House Democratic leader drops support of Blunt's college plan

JEFFERSON CITY, Mo. -- The top House Democrat dropped his support Monday for Gov. Matt Blunt's plan to finance a college building boom with student loan agency money, citing recent concerns raised by a financial analyst.

Blunt's proposal would take $350 million over six years from the Missouri Higher Education Loan Authority to finance building projects at nearly all of Missouri's public colleges and universities. In exchange, MOHELA would receive a 10-year, $1 billion pledge of tax-exempt bonding power from the state, which would allow it to replenish its losses through new loans.

House Minority Leader Jeff Harris of Columbia had been one of the few Democrats to publicly support the plan, which includes new facilities for the University of Missouri-Columbia.

But Harris said in a letter to the Republican governor that he longer backs the sale of MOHELA loans to finance the buildings because of concerns the plan could jeopardize the quasi-governmental agency's ability to continue providing low-interest loans.

Harris cites a recommendation last week by Liscarnan Solutions LLC that MOHELA take no further financial action on the plan until the effects of proposed federal changes on student loan interest rates and fees are known.

Liscarnan Solutions said the federal uncertainty calls into question its November conclusion that MOHELA should be able to make the state payments without jeopardizing its financial health, its credit rating or its current discounts and loan forgiveness programs for Missouri students.

No guarantees for future

MOHELA's executive director, Raymond Bayer Jr., has said the agency should have no trouble making its initial $210 million in payments. Bayer notes that an agreement between MOHELA and Blunt's administration already allows the agency to cancel any of its 24 subsequent quarterly payments of $5.8 million if MOHELA determines they are not financially feasible.

Even if changes in federal loan policies do not reduce MOHELA's profitability this year, Harris said there are no guarantees for the future.

"The whole initiative rests on a precarious foundation if it depends upon no changes being made to federal law for the next 11 years," Harris wrote in his letter to Blunt. "That is a risk we should not take."

But Blunt spokesman Rich Chrismer said there was no need to back away from the governor's plan because of the federal proposals.

"If we responded to every possibility or suggested change in Washington, D.C., we'd be paralyzed in Jefferson City on everything from education to health care to transportation," Chrismer said Monday night.

Harris suggested that if the building projects are to be funded, the money should instead come from general state revenues -- either as part of next year's budget or spread over multiple years.

Senate Democrats have proposed another alternative -- a requirement that MOHELA transfer 1.5 percent of its assets to the state annually, which currently would amount to about $87 million. A portion of that money would replace existing state revenues going to scholarships, freeing up state money to repay bonds they propose to issue for the buildings.

Some Republican lawmakers also are opposing Blunt's plan because of concerns the buildings could be used for embryonic stem cell research.

Although fellow Republicans control the Legislature, Blunt has said it's unlikely the plan can pass unless some Senate Democrats vote for it.