve fund or to pay its operating expenses, debt service, whether at maturity or upon redemption, or any other contractual obligations incurred in connection with the issuance or management of, or security for, bonds.
    Sec. 9. As used in this chapter, "sales agreement" means any agreement authorized under this chapter in which the state sells to the corporation a part (not to exceed fifty percent (50%)) of the amounts and revenues required to be paid by tobacco product manufacturers to the state and the state's rights to receive the amounts and revenues under the master settlement agreement.
    Sec. 10. As used in this chapter, "state" means the state of Indiana. If this chapter authorizes or requires the state to take an action and does not specify the individual or entity that is to carry out the action, the budget agency shall carry out the action on behalf of the state unless another state agency, state office, or state officer is required by law or contract to act on behalf of the state in carrying out the action.
    Sec. 11. (a) The general assembly finds the following:
        (1) The state entered into the master settlement agreement with certain tobacco product manufacturers on November 23, 1998.
        (2) Tobacco product manufacturers subject to the master settlement agreement are liable to make payments to the state from time to time, subject to the terms and conditions of, and payable solely as provided in, the master settlement agreement.
        (3) One (1) or more tobacco product manufacturers may be

unwilling or unable to fulfill their obligations under the master settlement agreement in the future as a result of:
            (A) a decline in cigarette consumption in the United States;
            (B) a decline in market share of a tobacco product manufacturer;
            (C) a decline in the market share of a tobacco product manufacturer and a concomitant increase in the market share of domestic and international tobacco product manufacturers that are not subject to the master settlement agreement;
            (D) an allegation by a tobacco product manufacturer that the state does not diligently enforce the state's qualifying statute;
            (E) a dispute about the amount payable by a tobacco product manufacturer under the master settlement agreement;
            (F) a lawsuit challenging the master settlement agreement that could result in a determination that the master settlement agreement is void or unenforceable or violates federal antitrust law;
            (G) a lawsuit brought against a tobacco product manufacturer by an individual smoker or nonsmoker and the individual's family, it being reported that as of December 31, 2002, there were approximately one thousand five hundred (1,500) active individual smoking and health care cost recovery cases pending in the United States;
            (H) a lawsuit brought against a tobacco product manufacturer as a class action in state or federal court alleging injury as a result of smoking, seeking health care cost recovery, charging consumer fraud, or alleging violations of consumer protection or unfair trade statutes;
            (I) a lawsuit brought by an asbestos manufacturer against a tobacco product manufacturer seeking contribution or reimbursement for amounts expended by the asbestos manufacturer in connection with defense of claims and payment of damages for asbestos injury allegedly caused, in whole or in part, by the tobacco product manufacturer; and
            (J) a bankruptcy by a tobacco product manufacturer, which could result in the delay, reduction, or elimination of payments to the state by the tobacco product

manufacturer.
    (b) As a result of the findings described in subsection (a), the general assembly finds that the state is at risk of loss of the amounts and revenues due under the master settlement agreement and that it will benefit the health, safety, and general welfare of the state's citizens to ensure a current and reliable source of revenue for the state through the sale and securitization of the payments due the state from time to time under the master settlement agreement as provided in this chapter.
    (c) The general assembly declares it the public policy of the state and a recognized governmental function to provide for the securitization of the amounts and revenues due under the master settlement agreement.
    (d) This chapter, being necessary for the health, safety, and general welfare of the state and its citizens, shall be liberally construed to effect its purposes.
    (e) The general assembly finds that the following activities are necessary and proper and serve a public purpose or purposes through the promotion of economic development, education, health, safety, and general welfare and will be of benefit to the state and its citizens:
        (1) The creation of the corporation.
        (2) Entering into one (1) or more sales agreements.
        (3) The sale to the corporation of up to fifty percent (50%) of the amounts and revenues required to be paid by tobacco product manufacturers to the state and the state's right to receive the amounts and revenues under the master settlement agreement.
        (4) The issuance of bonds by the corporation.
    Sec. 12. The tobacco settlement corporation is established. The corporation is a public body corporate and politic, separate from the state, and not a state agency. The exercise by the corporation of its powers constitutes an essential public and governmental function.
    Sec. 13. (a) The powers of the corporation are vested in and shall be exercised by a board consisting of the following seven (7) members:
        (1) The governor, or the governor's designee, who serves as chairperson.
        (2) The lieutenant governor, or the lieutenant governor's designee, who serves as vice chairperson.
        (3) The treasurer of state, or the treasurer of state's designee.

