Missouri is set to pay off the $600 million bond package approved in the 80s. A state representative says this is the perfect time for the state to issue another large bond package to pay for college capital improvements.
Rep. Chris Kelly (D-Columbia) draws on his experience in the legislature years ago to propose lawmakers send to the voters a $700 million bond package. Kelly says he settled on that number, because the state could handle that amount without a tax increase. Kelly proposes in HJR 32 to takes advantage of the $39 to 46 million allocated each year to pay off the current bond package. He envisions using that same funding stream to pay off the new bond package in 20 years, though the resolution gives the state 25 years to pay them off.
"The state will never be able to sell its bonds for a better price than it can right now and will never be able to get the work done more inexpensively than it can right now, because the contractors are hungry," says Kelly.
The bonds would pay for the top capital improvement priority on all four-year and two-year state college campuses. Kelly says it will make up for the failure of the Lewis and Clark Initiative to pay for college capital improvements. The sale of assets from the Missouri Higher Education Loan Authority has fallen far short of projections, causing many of the capital projects in the initiative to be delayed or scrapped.
The current bond package set to be paid off this year was approved by the legislature in 1982, during the second term of then-Gov. Bond. Voters approved the package. The state issued the bonds in 1983 and 1984.
Kelly sees other incentives for the legislature to act this session.
"We’ll get an excellent interest rate and the federal government will pick up 35% of our interest and that’s never happened before," Kelly says. "So, our timing, from a financial point of view, is wonderful."
Kelly explains that the $787 billion federal economic stimulus package approved by Congress contains a provision to help states pay off bonds. Kelly drafted his resolution prior to passage of the stimulus package. He says he only needs to make a bit of adjustment for the bonds to qualify for the federal subsidy.
Few legislators have faced such a large financial package. Kelly expects lawmakers to be skeptical of anything as large as he is proposing, but he believes that once the facts are laid out, they will favor the plan.
"They understand that the work at the various universities needs to get done. They understand we have a financial crisis. And they understand that we’ll never get the work done cheaper," Kelly says. "These are smart people and when you give them the facts, I think they’ll make rational decisions."