I have written on the following subject before but with little effect. I am not naive enough to think the subject I am writing on will change because of me, but I am hopeful that I might spur some intelligent conversation between people with a vested interest (that would be anyone who lives in the State of Mississippi) and influence over our elected officials (that would be anyone who can vote). If you fall into one or both of these categories I am asking you to help start a true debate over the future of the Healthcare TRUST Fund, or the Tobacco Fund as many recognize it.
As you might have read recently, there is a plan to take all of the money from the Healthcare TRUST. The Governor has agreed to let it happen as long as the legislature takes at least four years to get it done. This is probably an appropriate time for disclosure of the fact that my firm manages a portion of the Healthcare TRUST assets and if the TRUST is shut down we will lose that account and the revenue that comes with it. It is enough of a conflict for me to understand if you think my opinion is tainted, and therefore, in some way discredited. However, I ask you to look at the facts and make your own decision.
In Behavioral Finance it is understood that investors find it easy to make good decisions about the long term, but find it much more difficult to make good decisions about issues that affect them in the present. Psychologists have found that the decisions you make that demand reason and rational thought are literally made in a different part of the brain than those made on emotion. For instance, in one study a group was asked early in an interview what kind of movies they liked to see. Most of the test group indicated that they liked movies with a message, movies that would make them think. Later in the interview they were asked to pick out of a list what movie they would like to see that evening and almost everyone picked mindless, action packed movies over the ones with a message. What they wanted in the present was much different than what they felt they needed in the long run.
Our State has treated the Healthcare TRUST the same way. We created the trust in 1998 and our State government swore that all the money from the tobacco settlement would go into the trust and live there in perpetuity. Only the earnings from the trust would be used. This was a solemn vow and one that was applauded all over the country for the foresight and intelligence that was shown by our State. And we did just that….for almost two years. Then we started needing money for things. At first those things had something to do with Healthcare, but we were using the assets of the TRUST, not the earnings. It was said that we weren’t technically using the Healthcare TRUST money because the money was sent to the State first and was simply not put in the TRUST. Nevertheless, there have been approximately $2 billion in payments made to our State, yet our Healthcare Trust only has about $225 million in investable assets. The TRUST officially has more money than that but some money was borrowed from the TRUST by the State and has yet to be repaid. If all of the money had gone into the TRUST it is generally agreed that we would now be seeing somewhere between $100 million to $150 million a year in revenue that could be used for healthcare related issues. That is a big payoff.
I’m not so focused on the TRUST that I can’t understand why the State has taken those assets to use now. But for the life of me I don’t understand this. Politicians have been running for years on platforms of “No New Taxes”. They all say that we don’t need new taxes while the tax revenue we currently have is being wasted in State government. I’m ok with that. I don’t like the idea of new taxes either. But I don’t consider the money put into the heralded Healthcare TRUST as wasted money. I consider it an opportunity for Mississippians to do something great for the next generation. So, why are we using it instead of getting rid of the waste?
We do it because it is easy. The TRUST flies under the radar of most people and besides, it is difficult to maintain a long term plan when you have so many things you want and need in the short term. But just because it is easy doesn’t mean it is right.
The good news is that it isn’t too late. There are still many payments that could be made to the Healthcare TRUST that could make a difference in the lives of our citizens. However, I think this may be our last stand. If the legislature decides to take all of the money that is left in the TRUST over the next four years I don’t imagine that we will ever revive the TRUST.
You may wonder why I have capitalized the word TRUST in this column. I think we need a reminder that it is a TRUST which means we TRUSTED our elected officials to keep their promise when it was set up.
I am on my own here. I don’t pretend to speak for anyone other than myself and many of the very legislators that I admire and respect have varying opinions on this issue. I encourage you to have conversations before this issue itself is no longer relevant. I believe that the Healthcare TRUST is one of the best investments this State has ever made and I have been in the investment business long enough to know that.
Scott Reed, CIMA, AIFA, is CEO of Hardy Reed Capital Advisors in Tupelo.