        (4) Four (4) members appointed by the governor who are individuals of known probity and who possess adequate capacity for the performance of the duties of members of the corporation. Not more than two (2) of the members appointed under this subdivision may be members of the same political party.
    (b) The board shall elect from among the board's members the other officers the board considers necessary or convenient.
    (c) The term of the members of the board appointed by the governor is four (4) years from the date of their appointment, except that the terms of two (2) of the initial appointees, as determined by the governor, are for two (2) years from the date of their appointment.
    (d) Each member of the board appointed by the governor:
        (1) shall hold office for the term of the member's respective appointment;
        (2) shall continue to serve after the expiration of the appointment until a successor is appointed and qualified;
        (3) is eligible for reappointment; and
        (4) serves at the pleasure of the governor and may be removed from office by the governor at any time.
    (e) The members of the board are not entitled to any compensation for their services but are entitled to reimbursement for actual and necessary expenses on the same basis as state employees.
    Sec. 14. Four (4) members of the board constitute a quorum. Four (4) affirmative votes are required for the board to take action.
    Sec. 15. Meetings of the board shall be held in accordance with IC 5-14-1.5 and at the call of the chairperson or when a majority of the members of the board so requests.
    Sec. 16. (a) This section applies to a meeting of the board at which at least four (4) members of the board are physically present at the place where the meeting is conducted.
    (b) A member of the board may participate in a meeting of the board by using a means of communication that permits:
        (1) all other members of the board participating in the meeting; and
        (2) all members of the public physically present at the place where the meeting is conducted;
to simultaneously communicate with each other during the meeting.
    (c) A member of the board who participates in a meeting under subsection (b) is considered present at the meeting.
    (d) The memoranda of the meeting prepared under IC 5-14-1.5-4 must also state:
        (1) the name of each member of the board who participated in the meeting or was absent; and
        (2) with respect to each member who participated in the meeting, whether that member:
            (A) was physically present at the place where the meeting was conducted; or
            (B) participated in the meeting by using a means of communication described in subsection (b).
    Sec. 17. Any member or employee of the corporation who has, will have, or later acquires an interest, direct or indirect, in any transaction with the corporation shall immediately disclose the nature and extent of the interest in writing to the corporation as soon as the member or employee has knowledge of the actual or prospective interest. The disclosure shall be announced in an open meeting and entered into the minutes of the corporation. Upon disclosure, the member or employee shall not participate in any action by the corporation authorizing the transaction. However, such an interest does not invalidate actions by the corporation with the participation of the disclosing member before the time when the member became aware of the interest.
    Sec. 18. The corporation may, without the approval of the attorney general or any other state officer, employ independent counsel, bond counsel, other attorneys, financial advisers, investment bankers, auditors, other technical or professional assistants, and other officers, agents, and employees (including an executive director), permanent or temporary, as the corporation considers necessary or convenient to carry out the efficient operation of the corporation, and shall determine the qualifications, duties, compensation, and terms of service of all such individuals. The chairperson may appoint the initial executive director. The executive director is the chief operating officer of the corporation, and the board shall establish the executive director's duties and responsibilities, including the powers that the corporation has under this section. The board may delegate to an officer of the corporation, the executive director, or one (1) or more other employees or agents of the corporation such duties and responsibilities as the board considers necessary or convenient, including the powers that the corporation has set forth in this

section. Employees of the corporation shall not be considered employees of the state.
    Sec. 19. (a) The corporation shall:
        (1) adopt a policy establishing a code of ethics for its employees; or
        (2) decide it wishes to be under the jurisdiction and rules adopted by the state ethics commission.
    (b) A code of ethics adopted under this section must be consistent with Indiana law and approved by the governor.
    Sec. 20. The corporation has all the general powers necessary to carry out its purposes and duties and to exercise its specific powers. In addition to other powers specified in this chapter, the corporation may:
        (1) sue and be sued in the name of the corporation;
        (2) make and execute agreements, contracts, and other instruments, with any public or private person, in accordance with this chapter;
        (3) invest money held by the corporation or on its behalf under any trust agreement of the corporation or otherwise in the manner determined by resolution of the corporation or under the trust agreement (an investment under this subdivision is not restricted by or subject to any other law);
        (4) establish any general or special funds, accounts, or subaccounts, and controls on deposits to and disbursements from them, as it finds necessary, desirable, or convenient for the implementation of this chapter;
        (5) procure insurance, other credit enhancements, and other financing arrangements for its bonds to fulfill its purposes under this chapter, including but not limited to municipal bond insurance and letters of credit;
        (6) accept appropriations, gifts, grants, loans, or other aid from public or private entities;
        (7) establish a stable source of revenue to be used for the purposes set forth in this chapter;
        (8) enter into one (1) or more sales agreements with the state for purchase of a part (not to exceed fifty percent (50%)) of the amounts and revenues due to the state under the master settlement agreement, and of the state's rights to receive those amounts and revenues;
        (9) issue bonds in one (1) or more series;
        (10) sell, pledge, or assign, as security, all or a part of the revenues derived by the corporation under any sales

