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Lobbyist Money Help  

Questions of legality still surround MOHELA sale

April 22, 2006
By: Meghan Maskery
State Capital Bureau
Links: SB 1142, HB 1968, HB 1022 & SB 1256

JEFFERSON CITY - Legislators both in support and opposed to the sale of student loans to pay for various state projects have raised questions about whether the loan board can give money to the state legislature -- particularly if the money will be used for projects other student loans.

A key provision in a statute governing the college loan board in Section 173.425 provides "The proceeds of all bonds...shall not be considered to be part of the revenue of the state..., shall not be required to be deposited into the state treasury, and shall not be subject to appropriation by the General Assembly. The proceeds, fees, and revenue shall remain under the exclusive control and management of the authority..."

Wes Shoemyer, the Democratic representative from Clarence, has read that statute on the House floor and in a committee meeting to try to convince others that the state cannot use any profits from the sale of student loans.

"That's why our predecessors wrote these kind of statutes in here to keep us from raiding the kiddy jar." He added, "That money came from by and large poor and middle class families. Those are private dollars," Shoemyer said.

Another part of the statute states, "Student loan notes purchased or financed shall not be considered to be public property."

To Shoemyer the language clearly states that the sale will be challenged and the money will not be available for the projects the legislature finally agrees to fund.

"They'll have a lawsuit. Don't tell anyone to begin breaking ground yet," Shoemyer said of the proposed building projects that would be financed by the loan sale.

House Speaker Pro Tem Carl Bearden said he interprets the statute to only prohibit the state from forcing the Missouri Higher Education Loan Authority to hand over money. If MOHELA wants to give the state proceeds after voluntarily selling student loans, then the plan is legal.

"When it says, 'you're not able to do that.' We're not doing that. We're waiting upon a decision by the MOHELA board," said Bearden, R-St. Charles.

To preempt a possible legal challenge that would hold up the profits from the sale, Sen. Chuck Graham, D-Columbia, has a filed a bill that would establish a fund to accept the profits from the sale.

Graham's bill includes provisions specifying how the funds can be used. For example, the money could not pay for public debt under the bill.

That bill has yet to even to have committee hearing and the committee's chairman -- Sen. Gary Nodler, R-Joplin -- said he has no plans to schedule a hearing on the bill.

Nodler said the bill is unnecessary. He points to a time when MOHELA provided the state with funds for the Charles Gallagher Student Financial Assistance Program, which is distributed by the state's Higher Education Department.

"If its in question then we can't do whatever we've already done with the Gallagher scholarships," Nodler said.

To Nodler, the legal question is just an attempt to stop any sale of the loan authority's assets.

"There are those folks that from the beginning, often for partisan purposes, have tried to raise red herrings," Nodler said.

MOHELA has yet to take a formal, public position on the issue.

But at a March 10 meeting of the MOHELA board of directors, lawyers representing MOHELA said they could not guarantee the legality of the plan to sell student loans to fund the governor's initial proposal for higher education.

At an April 4 Senate hearing, MOHELA's interim director, Raymond H. Bayer, said he still could not definitely say the proposal is legal.

Bayer was unavailable for a direct interview on Thursday. Instead, the MOHELA office directed questions to a private public relations firm.

The firm, Vandiver Group, e-mailed back a response attributed to Bayer to the question as to whether the loan authority needed Graham's legislation to hand profits from its assets over to the state.

~~"That is a matter for the legislature and the Governor to decide." was the reply.

Lawyers from the Senate and the governor's office have already checked into the legality of the sale according to Senate Appropriations Committee Chairman, Chuck Gross.

Gross, R-St. Charles County, said, "The general consensus that I've heard is that it is legal and there's not any real concern about a legal challenge being successful."

In a related development, a proposal by Clint Zweifel, D-St. Louis County, to ensure MOHELA conducts an independent legal analysis of the plan was passed unanimously Thursday by a House committee with changes in wording.

The original proposal would have required actuarial and legal studies of the sale before it could happen and would give legislators the final say in whether MOHELA can sell half its assets to fund whatever projects are finally approved by the legislature.

Zweifel said the mandates were eliminated in the version that passed. Still, Zweifel is grateful that there will be further opportunities for legislators to discuss the issues surrounding the proposed sale as the bill makes it way onto the House floor.