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 funds 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 non-profit 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 amount of profits expended from the sale of $2.4 billion in student loans rests on an assumption. Bayer said, "The up front money appears to be substantially easier than the ongoing funds. 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 plan differs from both the governor's proposal for how to use the profits and the plan recently passed by the House.
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 funds 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 funds. The list of building construction projects includes several public universities.
"Is there a priority on this list of institutions or is this going to be a political free-for-all," Green said.
Earlier in the hearing, the chairman of the Senate's Appropriations committee and sponsor of the Senate bill, compared the situation to the time the legislature planned for money coming from a pending tobacco settlement.
"We didn't know what was going to appear down the line," Chuck Gross, R-St. Charles County.
Later he said, "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. 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."
The reason capital projects do not require full funding is they can take years to complete, Gross said.
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 students loans if the profits go solely toward funding higher education.
Still, Bayer said the Senate and House plans to use the profits for other uses do not mean the board won't approve the loan sale.
Bayer said, "We're still moving forward with preparing to fund the governor's Lewis and Clark Initiative" referring to Gov. Matt Blunt's initial proposal for spending the profits. Bayer said the board has not discussed the other plans for the funds and still does not know if the sale is even legal.
Representatives from state universities expressed support for the Senate's proposal at the hearing. UM system president Elson Floyd said the Senate and governor's plans are the university's best hope to get funding for building construction projects.
"We haven't had a capital appropriation since 2001," Floyd said.
He spoke in support even though the Senate bill provides $2 million less for a Health Sciences Research Center on the MU campus.
A provision in the bill would also restrict the type of research allowed in the new campus buildings. Anything involving embryonic stem research, human cloning or abortion would not be allowed.
Steve Knorr, a lobbyist of the UM system said in response to a senator's question about the affect of this restriction, "As far as recruiting faculty, if you put restrictions on research, they'll think twice about coming."
Also at he hearing, Greg Steinhoff, the director of the Economic Development Department, said the building construction proposals will benefit the entire state because they will create thousands of high-paying new jobs and in turn, generate revenue for the state over a long-term basis.