agreement, to provide for and secure the issuance of bonds;
        (11) manage its funds, obligations, and investments as necessary and as consistent with its purposes;
        (12) without complying with IC 4-22-2, adopt, amend, and repeal bylaws, rules, and regulations not inconsistent with this chapter and necessary or convenient to regulate its affairs and to carry into effect the powers, duties, and purposes of the corporation and conduct its business; and
        (13) exercise any other power reasonably required, convenient, or desirable to implement the purposes of this chapter.
The rule of law that any doubt as to the existence of a power of the corporation shall be resolved against the existence of that power is abrogated. Any doubt as to the existence of a power of the corporation shall be resolved in favor of its existence.
    Sec. 21. The corporation may not:
        (1) exercise the power of eminent domain; or
        (2) levy taxes of any kind.
    Sec. 22. (a) The corporation may issue its bonds in principal amounts as may be necessary or appropriate to provide sufficient funds for:
        (1) the exercise of any of its powers or achievement of its purposes;
        (2) the payment of debt service on its bonds;
        (3) the establishment of operating reserves and debt service or other reserves to secure the bonds;
        (4) the costs of issuance of its bonds and credit enhancements, if any; and
        (5) all other financing costs or other expenditures of the corporation incident to and necessary to carry out its purposes or powers.
Subject to section 36 of this chapter, the net proceeds of bonds shall be deposited in any fund specified by law, except that the net proceeds of refunding bonds shall be deposited in accordance with a trust agreement of the corporation.
    (b) Before issuing bonds under this chapter, the corporation shall publish a notice of its determination to issue the bonds. The notice shall be published one (1) time in one (1) newspaper published and of general circulation in each of the six (6) counties having the greatest populations in the state. An action to contest the validity of:
        (1) a series of bonds issued by the corporation; or

        (2) any sales agreement entered into by the corporation and the state related to the bonds;
may not be brought after the fifteenth day following the publication of the notice. If an action challenging the bonds or sales agreement is not brought within the time prescribed by this subsection, the bonds or sales agreement are conclusively presumed to be authorized fully and valid under Indiana law, and any individual or entity is estopped from further questioning the authorization, validity, execution, delivery, or issuance of the bonds or the sales agreement.
    (c) The bonds, when issued, must have all the qualities of negotiable instruments, subject to provisions for registration, under IC 26-1 and are incontestable in the hands of a bona fide purchaser or owner of the bond for value. Bonds issued under this chapter are exempt from the registration requirements of IC 23-2-1 and any other state securities registration statutes.
    (d) The corporation's bonds must:
        (1) bear the date or dates;
        (2) mature at the time or times;
        (3) be in the denominations;
        (4) be in the form;
        (5) be registered or registrable in the manner;
        (6) be made transferable, exchangeable, and interchangeable;
        (7) be payable in the medium of payment and at the place or places;
        (8) be subject to the terms of redemption;
        (9) bear the fixed or variable rate or rates of interest;
        (10) be payable at the time or times; and
        (11) be sold at a public or negotiated sale in the manner and at the price or prices;
as the corporation determines.
    (e) The bonds shall be executed by one (1) or more officers of the corporation and by the trustee or paying agent. Execution of the bonds may be by manual or facsimile signature.
    (f) The bonds of the corporation are subject to the terms, conditions, covenants, and protective provisions that are found necessary or desirable by the corporation, including, but not limited to, pledges of the corporation's assets, setting aside of reserves, and other provisions the corporation finds necessary or desirable for the security of bondholders.
    (g) Any pledge of revenues to be derived by the corporation under a sales agreement or from any other source, and the right to

