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BACKGROUND INFORMATION CONCERNING MOHELA SALE
James S. Cole, General Counsel
Last updated February 14, 2007
MOHELA is the Missouri Higher Education Loan Authority. It was created to make loans to college students at favorable interest rates. Its assets include a large portfolio of student loans that are now being paid back by the borrowers, most of whom have salaries obtained with the college degrees that MOHELA loans helped to finance. Just as a lender on a home mortgage loan may sell the loan to another lending institution, and the borrower will then send monthly payments to the new holder, the holder of these student loans (MOHELA) may be able to sell blocks of the loans to a willing buyer, and then the borrowers will make their payments to the new holder.
In January, 2006, Governor Blunt announced the idea of having MOHELA sell a large portion of its student loan portfolio to raise money for buildings and other capital projects at public colleges. He called his program the “Lewis and Clark Discovery Initiative.” A number of the capital projects would create or expand facilities that can be used for stem cell research. Unfortunately, the Governor does not distinguish between research using embryonic stem cells on one hand, in which young human beings at the blastocyst stage are killed in order to harvest their stem cells, and adult stem cells on the other hand, which can be obtained without harming human life.
Because at least a portion of the funds raised from a sale of MOHELA assets will be used for facilities in which to kill embryonic humans to harvest their stem cells, Missouri Right to Life and other pro-life organizations stand opposed to the Governor’s MOHELA sale.
Unlike the sale of mortgage loans by private lenders, the proposed sale of MOHELA loans runs into at least one legal problem: the statutes that established MOHELA do not say anything about selling the loans to other lenders. MOHELA may lack the power to make such a sale. In order to instill confidence in potential buyers that MOHELA has the right to sell blocks of student loans so that buyers can legally take them over, the Governor has found it prudent to ask the General Assembly to pass legislation that specifically grants MOHELA the power to sell its loans to private buyers.
The Governor’s plan contemplates that the proceeds of the MOHELA sale, in the amount of approximately $350,000,000.00, will be funneled through a state agency known as the Missouri Development Finance Board. Other mechanical details of the plan, such as its resolutions and the “cooperation agreement” between that Board, MOHELA, the Missouri Departmant of Economic Development, and the University of Missouri, need not be described in this paper. It is sufficient to note here that most of the MOHELA sale money will go to public colleges and universities for the capital projects approved for the “Lewis & Clark Discovery Initiative.” A relatively small amount, $15,000,000.00, is slated for the Missouri Technology Corporation “to attract and retain high technology companies and commercialize existing research already being conducted in our state.” In January, 2007, as the plan continued to draw opposition from several concerned bodies of citizens, including pro-life groups, the Governor expanded the beneficiaries of the sale to add certain federally-qualified health clinics.
The authorization to conduct the MOHELA sale is found in SB 389. The Governor continues to tweak the plan in order to win the support of a majority of legislators. The leadership of the majority party is solidly behind the Governor, but some of the troops are not so sure, and the opposition of pro-life citizens is causing much discomfort among rank-and-file legislators.
One of the Governor’s ploys to reduce pro-life opposition has been to add language to SB 389 that purports to exclude illegitimate projects from receiving funds. There are several problems with the exclusionary language, but one problem eclipses the rest: the approval of Amendment 2 by the voters in November, 2006. (Amendment 2 is now Article III, Section 38(d) of the Missouri Constitution, but for ease of reference, it will be called “Amendment 2” in the rest of this paper.)
In three places, Amendment 2 nullifies any attempt to deprive stem cell researchers of public money. In subsection 7, it is provided:
No state or local law, regulation, rule, charter, ordinance, or other governmental action shall (i) prevent, restrict, obstruct, or discourage any stem cell research or stem cell therapies and cures that are permitted by this section to be conducted or provided, or (ii) create disincentives for any person to engage in or otherwise associate with such research or therapies and cures.
