Nixon labels Blunt's latest plan for MOHELA as 'ill-conceived'

JEFFERSON CITY, Mo. -- Attorney General Jay Nixon on Wednesday urged Missouri's student loan authority to reject Gov. Matt Blunt's "latest ill-conceived" plan for a college building boom financed by the agency's money.

Nixon's sharply worded nine-page letter comes in advance of Friday's board meeting of the Missouri Higher Education Loan Authority, which is to consider -- and potentially vote -- on Blunt's plan.

Contrary to the assertions of attorneys hired by Blunt's administration and MOHELA, Nixon contends it would be illegal to carry out the proposed $350 million transfer of student loan proceeds to the Missouri Development Finance Board, which in turn would give the money to state colleges and universities.

Nixon notes the state and MOHELA could be sued to try to block the deal. But the attorney general's letter does not say whether he would file suit. A spokesman said Nixon had no comment Wednesday about that possibility.

Nixon did sue the student loan agency in February, claiming its development of and Jan. 31 vote supporting an earlier version of the plan was done in violation of Missouri's open meetings law.

The revised plan, released by Blunt's administration a little over a week ago, makes "only cosmetic changes" and would run afoul of a state law prohibiting the use of MOHELA assets for anything other than its purpose of ensuring students have access to loans, Nixon said. Instead, it seeks to "raid MOHELA's assets," he said.

"I strongly urge the board of MOHELA to reject this latest ill-conceived attempt to fundamentally alter the direction, purpose and focus of MOHELA from helping students cope with the increasingly high cost of higher education to harnessing those same students to the wheel to generate cash flow to fund capital improvements at the state's colleges and universities," Nixon wrote.

The board chairwoman of the student loan agency acknowledged receiving the letter Wednesday, but Karen Luebbert said she had not yet reviewed it.

"Given the legal issues surrounding this matter and the current lawsuit, it would be inappropriate for me to comment about this," said Luebbert, of Chesterfield.

MOHELA's executive director, Raymond Bayer Jr., also declined to comment.

But a Blunt spokesman blasted Nixon and claimed his legal concerns were not valid.

"Jay Nixon's latest rant proves beyond a shadow of a doubt that he is an enemy of higher education and of creating jobs for working families," said Blunt spokesman Spence Jackson.

Blunt also sent a letter Wednesday to Luebbert, thanking MOHELA for its "excellent cooperation" in developing an arrangement that benefits all parties. He attached a list of more than 60 colleges, health clinics, organizations and people who have spoken in favor of the effort in hope that it "will inspire you and all those involved to continue the excellent work."

Blunt's original plan, which failed in May in the legislature, called for MOHELA to transfer $450 million to the state. Bayer had written Blunt a letter in late April saying it was necessary for the Legislature to amend state law to specifically authorize the transfer of its money to the state under the plan. But that bill never passed.

Attorneys hired by Blunt's administration say the new plan avoids that legal concern because, in exchange for its money, MOHELA is getting benefits that could help carry out its mission of underwriting student loans.

Under the revised plan, the Department of Economic Development would pledge to provide MOHELA with $1.1 billion in tax-free bonding authority over 11 years; the University of Missouri would pledge to consider increasing its use of MOHELA for student loans; and the Blunt administration would pledge to support legislation granting MOHELA the power to originate loans, instead of only buying them on the secondary market.

Nixon said all those benefits are "illusory."

He notes that an opinion by Columbia Capital Management put the present 40-year value of the pledged bond allocation to MOHELA at $289 million. But the "glaring omission" of the analysis is that MOHELA could likely expect to receive some portion of the state's annual tax-exempt private activity bond allocation anyway. It has in the past, receiving an average of $160 million during the past three years, he said.

Additionally, Nixon said, state law only provides the Department of Economic Development the authority to distribute the current year's federal allocation of such bonds. And there is no guarantee that federal or state legislators will not change the bond allocation process.

Nixon said the prospect of increased MOHELA use by universities and a new law expanding its power to originate loans also provide no real benefit to the quasi-governmental student loan agency, because they are only pledges of support for actions -- with no guarantee of results.

---

On the Net:

MOHELA: http://www.mohela.org

Blunt: http://www.gov.mo.gov

Nixon: http://www.ago.mo.gov