receive revenues under a sales agreement or from any other source, or any pledge of a special fund, account, or subaccount created by the corporation, together with any investment earnings, is valid and binding at the time the pledge is made. Property so pledged is immediately subject to the lien of the pledge without any physical delivery of the property or further act. The lien of such a pledge is valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the corporation, regardless of whether the parties have notice of the lien. Notwithstanding any other provision of law to the contrary, the resolution or trust agreement of the corporation or any other instrument by which the pledge is created need not be recorded or filed except in the records of the corporation to perfect the pledge.
    (h) Neither a member of the board nor an individual executing bonds or notes issued under this article is liable personally on the bonds or notes.
    (i) The corporation may, out of any funds or revenues available for the purpose, purchase its bonds in the open market or by a negotiated purchase authorized by the board.
    Sec. 23. (a) The bonds issued under this chapter by the corporation constitute the special obligations only of the corporation and are payable solely from and secured exclusively by the pledge by the corporation of certain funds and revenues and rights to receive funds or revenues as provided in the resolution or trust agreement authorizing or securing the bonds in accordance with this chapter. Neither the faith and credit nor taxing power of the state or any political subdivision of the state is pledged to the payment of principal or interest on the bonds. Each bond of the corporation must plainly state on its face that the bond does not constitute an indebtedness or lending of the credit of the state within the meaning or application of any constitutional provision or limitation but that it is payable solely as to both principal and interest from the funds, revenues, and rights pledged under this chapter. This chapter and the covenants and undertakings of the corporation as expressed in any proceedings preliminary to or in connection with the issuance of the bonds may be enforced by a bondholder by action for injunction or mandamus against the corporation or any officer, agent, or employee of the corporation, but an action for monetary judgment may not be brought against the state for any violations of this chapter.
    (b) All property of the corporation is public property devoted to an essential public and governmental function and purpose and is

exempt from all taxes and special assessments, direct or indirect, of the state or a political subdivision of the state. All bonds issued under this chapter are issued by a body corporate and politic of the state, but not a state agency, and for an essential public and governmental purpose, and the bonds, the interest thereon, the proceeds received by the holder from the sale of the bonds to the extent of the holder's cost of acquisition proceeds received upon redemption before maturity, and proceeds received at maturity and the receipt of the interest and proceeds are exempt from taxation in the state for all purposes except the financial institutions tax imposed under IC 6-5.5 or the state inheritance tax imposed under IC 6-4.1.
    Sec. 24. Contracts entered into by the corporation shall be entered into in the name of the corporation and not in the name of the state of Indiana. The obligations of the corporation under the contracts are obligations only of the corporation and are not in any way obligations of the state of Indiana.
    Sec. 25. Bonds issued under this chapter are securities:
        (1) in which all public officers and agencies of the state, insurance companies, banking associations, investment companies, executors, administrators, trustees, and other fiduciaries may properly and legally invest funds, including capital in their control or belonging to them; and
        (2) that may properly and legally be deposited with and received by any officer or agency of the state for any purpose for which the deposit of bonds or obligations of the state is authorized by law.
    Sec. 26. (a) Without complying with any other law governing the sale or disposition of property by the state, the state may sell and assign to the corporation, and the corporation may purchase, all the state's right to receive a part (not to exceed fifty percent (50%)) of the state's annual share of the amounts and revenues due to the state under the master settlement agreement and of the state's rights to receive those amounts and revenues. Subject to the fifty percent (50%) limitation in this subsection, the state may make multiple sales and assignments to the corporation under this section, and the corporation may make multiple purchases under this section. The state, including the governor and the attorney general, may take any action necessary or convenient to facilitate and complete a sale. The corporation may take any action necessary or convenient to facilitate and complete a purchase.
    (b) A sale and assignment made under this section is

