MOHELA misses payment
The UM system is prepared to start projects without the payment.
April 15, 2008
The new Ellis Fischel Cancer Center wing in a surgical tower under construction at University Hospital would cost about $54 million to complete. Because the Missouri Higher Education Loan Authority skipped its quarterly payment to the state, Sen. Chuck Graham, D-Columbia, asked Gov. Matt Blunt to release funds to build the new facility at the cancer center.
A plan to sell assets from a state student loan agency and use the profit to fund building projects is taking heat after the agency put off part of a payment to the state, but officials from the agency said there’s nothing to worry about.
The plan sold assets of the Missouri Higher Education Loan Authority to fund higher education construction projects and arranges for the agency to make quarterly payments to the state.
After MOHELA only sent a part of the expected payment earlier this month, Sen. Chuck Graham, D-Columbia, sent a letter to Gov. Matt Blunt’s office asking him to immediately release funds to build a new facility for Ellis Fischel Cancer Center.
“The news of MOHELA’s decision Friday to skip its quarterly payment to Missouri’s universities and colleges for construction projects was disturbing to say the least,” Graham said in the letter. “I believe this decision and MOHELA’s overall financial distress calls for drastic changes in how the construction projects authorized in previous legislation are funded.”
The law authorizing the MOHELA asset sale allows the agency to put off its payments if making one would adversely affect “the services and benefits provided Missouri students or residents in the ordinary course of the authority’s business, the borrower benefit programs of the authority, or the economic viability of the authority.”
The agency is headed toward its first net loss in its history. A bill in the Missouri House would allow the agency to originate some student loans, which would avoid premiums the agency has to pay to lenders.
In the letter Graham said this measure might be “too little, too late.”
Nikki Krawitz, UM system vice president for finance and administration, said the state is scheduled to release funding for the Ellis Fischel project in fiscal year 2012. She said the university can start the project without state funding, and the funding doesn’t become available until after the project has incurred cost.
“We are prepared to absorb some of the cost until reimbursement is available, so it shouldn’t delay the project,” Krawitz said. “It’s not a question of the timing of the funding, but whether we get it.”
The law requires that the full $350 million to be distributed September 30, 2013. MOHELA released $230 million in September and $5 million by Dec. 31. It’s required to release another $5 million every quarter until September 2013.
MOHELA Executive Director Raymond Bayer said he’s confident that the agency would be able to fund the projects.
“My opinion is that MOHELA will be able to make all of the future payments,” he said.
MOHELA Business Development Director Will Shaffner said the agency’s governing board made a partial payment because of instability in the credit market. He said many larger organizations are evaluating their finances because of the market.
“All they’re doing is what’s allowed for them in the legislation,” he said.
He said the board would meet in four to eight weeks to re-evaluate making the entire payment.
The new cancer center, part of a surgical tower being built at University Hospital, would cost about $54 million, and the Lewis & Clark Discovery Initiative was slated to provide $31 million.
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