1. Selling Assets of Missouri’s Secondary Market - The “MOHELA Plan” Paul Wagner Deputy Commissioner Missouri Department of Higher Education

2. What is MOHELA? ► Missouri Higher Education Loan Authority - created by statute in 1981. ► Core Purpose – to purchase federally guaranteed student loans from lenders to provide liquidity and specialized service. ► MOHELA then services those loans through the repayment period. ► MOHELA is one of the largest non-profit secondary markets in the country, annually purchasing over $1.5 billion in student loans.

3. What was the Governor’s Original Plan?   In January 2006 the Governor announces a plan to sell MOHELA for an estimated $425 million.   The money would be used for a research and economic development-focused construction plan called the Lewis and Clark Discovery Initiative.   The vast majority of this funding would flow to colleges and universities for research buildings, business incubators, and other campus construction projects.

4. What was MOHELA’s response?   The Board responded by proposing the sale of approximately half of its portfolio to generate an estimated $450 million.   Three board members resign in protest, chair resigns in protest, the Governor appoints replacements.   The executive director is fired.   Several other board members resign due to conflict of interest concerns, the Governor appoints replacements.

5. What were cited as the benefits? ► Unique opportunity to refocus Missouri’s economy on life science research and address long-standing capital needs in higher education  Large new life science research buildings on the UM- Columbia and UM-Kansas City campuses  Several other major construction projects on university campuses  Several regional business incubators to assist in commercializing research  Establishment of the Missouri Technology Corporation to recruit and support fledgling high-tech companies

6. What were the main objections? ► ► The sale would threaten MOHELA’s existence which would jeopardize students’ access to low cost student loans. ► ► MOHELA’s authorizing statute did not allow for spending on capital projects, etc. ► ► The Governor’s plan did not directly benefit students. ► ► Community colleges and many Missouri private institutions use MOHELA, but none would benefit from the sale. ► ► Political geography - most of the money went to “Democratic” areas of the state (KC, St. Louis, Columbia) when the Governor and both legislative majorities are Republican.

7. The End of the 2006 Session ► ► The legislature did not pass the Governor’s proposed spending plan   The spending bill was approved by both chambers, but final approval was procedurally linked to a separate House bill to limit appropriations to public universities unless scholarship appropriations increased to certain levels.   That separate proposal did not have widespread support, and both failed.

8. What Happened Between 2006 & 2007? ► ► Agreements on other spending helps shore up legislative support   $40 million for FQHCs   $45 million for scholarships ► ► Voters pass Amendment 2   Legislature may not restrict stem cell research beyond federal restrictions   Hopes and reaction of Pro-Life groups

9. Impact of Amendment 2 ► ► Staunch opposition to MOHELA plan from Missouri Right to Life and the Catholic Conference ► ► Any building could be used for stem cell research, even if not currently designed for that. ► ► Research buildings and several others replaced by renovations, geographically dispersed agriculture conference facilities, community college maintenance and repair. ► ► University of Missouri pledges to not conduct stem cell research in “MOHELA” buildings. ► ► Collapse of Democratic support

10. The 2007 Session - SB 389 ► SB 389, a sweeping higher education omnibus bill includes:  Statutory changes to MOHELA’s authorizing statutes (protection for the Board)  Establishment of the Lewis and Clark Discovery Fund  A schedule of transfers from MOHELA to the fund totaling $350m ► The revised spending bill for the projects is introduced separately. ► Senate Democrats filibuster SB 389, objecting to several provisions. ► The filibuster is ended by a rarely used tactic, large projects in Kansas City and Columbia are removed. ► SB 389 passes as does related appropriations bills.

11. Where are we now? ► SB 389 to take effect on August 28, 2007 ► Initial transfer of $230 million from MOHELA into the fund to be made by September 15 th (then $5 million quarterly to September 2013) ► Governor has pledged to restore UM-Kansas City and UM-Columbia projects

12. Almost 2 years in, still a long way to go? ► Challenges with long-term cash flow regarding construction projects ► August 9 th – class action lawsuit filed on behalf of borrowers seeking to immediately prevent the cash transfers and any spending