irrevocable. The part of the amounts and revenues, and the right to receive the amounts and revenues, sold to the corporation shall be pledged to the bondholders. The sale and assignment shall constitute and be treated as a true sale and absolute transfer of the property so sold and assigned and not as a pledge or other security interest granted by the state for any borrowing. The characterization of a sale and assignment as an absolute transfer shall not be negated or adversely affected because only a part of the amounts and revenues due to the state under the master settlement agreement is being sold and assigned, because the state is acquiring or retaining an ownership interest in a part of the amounts and revenues due under the master settlement agreement not so sold and assigned, or for any other reason.
    (c) The state covenants and agrees with the holders of any bonds that so long as any bonds of the corporation issued under this chapter are outstanding and unpaid, the state will not limit or alter the rights vested in the corporation to fulfill the terms of any agreements made with, or make payments to, the holders of the bonds or in any way impair the rights and remedies of the bondholders, until the bonds, together with interest thereon, and all costs and expenses in connection with any action or proceedings by or on behalf of the bondholder are fully paid, satisfied, and discharged.
    (d) The terms of any sales agreement must provide that on and after the effective date of the sale and assignment:
        (1) the state shall have no right, title, or interest in the property sold and assigned;
        (2) the property sold and assigned is the property of the corporation and not the property of the state;
        (3) the property sold and assigned shall be owned, received, held, and disbursed by the corporation or its trustee or assignee, and not by the state;
        (4) none of the property sold and assigned shall be subject to garnishment, levy, execution, attachment, or other process, writ (including writ of mandate), or remedy in connection with the assertion or enforcement of any debt, claim, settlement, or judgment against the state; and
        (5) the part of the amounts and revenues due under the master settlement agreement that are sold and assigned to the corporation must be paid directly to the corporation or its trustee or assignee and shall not be considered money drawn from the state treasury.

    (e) Any sales agreement may include other agreements and covenants of the state that may be permitted by the Constitution of the State of Indiana and as may be necessary or convenient for the sale and assignment of a part of the amounts and revenues due under the master settlement agreement and the issuance of bonds to finance the purchase by the corporation.
    (f) The state shall:
        (1) notify the independent auditor and the escrow agent under the master settlement agreement that a part of the amounts and revenues due under the master settlement agreement has been sold and assigned to the corporation; and
        (2) irrevocably instruct the independent auditor and the escrow agent that, after the date of the notice under subdivision (1), all or a part of the amounts and revenues due under the master settlement agreement sold and assigned to the corporation is to be paid directly to the trustee under the trust agreement of the corporation for the benefit of the owners of the bonds secured by a pledge of those amounts and revenues, until the bonds are no longer outstanding under the resolution or trust agreement.
    Sec. 27. Members of the board, the officers and employees of the corporation, the agents of the corporation, and any other individuals executing bonds issued under this chapter are not subject to personal liability or accountability by reason of any act authorized by this chapter, including, without limitation, the issuance and sale or placement of bonds, the failure to issue bonds, the execution and delivery of bonds, and the exercise of any other powers contemplated by this chapter.
    Sec. 28. (a) The corporation is prohibited from filing a voluntary petition under Chapter 9 of the federal bankruptcy code or any corresponding chapter or section that may, from time to time, be in effect. A governmental officer, governmental organization, or another entity or person may not authorize the corporation to be a debtor under Chapter 9 of the federal bankruptcy code or any successor or corresponding chapter or sections.
    (b) This section shall be considered to be incorporated in any contractual obligation owed to the holders of bonds issued under this chapter. Any such contractual obligation shall not subsequently be modified by Indiana law before the date that is three hundred sixty-six (366) days after the date upon which the corporation no longer has any bonds outstanding.
    Sec. 29. The corporation shall dissolve not later than two (2)

years after the date of final payment of all of its outstanding bonds and the satisfaction of all outstanding obligations of the corporation, 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 chapter. Upon dissolution of the corporation, all the corporation's property, including the corporation's right, title, and ownership interest in amounts and revenues due under the master settlement agreement, shall be transferred and assigned to the state. The amounts and revenues transferred to the state shall be deposited in or to the credit of the state general fund. The corporation shall execute all necessary assignments and other documents as may be necessary or convenient to transfer and assign its property to the state.
    Sec. 30. Before issuing any bonds, the corporation shall enter into a sales agreement that includes the agreement of the state to:
        (1) diligently enforce the corporation's right to receive the amounts and revenues due under the master settlement agreement and sold under the sales agreement, to the full extent permitted by the master settlement agreement;
        (2) diligently enforce the qualifying statute as contemplated by the master settlement agreement against all tobacco product manufacturers that are selling tobacco products in Indiana and are not signatories to the master settlement agreement;
        (3) neither amend the master settlement agreement nor take any other action that would in any way:
            (A) alter, limit, or impair the corporation's right to receive the part of the amounts and revenues due under the master settlement agreement and sold under the sales agreement;
            (B) limit or alter the rights vested in the corporation by this chapter or other law to fulfill its agreements with the bond owners; or
            (C) impair the rights and remedies of the bond owners or the security for the bonds;
        until the bonds, together with the interest on the bonds and all costs and expenses in connection with any action or proceedings by or on behalf of the bond owners, are fully paid and discharged;
        (4) not amend, supersede, or repeal the qualifying statute in any way that would violate section 26(c) of this chapter; and
        (5) take no action that would adversely affect the tax exempt status of any tax exempt bond, and, to the extent permitted by