An almost identical nullification is contained in subsection 2, subdiv. (7). Finally, in subsection 5, it is provided that no state or local governmental body or official shall eliminate, reduce, deny, or withhold any public funds provided or eligible to be provided to a person that (i) lawfully conducts stem cell research or provides stem cell therapies and cures, . . . but (ii) receives or is eligible to receive such public funds for purposes other than such stem cell-related activities, on account of, or otherwise for the purpose of creating disincentives for any person to engage in or otherwise associate with . . . such stem cell-related activities.
Now that Amendment 2 is part of the Missouri Constitution, the above provisions guarantee that no restrictive language that excludes certain stem cell projects from a laundry list of projects can stand. Citizens who read Amendment 2 for themselves will quickly realize that excluding buildings from the MOHELA sale is just a ploy. Pro-life citizens are not dupes.
A second attempt to limit the damage of the MOHELA sale was to add language to SB 389 providing, in essence, that MOHELA money could not go to stem cell research projects unless they are eligible for federal funding. That restriction not only runs aground on the same three subsections of Amendment 2 that have been described already, it is nullified by a fourth provision of Amendment 2.
One of the many misleading portions of Amendment 2 was a clause in subsection 2 that says (in the relevant portion), "any stem cell research permitted under federal law may be conducted in Missouri . . . subject to the requirements of federal law . . ." At first blush, this language suggests that the second addition to SB 389, limiting research to what is federally-funded, is enforceable. The language implies that whatever is not federally funded is not "permitted under federal law." However, as with so many other things in Amendment 2, there is a definition at the end of the Amendment that takes away the substance of what is said earlier in the Amendment.
In subsection 6 of Amendment 2, there is the following definition of the key phrase, "permitted under federal law":
(8) 'Permitted under federal law' means, as it relates to stem cell research and stem cell therapies and cures, any such research, therapies, and cures that are not prohibited under federal law from being conducted or provided, regardless of whether federal funds are made available for such activities.
Look closely at the last phrase, "regardless of whether federal funds are made available for such activities." It means that any restriction on federal funding does not count. It is only a restriction by federal law that is unconnected with funding that counts. Amendment 2 says that the restrictions on federal funding cannot be considered; what can be considered is only whether other federal law prohibits the activity in question. Since SB 389 refers only to limitations on federal funding, and Amendment 2 says such limitations cannot count as what is or is not “permitted under federal law," the limitation is void and unenforceable.
Yet a third attempt to rein in the use of MOHELA money was proposed on the floor of the Senate. In this attempt, it was stated that if the courts declare any relevant provision of the statute is null and void, then all the provisions that govern the MOHELA sale will be null and void. This restriction, like the others, fails to take into account the over-arching authority of Amendment 2 as a provision of the Constitution. The very clause that says the other parts of the bill would become null and void would constitute a restriction or limitation on funding for "stem cell research" under Amendment 2, and so it would be struck down and the deal would proceed.
A rough comparison may illustrate the point. In Missouri law, a will can say that anyone who challenges the will loses all inheritance rights under it. This is called an "in terrorem" clause. Missouri probate law has no overarching prohibition against such clauses, and the courts enforce them here. However, some other states refuse to allow their courts to enforce “in terrorem” clauses.
Amendment 2, in essence, is like the other states' probate laws. Its overarching nullifications of restrictions on funding effectively prohibit an "in terrorem" clause in connection with the allocation of money by the state. The courts will see that the "in terrorem" clause operates to keep money from institutions that would otherwise get it, and the courts will be compelled by Amendment 2 to strike down the "in terrorem" clause from SB 389 along with the other restrictions on the uses of MOHELA money. Amendment 2 binds the courts to hold the “in terrorem” clause unconstitutional for the same reasons as it invalidates the exclusion of certain building projects.
In addition to the constitutional problems raised by Amendment 2, many other serious flaws require pro-life opposition to the MOHELA sale as it is presently structured. Until there is a resolution of the constitutional problems, there is no need to prolong this background paper with several more pages describing the non-constitutional flaws.
As additional strategems are employed by the Governor and his allies to win support for the MOHELA sale, we encourage pro-life citizens to read the latest updates on the situation from Missouri Right to Life.