Tuesday, September 26, 2006

Blunt opts for new plan

The governor blames the attorney general for foiling a proposal to fund a building boom.
By KIT WAGAR
The Star’s Jefferson City correspondent


With the specter of lawsuits hovering over the deal, Gov. Matt Blunt on Monday dropped his effort to force the partial sale of Missouri’s student loan agency.

Blunt’s office said he would support a new plan that would ask the legislature to approve the transfer of $350 million from the independent student loan authority to the state to finance a building boom at state universities.

The decision was a sharp about-face by Blunt, who has insisted for eight months that his plan to go it alone and push the deal through the board of the Missouri Higher Education Loan Authority was legal and financially sound.

Blunt’s spokesman, Spence Jackson, said the change of heart was prompted by the possibility of board members balking at approving the latest deal. Their reluctance stemmed from concern that they would be sued by Attorney General Jay Nixon or others, Jackson said.
Nixon had warned board members in a Sept. 6 letter that state law required the loan authority’s assets to be used only to help students obtain low-cost college loans. His staff also warned board members that they could be held liable for violating their fiduciary duty if they took action not in the loan authority’s interest.

In announcing his reversal, Blunt sounded a defiant tone, blaming Nixon for foiling his plan. He called Nixon’s objections politically motivated, reckless and irresponsible.
Jackson went even further, saying Nixon’s “narcissistic obsession with legal threats has board members rightly in fear of his abuse of office.”

In a low-key statement, Nixon emphasized his twin demands: public participation in any divestiture of loan authority assets and a comprehensive analysis of any proposal to ensure that the plan is legal and would not leave the loan authority bankrupt.

“Sending the MoHELA proposal back to the General Assembly for consideration provides the necessary opportunity for public input,” Nixon said. “It is essential that the legislature also demand the analysis that was promised on the impact of this deal on Missouri families’ access to higher education.”

Blunt’s plan has gone through a half-dozen versions in efforts to answer Nixon’s complaints that the plan could raise the cost of student loans, that it represented an illegal transfer of a nonprofit agency’s assets and that it could bankrupt the loan authority.

Blunt’s latest plan attempted to address the financial concerns by shrinking the amount of money the loan authority would transfer. The legal concerns were addressed by calling the transfer a “cooperation agreement” among state agencies rather than a gift to the state.
But the latest plan has been unraveling slowly ever since Blunt unveiled it Aug. 28. Details in the agreement kept changing, and Nixon again criticized the way the plan was developed without public comment.

The plan was scheduled to be approved by the loan authority’s board Sept. 8. But it was pushed back to Sept. 27 after several board members expressed concerns about the possibility their vote could violate their duty to the loan authority.

Three board members abruptly resigned last week. Blunt replaced them, but it put the new members in the position of voting on a multibillion-dollar transaction after being on the board less than a week.

Greg Steinhoff, director of Missouri’s Economic Development Department, said the new plan makes the cooperation agreement effective only upon approval of the legislature. Lawmakers would grant approval by changing state law to expand the loan authority’s mandate to include the payments required under the new plan.

That is the course that Nixon had recommended since early this year. But Blunt administration officials insisted that their change of direction was not an acknowledgment that Nixon was right. Such a move would simply insulate board members from unfounded accusations that they had violated their duty, they said.

“It’s an acknowledgment that Nixon’s bullying tactics scared some board members, and we are taking action to protect them against a school-yard bully,” Jackson said.

To reach Kit Wagar, call (816) 234-4440 or send e-mail to kwagar@kcstar.com.