law, take all reasonable actions necessary to protect the tax exempt status of any tax exempt bond.
Subdivision (3) shall not be construed to preclude the state's regulation of smoking and taxation and regulation of the sale of cigarettes or other tobacco products.
    Sec. 31. The corporation shall contract with an independent certified public accountant for an annual financial audit of the corporation. The certified public accountant shall present an audit report not later than seven (7) months after the end of each fiscal year of the corporation.
    Sec. 32. The state board of accounts may at any time conduct an audit of the corporation.
    Sec. 33. The corporation shall submit copies of its annual budget and the audit report referred to in section 31 of this chapter to the budget director, the legislative council, and the state board of accounts. The report to the legislative council must be in an electronic format under 5-14-6.
    Sec. 34. Income or revenues of the corporation not required to meet its obligations, including redemption obligations on its bonds, shall be paid to the state general fund if directed by the governor.
     Sec. 35. (a) As used in this section, "sale part" means the part of the punitive damage award payment determined under STEP FOUR of the following formula:
        STEP ONE: Determine the total of the amounts and revenues that the corporation is entitled to receive under any sales agreements and assignments entered into under section 26 of this chapter.
        STEP TWO: Determine the total of the amounts and revenues due to the state under the master settlement agreement, without regard to any sales agreements and assignments entered into under section 26 of this chapter.
        STEP THREE: Divide the STEP ONE amount by the STEP TWO amount.
        STEP FOUR: Multiply the punitive damage award payment by the STEP THREE result.
    (b) This section applies upon the entry of a judgment that includes a punitive damage award in a civil action related to tobacco products in which:
        (1) the state or a state agency is the party to the action receiving the award; and
        (2) a tobacco manufacturer who participates in the master settlement agreement is the party against whom the judgment

was entered.
IC 34-51-3-6 does not apply to such a punitive damage award.
    (c) Upon entry of a judgment described in this section, the right of the state or a state agency to receive the sale part of the punitive damage award payment described in this section is assigned to the corporation. For as long as this assignment is in effect, any sale part of a punitive damage award payment received by the state or a state agency in settlement of a judgment described in this section or as satisfaction or partial satisfaction of a judgment to which this section applies shall be considered to be held for the benefit of the corporation and shall be remitted immediately after receipt of the payment, at the direction of the treasurer of state, to the corporation subject to any pledge under this chapter.
    (d) The corporation may spend money received under this section in accordance with this chapter, subject to any pledge under this chapter.
    (e) The part of the punitive damages award that exceeds the sale part under this section shall be paid to the state or a state agency, as applicable, and used as otherwise provided by law.
    (f) The assignment under this section terminates upon the earliest of the date on which:
        (1) the corporation is dissolved under section 29 of this chapter;
        (2) all outstanding bonds and other agreements of the corporation have been paid in full or otherwise discharged; or
        (3) a state court has entered a final judgment from which no further appeal is allowed ordering the judgment debtor tobacco manufacturer to pay the state or a state agency both its obligations under the master settlement agreement and any punitive damages to be paid to the state or a state agency without setoff, credit, or reduction of one (1) obligation on account of the other.
    Sec. 36. (a) As used in this section, "fund" refers to the tobacco securitization endowment fund established by this section.
    (b) There is established the tobacco securitization endowment fund. The fund is a state fund, which shall be administered by the budget agency. The treasurer of state shall invest money in the fund in the same manner as other public money may be invested. Money in the fund shall not be combined or commingled for cash management or investment purposes with any other fund. The earnings from investment of money in the fund accrue to the fund. Money in the fund does not revert to the state general fund at the

