Analysis: MOHELA Remains Cash Target

5 years 11 months 3 weeks ago Sunday, December 25 2011 Dec 25, 2011 Sunday, December 25, 2011 12:11:00 PM CST December 25, 2011 in News
Source: The Associated Press
By: David A. Lieb

JEFFERSON CITY (AP) - The idea was creative and controversial: Missouri could take money from its student loan authority to help finance the governor's agenda for higher education.

When the idea came from Republican Gov. Matt Blunt, it was denounced by then-Attorney General Jay Nixon, a Democrat with his own aspirations for the governor's office.

Now entering his fourth year as governor, Nixon is the one thinking of taking of money from the Missouri Higher Education Loan Authority to help finance higher education institutions. Perhaps it's no surprise that the idea has been just as controversial when floated by Nixon's administration as it was when he opposed it.

Whereas Blunt forged ahead with his plans to target the treasurers of MOHELA for a college construction boom - and ultimately was successful in enacting legislation - it remains to be seen whether Nixon actually will incorporate the latest idea into his State of the State address in January. If he does, it's likely that some of his own words will be used against him.

Nixon initially remained silent when Blunt outlined a plan in January 2006 to sell MOHELA for a projected $425 million in order to finance construction on college campuses, fund scholarships, endow professorships and commercialize university research. But when the MOHELA board endorsed a revised plan a few days later - offering to sell half its assets to generate $450 million over several years - Nixon quickly began raising concerns about the "troubling lack of transparency." He then sued MOHELA, claiming it violated the state's open meetings law in its rush to develop and approve an alternative to Blunt's plan.

Blunt's proposal got bogged down in the Legislature and court and underwent numerous revisions. As the MOHELA board prepared to vote on one of those drafts in September 2006, Nixon sent the agency a letter blasting the "ill-conceived" plan and suggesting it might be illegal for a variety of reasons.

Legislators ultimately passed a bill in May 2007 that directed MOHELA to pay $350 million to the state over several years to finance dozens of building projects at public colleges and universities. Nixon sent Blunt a letter urging him to veto it.

"Hundreds of millions of dollars are being raided from the state's trust fund for low-cost student loans, and the real needs and concerns of students and their parents have been ignored," Nixon wrote in a letter dated May 22, 2007. Nixon went to assert that "every penny" MOHELA has "should be used to benefit students in the form of low-cost loans." Yet legislation results in "the confiscation of MOHELA's assets," Nixon said at a later point in the letter.

Blunt disregarded Nixon's concerns, signed the bill into law, and traveled the state promoting it.

A few months later, MOHELA made an initial $230 million payment to the state. That money has helped repair and construct various buildings on college campuses. But it wasn't long before the loan agency encountered financial strains because of a national credit market crisis and changes in federal student loan policies. The MOHELA board decided in 2008 to exercise a clause in the new law that allowed it to skip its state payments if making them would put the agency at financial risk.

The student loan agency has continued to postpone its payments on Blunt's college construction plan. Since Nixon took office in January 2009, he has scuttled legislative attempts to direct money toward the building plan, often citing the tight state budget. Nixon has, nonetheless, tapped MOHELA to provide tens of millions of dollars to offset a portion of his budget cuts to college scholarship programs.

All that served as background for Nixon's latest idea, which leaked out in December after it was shared with some university officials. The idea - which Nixon's administration says is not firm enough to be a plan or proposal - would call for five of the state's largest universities to transfer $106 million from their reserves to the state so that Missouri could avoid making deep cuts to the core budgets for higher education institutions in the 2013 fiscal year. The university reserves would then be replenished over several years with money from MOHELA.

Nixon's budget director, Linda Luebbering, explained that the $106 million figure was intended to match the amount MOHELA already owes under Blunt's college construction plan. The money would instead be diverted to Nixon's university financing plan.

Nixon spokesman Sam Murphey said there was a significant difference between Blunt's plan and Nixon's idea. The implication was that Blunt's plan altered MOHELA's mission whereas Nixon's did not.

"This was one preliminary idea being discussed at the staff level to preserve base funding for colleges and universities while also maintaining funding (for) student scholarships," Murphey said. "That is a priority fully consistent with the purpose of MOHELA."

Ken Warren, a political science professor at Saint Louis University, says Nixon's idea to tap into MOHELA's money illustrates a couple of political realities.

One: "It's always been common for politicians to flip-flop," Warren said.

He cites the example of President Barack Obama's pledge as a candidate to close the Guantanamo Bay terrorist detention facility, contrasted with the fact that it remains open today, because Obama was unable to secure support for placing the suspected terrorists anywhere in the U.S.

That leads to Warren's second point: "It's often been said that there's a big difference between being a candidate and being the officeholder."

 

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