Blunt to make MOHELA deal subject to legislative approval

JEFFERSON CITY, Mo. -- Bowing to the pressure of a potential lawsuit, Gov. Matt Blunt agreed Monday to make his proposal for financing college buildings with student loan agency profits subject to legislative approval.

The concession comes as the Missouri Higher Education Loan Authority was preparing to vote Wednesday on Blunt's plan to pay $350 million to a state board, which would then pass the money on to public colleges and universities.

That vote can still occur, but for the deal to take effect, it also would require the approval of the legislature when its next regular session begins in January, Blunt spokesman Spence Jackson said Monday.

Blunt's Department of Economic Development director, Greg Steinhoff, sent a letter Monday to MOHELA proposing that the deal would first be approved and signed by the parties involved, then submitted to the Legislature.

As a reason for the contingency, Steinhoff cited warnings from Attorney General Jay Nixon that the plan was illegal and that any MOHELA board members voting for it could be sued in their individual capacities for allegedly violating their fiduciary duties.

Jackson said both current and recently departed MOHELA members had expressed concerns about getting sued. The decision to send the proposal to the Legislature was a reaction to that, he said.

"Sending the MOHELA proposal back to the General Assembly for consideration provides the necessary opportunity for public input," Nixon said in a written statement.

But Blunt's administration said it was only acceding to Nixon's threats, not to the validity of his concerns that the plan was illegal and poor public policy. Blunt's administration simply decided to protect MOHELA board members from "baseless political lawsuits by a narcissistic attorney general," Jackson said.

The change of plans was just the latest twist in a saga that began in January when Blunt initially proposed to sell the Chesterfield-based quasi-governmental student loan agency as a way to finance college buildings, scholarships, endowed professors and job development among biotechnology firms.

The MOHELA board responded with a plan to sell off much of its student loans for Blunt's plan but remain in business. The $450 million spending plan, however, failed to pass during the legislative session that ended in May. So Blunt's administration tried to pursue an arrangement that would exclude the Legislature.

Under a plan outlined in late August, MOHELA would pay $350 million over six years to the Missouri Development Finance Board, which would then distribute most of the money for college and university construction projects. A portion also would go to attract biotechnology business and spin off university research into commercial products.

In exchange, MOHELA was to receive $1.1 billion to $1.8 billion in tax-exempt bonding authority over 11 years from the Department of Economic Development; a pledge by the University of Missouri to consider greater use of MOHELA loans; and support from Blunt's administration for legislation expanding MOHELA's power to initiate loans.

But the MOHELA board delayed an expected vote Sept. 8 after Nixon's office relayed warnings of a likely lawsuit -- if not by Nixon himself, then from someone else. Nixon also alleged four of the MOHELA board members could have conflicts of interest, and three of them subsequently resigned. Blunt last week quickly appointed replacements for the two positions he controlled to ensure that Wednesday's vote could occur.

Blunt's plan had been revised as recently as Thursday. And MOHELA's executive director, Raymond Bayer Jr., had said earlier Monday that he didn't expect any additional changes to that plan before the board's vote.

Under that revision, MOHELA would have paid money more quickly than originally proposed to the Missouri Development Finance Board, which wouldn't have passed it on to colleges and universities until Jan. 1 -- or until a lawsuit was resolved, if one was filed.

Some skeptics of Blunt's plan welcomed word that it would be placed back before the Legislature.

"More opportunity for real discussion is better for students, and I think students really have been the missing link from most of this conversation that's been coming from the governor's office," said Rep. Clint Zweifel, D-Florissant.

By submitting the plan to the Legislature, it could get altered again.

But Blunt's spokesmen said he expected legislators to approve it with far less dissension than existed during the 2006 session. He noted that Senate President Pro Tem Michael Gibbons and House Speaker Rod Jetton agreed in August to the basic approach and spending list in the new plan. That agreement also calls for the Legislature to spend more state money on college scholarships and health clinics that serve the poor and uninsured.