end of any state fiscal year.
    (c) Subject to subsection (e), the corporation shall deposit, or cause to be deposited, the proceeds of the sale of bonds (other than refunding bonds) in the fund. The budget agency shall transfer money from the fund for one (1) or more of the following purposes:
        (1) To the state general fund to make a distribution for tuition support to school corporations and charter schools in the first six (6) months of a calendar year that begins in the state fiscal year in which the corporation receives the proceeds of the bonds that would otherwise be made in the second six (6) months of the calendar year under the distribution schedule provided in the budget bill. The amount of the distribution may not exceed an amount equal to one-twelfth (1/12) of the distributions described in IC 21-3-1.7-9 that each school corporation and charter school would otherwise receive by law in the calendar year. The budget agency shall determine the amount to be transferred and the schedule for making the distribution after review by the budget committee. There is annually appropriated to the budget agency the amount necessary from the fund to make the transfer to the general fund if the distribution provided by this subdivision is made. There is annually appropriated to the department of education from the state general fund the amount transferred under this subdivision for the purpose of making the supplemental distribution permitted by this subdivision. The first distribution for tuition support in the second six (6) months of the calendar year in which a distribution is made under this subdivision shall be reduced by the amount of the distribution made under this subdivision. An appropriation for tuition support from the state general fund or the property tax replacement fund for the state fiscal year beginning on July 1 in the calendar year in which a distribution is made under this subdivision that would otherwise be encumbered to make the distribution in the second six (6) months of the calendar year shall be treated as available to make a similar supplemental distribution in the first six (6) months of the immediately following calendar year.
        (2) To the property tax replacement fund to make a distribution under IC 6-1.1-21 to taxing units in the first six (6) months of a calendar year that begins in the state fiscal year in which the corporation receives the proceeds of the

bonds that would otherwise be made in the second six (6) months of the calendar year under the distribution schedule provided in IC 6-1.1-21-10. The amount of the distribution may not exceed the lesser of sixteen and six-tenths percent (16.6%) of the distributions described in IC 6-1.1-21 that each taxing unit would otherwise receive by law in the calendar year or the July payment that the taxing unit would otherwise receive by law in the calendar year. The budget agency shall determine the amount to be transferred and the schedule for making distributions after review by the budget committee. The distribution shall be made in the same manner that other distributions under IC 6-1.1-21 are made. There is annually appropriated to the budget agency the amount necessary from the fund to make the transfer for the property tax replacement fund distribution provided by this subdivision. There is annually appropriated to the property tax replacement fund board from the property tax replacement fund the amount transferred under this subdivision for the purpose of making the supplemental distribution permitted by this subdivision. The first distribution under IC 6-1.1-21-10 in the second six (6) months of the calendar year in which a distribution is made under this subdivision shall be reduced by the amount of the distribution made under this subdivision. An appropriation for distributions under IC 6-1.1-21 from the property tax replacement fund for the state fiscal year beginning on July 1 in the calendar year in which a distribution is made under this subdivision that would otherwise be encumbered to make the distribution in the second six (6) months of the calendar year shall be treated as available to make a similar supplemental distribution in the first six (6) months of the immediately following calendar year.
        (3) To the state general fund to make a distribution to each educational entity in the state fiscal year in which the corporation receives the proceeds of the bonds. For the purposes of this subdivision, "educational entity" means Indiana University, Purdue University, Indiana State University, Ball State University, the University of Southern Indiana, Vincennes University, Ivy Tech Community College of Indiana, the Indiana Higher Education Telecommunications System (IHETS), and the Indiana commission for higher education (ICHE). The amount of the

