Minnesota’s state government on Wednesday sold $757 million in tobacco settlement bonds as part of the controversial deal reached in July to end the state’s historic 20-day government shutdown. Gov. Mark Dayton and Republican lawmakers reached the deal after partisan negotiations over Minnesota’s $5 billion budget deficit crumbled during the divisive 2011 legislative session and stalled for months afterward.

The bond sale is a one-time measure that frontloads yearly lawsuit payments to the state from the tobacco industry for use as a temporary budget fix. Strenuous negotiations between Dayton and GOP leaders stretched for weeks after they were constitutionally bound to enact a two-year state budget last summer.

The eventual deal, which included about $1.3 billion in additional revenue to pay for programs that Dayton refused to cut, was criticized by Democrats and Republicans alike. On top of the $757 million sale, which leaves the state $640 million to spend after overhead and interest costs are taken out, Dayton and lawmakers agreed to shift $700 million in payments to K-12 education, leaving the total owed to schools at $2.1 billion.

In cutting the deal, Dayton dropped his call for taxes on the wealthiest Minnesotans, and GOP leaders upped the line on how much they were willing to spend. A cascade of bonding agencies that watch Minnesota’s debt downgraded the state’s credit rating after lawmakers released the compromise.

Minnesota Management and Budget, the state agency tasked with overseeing the sale, released the news Thursday.

“This is the first time a sale like this has been completed in Minnesota and it went extremely well.  The response from the market was stronger than expected,” Assistant Commissioner for Treasury and Debt Managment Kristin Hanson said in a statement. 

The state created the Tobacco Securitization Authority to sell the bonds.

Photo courtesy of MinnPost.com