Funds for higher education capital improvement projects under review by Office of Administration

JEFFERSON CITY - More than 30 capital improvement projects funded by the 2007 sale of MOHELA's assets are being suspended or reviewed because of insufficient capital within the loan agency.

The Missouri Higher Education Loan Authority was slated to provide $350 million to support the Lewis and Clark Discovery Initiative Fund proposed by former Gov. Matt Blunt in January 2007. The Lewis and Clark fund would have financed 31 projects for 14 state universities and the Coordinating Board for Higher Education.

Of the 14 universities affected, the Columbia campus of the University of Missouri System is receiving the most program suspensions, which amounts to a total of $51.2 million in suspended funds. One of the projects affected is the Ellis Fischel Cancer Center, which was to receive $31.2 million to help finance its $50 million construction of a new facility located at MU.

Officials at five state universities received letters from Gov. Jay Nixon's Office of Administration on Wednesday. Written on Tuesday and printed on Commissioner Kelvin Simmons' letterhead, the letters explained that MOHELA has experienced "financial duress" and can no longer support the "projected funding for capital improvement projects."

"Please be advised that unless and until you receive express written authorization from this office to the contrary, any expenditure of funds on any of the foregoing 13 projects for any reason or by any entity will not be reimbursed or paid for with funds from the (Lewis and Clark fund) or any other state appropriations," Simmons said in a letter addressed to Nikki Krawitz, UM System vice president of finance and administration. "I will notify you as to whether there are sufficient funds in the (Lewis and Clark fund) to proceed."

Twelve of the 13 programs cited in Simmons' letter to Krawitz are associated with MU. According to the letter sent to Krawitz, funds for 10 of those programs are "currently under review by the state of Missouri, Office of Administration in cooperation with the Coordinating Board for Higher Education. A determination will be made on an expeditious basis as to whether the very limited funding available from the (Lewis and Clark fund) can support any of these projects."

In addition to Ellis Fischel, the remaining two programs whose funds are being suspended indefinitely are the McCredie Farm located in Callaway County and the Plant Science Research Center located in Mexico, Mo.

As of 6 p.m. Wednesday, Nixon's Office of Administration did not return calls, and MU spokesman Christian Basi said MU Chancellor Brady Deaton was not available for comment.

Ellis Fischel director Dr. Charles Caldwell said he, UM System President Gary Forsee and other university officials received notification of the fund suspensions Wednesday morning and did not have any prior notice.

"Given the current financial situation in the state and nationally, I suppose it's not too surprising that the state would have to re-examine its priorities," Caldwell said. "On the other hand, there had been no discussion of this previously, so in that context, I was a bit surprised."

Caldwell said he and Forsee were in active correspondence on Wednesday after learning of the suspended funds, and both hope to communicate with Nixon and the legislature. If the funds are terminated altogether, Caldwell said Ellis Fischel would have to seek alternative sources for financing the new facility. But the search for such alternative sources has not begun, Caldwell said.

"We really haven't had the opportunity yet to discuss this with the governor's office or the legislative delegation," Caldwell said. "It's not clear to me whether this is an irrevocable decision and it's permanent or whether this is a temporary withhold of the money until all the projects can be re-examined. So until we can have those discussions, it's difficult to know exactly what path to pursue."

Ellis Fischel is Missouri's only hospital dedicated primarily to cancer. The cancer center has been located on Business Loop 70 for 70 years, and its 19-year partnership with the MU Health Sciences Center has facilitated its planned relocation to MU next to University Hospital. Following its relocation, Ellis Fischel would apply to become a Comprehensive Cancer Center. There are 39 such centers qualified by their extensive research and funded through federal and non-federal sources, according to the National Cancer Institute.

The new facility would expand the center's potential for housing more equipment and technology, Caldwell said.

"This is a 70-year-old building, so in fact if we wanted to put some of the newer equipment in there that we would like to, there would not be room in terms of the heights of ceilings and the sizes of rooms," Caldwell said. "So what we're really looking at is the ability to build a new building that could accommodate future enhancements for years."

The Lewis and Clark fund took effect in fiscal year 2008. According to the Department of Economic Development, MOHELA's board agreed to finance the Lewis and Clark fund over six years, with $5 million quarterly payments that would transfer a total of $350 million to the state.

According to the plan's layout, the financing for the 31 projects under the Lewis and Clark fund would not go through the normal budget process, wherein the General Assembly must approve of its design and execution. A document addressing questions about the fund and released by the state Economic Development Department said "the transfer and expenditure of moneys by MOHELA, the Missouri Development Finance Board, the Missouri Health and Educational Facilities Authority and other similar boards are separate and distinct from the state treasury and therefore outside of the state's budget process."

But Rep. Chris Kelly, D-Columbia, said he has always opposed the Lewis and Clark fund on the basis of its legality and its using money designed for student loans and not appropriations for capital improvement projects.

"It was, from the beginning, legally suspect and governmentally foolish," Kelly said. "The ex-governor tried to do it in illegal ways. The MOHELA money was there for student loans. They went after MOHELA for political reasons and never got the job done. It was incredibly poorly handled."

Kelly also said he was not surprised by the suspension of funds.

"I knew that MOHELA scam was in a lot of trouble," Kelly said. "I didn't know it was in this much trouble. This is probably -- although nobody will admit this -- the death knell of the MOHELA deal, the whole Lewis and Clark fiasco. It died because the market killed it, and it was so structurally dysfunctional that it was actually never going to happen. This is just the end of a boondoggle."

When asked for his opinion on the extent of impact MU will face because of the fund suspension, Kelly said the money was never there and the Lewis and Clark fund would never have materialized because of the nature of the credit and loan process.

"It was always mythology," Kelly said. "It was never going to happen. It was always just pie in the sky. ... I think this is the beginning of the end for the whole MOHELA scam. I wish this were not true, because I want the buildings. But that's all this ever was, an empty promise."