Shortly after directors of Missouri's student loan agency voted to sell off much of the organization's assets to fund new buildings at state universities, a group of retired teachers protested quietly.
Susan Cunningham, a retired teacher from Pacific, Mo., said the decision by Gov. Matt Blunt's hand-picked directors could come back to haunt the governor. The issue is important to too many people: students are struggling under crushing debt loads and their parents who are forced to help out, she said.
Cunningham didn't buy the Blunt appointees' assertions that transferring $350 million from the student loan agency to the state would have no effect on students.
"Any organization that loses half its assets is not able to do as much," Cunningham said. "They are just blowing smoke. They think people are stupid. We know when the baloney is sliced too thin."
Blunt got the decision he wanted when the Missouri Higher Education Loan Authority board voted 4-2 Wednesday to turn over the assets to the state. But it came at a high cost: Eight months of controversy and the resignation of five of the seven board members since Blunt's plan was proposed in January.
All four of the board members who voted for the plan were appointed by Blunt this year, including two members appointed just last week. The fifth seat remains vacant.
With assets of about $5.4 billion, the loan authority will have to sell off about half that to raise the $350 million it would transfer to the state. A few facts about the deal from the loan authority's staff:
- The loan authority's net worth will drop from $237 million to about $100 million.
- Net worth as a percentage of loans outstanding will drop to between 1.75 and 2, which is far below the board's policy of maintaining a net worth ratio of at least 3 percent.
- The return on average assets will drop below 0.2 percent -- the minimum allowed by the board -- "for the next few years."
The two newest members, Tom Reeves and Randy Etter, said little during the board meeting. Afterward, Etter said he felt comfortable voting to authorize multibillion-dollar transactions after less than a week on the board because he had spent the better part of a day last week meeting with the loan authority’s management. He said he felt he had a good grasp of the loan authority’s operations.
“A month from now, I’d be no better off on this subject,” Etter said.
The dissenting board members -- John Greer and Karen Luebbert -- had a different view. Both noted that the deal had continually changed over the last eight months. Each version had been approved by the loan authority's lawyers and financial staff -- yet it always changed again whenever outsiders pointed out flaws.
Greer noted that management had assured board members that the loan authority could afford a previous proposal to give the state $450 million, then later conceded that it was not possible.
Luebbert said the University of Missouri has the highest tuition rates in the Big 12 athletic conference and Missouri lags behind other states in need-based student assistance. The loan authority can help address those issues and keep students from graduating with crushing debt loads.
“MoHELA won’t be the same,” Luebbert said after the meeting. “We won’t have the resources to provide for our most needy students.”
Next stop: The legislature. Attorney General Jay Nixon, who is likely to challenge Blunt in 2008, said he hoped the legislature would demand a clear and independent financial analysis of the plan’s affects on students and their families before approving the deal.
Rep. Clint Zweifel, a St. Louis County Democrat, is already calling for just such a study.
The loan authority board's action sets the stage for Blunt to move ahead on his building plan. But his advisers must have their fingers crossed that the loan authority deal doesn't unravel in the meantime and there is not crimp in the availability of college loans.
If either of those happens, the baloney could start looking might thin indeed.
Posted by Kit Wagar