What are the potential consequences of securitization?
One of the biggest consequences of securitizing is the huge financial loss of future settlement payments. In fact, the amount that the state would receive as a one-time payment would be just pennies on the dollar to what the state would receive if it continues to receive its scheduled payments for the duration of the agreement. In many of the states and counties who’ve securitized their settlement funds, the money the state receives is minimal. For example, in Washington State, projections used by proponents of securitization showed that the state would receive, at best, less than 38 cents on the dollars– with returns of only 25 to 30 cents per dollar more likely, according to the state’s director of financial management (CTFK, 2002). Even more troubling is what occurs to states that securitize in order to address budget deficits. At least five of the eight states that have done so have had their credit ratings lowered as a result, which forces the state to pay higher interest rates o
