Two plans would divert money from higher education.
JEFFERSON CITY — Legislative wrangling over how to spend the $450 million expected from the sale of college loans continues to raise questions over whether the money will even be available.
Allan Purdy, one of the founders of the state’s loan authority and a member of the board of directors for 22 years, said the nonprofit organization is not a cash cow.
“There is not a basket of golden eggs in Chesterfield,” Purdy said, referring to the city where the Missouri Higher Education Loan Authority has its headquarters.
Purdy told the Senate Appropriations Committee on Tuesday to keep in mind while making plans for the profits that only $255 million from the proposed sale will be available during the first year. The rest of the $450 million will come in quarterly $15 million installments until the year 2011. He said changes in the economy, such as fluctuations in interest rates, could affect the plan.
Raymond Bayer Jr., interim executive director of MOHELA, agreed that the amount of profits generated by the sale of $2.4 billion in student loans rests on an assumption.
“The upfront money appears to be substantially easier than the ongoing funds,” Bayer said. “The plan was put together based on assumptions of continued growth.”
Purdy and Bayer testified at the hearing where legislators debated a third plan for the use of the profits expected from the student loan sale.
The Senate bill would put about $325 million toward higher education, most of which would go toward building construction, and about $125 million toward health care initiatives.
Sen. Tim Green, D-St. Louis County, expressed concern about planning to use money that might never make it to the legislature’s coffers. Green said the committee needs to make a priority list to determine who would get first dibs on the money.
“It’s not uncommon in a capital bill for us to have more dollars worth of projects than we expect to have in income in the first year,” said Sen. Chuck Gross, R-St. Charles County. “We can weigh in on what priority we want those projects to be accomplished. I’m open to ideas on doing that, but we’re not at that point yet.”
Both the Senate plan to fund health care and the House plan to repay debt go against a resolution adopted March 10 by the MOHELA board of directors that they will only support the sale of student loans if the profits go solely toward funding higher education.
Bayer said even though the Senate and House plan to use the profits for other uses, it does not mean the board won’t approve the loan sale.
Bayer said the board is still moving forward with Gov. Matt Blunt’s initial proposal for spending the profits but has not discussed the other plans for the funds and still does not know if the sale is even legal.