distribution may not exceed an amount equal to one-twelfth (1/12) of the calculated amount for the appropriations to the educational entity in all line items in HEA 1001-2003, SECTION 9 for the state fiscal year beginning July 1, 2004, and ending June 30, 2005. The budget agency shall determine the amount to be transferred, the schedule for making distributions, and the purposes for which the distributed amounts may be used after review by the budget committee. There is annually appropriated to the budget agency the amount necessary from the fund to make the transfer to the state general fund to provide the distribution in this subdivision. There is annually appropriated to the budget agency from the state general fund the amount transferred under this subdivision for the purpose of making the supplemental distribution permitted by this subdivision. A distribution under this subdivision shall be made in the same manner as other appropriations made to educational entities in the state fiscal year when the distribution is made. A distribution under this subdivision shall be treated as reducing any claim that the educational entity has to one-twelfth (1/12) of the calculated amounts for the appropriations to the educational entity in all line items in HEA 1001-2003, SECTION 9 for the state fiscal year beginning July 1, 2004, and ending June 30, 2005. The amount of the claim reduction is equal to the amount distributed to the educational entity. A claim attributable to a particular line item shall be reduced in the amount calculated by the budget agency. The budget agency makes the final determination.
    (d) Subject to subsection (e), any balance of bond proceeds remaining in the fund after the completion of the distributions described in subsection (c) shall be used for purposes determined by the general assembly.
    (e) Notwithstanding any other law:
        (1) the state is not required to deposit in the fund proceeds of the sale of bonds needed to pay financing costs; and
        (2) the state and the corporation shall:
            (A) make any deposits to, investments in, and expenditures, transfers, and payments from the fund; and
            (B) take other actions, including the making of investments in other state funds and accounts;
        as may be necessary to ensure that the tax exempt status of

any tax exempt bond is not adversely affected.
Before acting under subdivision (2), the corporation may obtain the written advice of bond counsel.

SOURCE: IC 6-1.1-21-10; (06)IN1404.1.2. -->     SECTION 2. IC 6-1.1-21-10 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 10. (a) There is established a property tax replacement fund board to consist of the commissioner of the department, the commissioner of the department of local government finance, the director of the budget agency, and two (2) ex officio nonvoting representatives of the general assembly of the state of Indiana. The speaker of the house of representatives shall appoint one (1) member of the house as one (1) of the ex officio nonvoting representatives, and the president pro tempore of the senate shall appoint one (1) senator as the other ex officio nonvoting representative, each to serve at the will of the appointing officer. The commissioner of the department shall be the chairman of the board, and the director of the budget agency shall be the secretary of the board.
    (b) Except as provided in IC 4-4-33-36 and section 10.5 of this chapter, the schedule to be used in making distributions to county treasurers during the periods set forth in section 4(b) of this chapter is as follows:
    January    0 .00%
    February    0 .00%
    March    16 .70%
    April    16 .70%
    May    0 .00%
    June    0 .00%
    July    16 .60%
    August    0 .00%
    September    16 .70%
    October    16 .70%
    November    16 .60%
    December    0 .00%
The board may authorize the department to distribute the estimated distributions to counties earlier than what is required under section 4(b) of this chapter.
    (c) The board is also authorized to transfer funds from the property tax replacement fund for the purpose of providing financial aid to school corporations as provided in IC 21-3.
SOURCE: IC 8-9.5-9-2; (06)IN1404.1.3. -->     SECTION 3. IC 8-9.5-9-2, AS AMENDED BY P.L.214-2005, SECTION 50, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 2. As used in this chapter, "authority" means:
        (1) an authority or agency established under IC 8-1-2.2 or

IC 8-9.5 through IC 8-23;
        (2) when acting under an affected statute (as defined in IC 4-4-10.9-1.2), the Indiana finance authority established by IC 4-4-11;
        (3) only in connection with a program established under IC 13-18-13 or IC 13-18-21, the bank established under IC 5-1.5;
        (4) a fund or program established under IC 13-18-13 or IC 13-18-21;
        (5) the Indiana health and educational facility financing authority established by IC 5-1-16;
        (6) the Indiana housing finance authority established by IC 5-20-1;
        (7) the authority established under IC 4-4-11; or
        (8) the authority established under IC 5-1-17; or
        (9) the corporation established by IC 4-4-33.

SOURCE: IC 8-9.5-9-8; (06)IN1404.1.4. -->     SECTION 4. IC 8-9.5-9-8 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE UPON PASSAGE]: Sec. 8. (a) With respect to all leases and contracts entered into by the authority with the Indiana department of transportation, the Indiana department of administration, a fund or program established under IC 13-18-13 or IC 13-18-21, or any other entity to support obligations, the lease or contract may provide that payments under a swap agreement are treated as a debt service on the obligations or as additional rental or other payment due under the lease or contract as the authority may determine.
    (b) The authority may determine that payments under a swap agreement may be integrated with payments on obligations for the purpose of meeting any statutory requirements related to the issuance of obligations. The authority may also determine to secure its payments under a swap agreement with the same collateral securing the related obligations, either on a parity or on a subordinate basis.
SOURCE: ; (06)IN1404.1.5. -->     SECTION 5. An emergency is declared for this act.