Our Opinion: Sensible settlement suggestion
News Tribune editorial
Sunday, February 12, 2012
A proposal to assist higher education in Missouri with settlement money is both appropriate and reasonable.
The state’s share of a national mortgage settlement with five major financial companies will bring about $196 million to the state.
Attorney General Chris Koster has directed about $40.5 million to be used in the state budget, and Gov. Jay Nixon has announced he will add the money to his recommended appropriation for higher education.
As you may recall, Nixon in January proposed cutting higher education funding by 12.5 percent as part of his constitutional obligation to balance the budget.
If approved by lawmakers, the additional funding will ease the pain for the state’s colleges and universities.
For example, Lincoln University President Carolyn Mahoney calculates the previously announced 12.5 percent cut for the school will diminish to a 7.87 percent cut. Although the reduction remains painful, it certainly is less severe.
We also believe the appropriation is proper because the majority of the settlement money — $155.5 million — will compensate borrowers damaged by unfair mortgage practices.
Those borrowers are broken down into three categories, which include:
• One group, whose members already have lost their homes to foreclosure, will receive cash payments of about $2,000 each, totaling about $31 million.
• Another $38 million is directed for refinancing for borrowers current on their mortgages, but who are “underwater” because their homes are worth less than what is owed.
• The remaining $86.5 million will be used to reduce the principal for people who are behind on their mortgages but can afford to make payments at a reduced rate.
These allocations mark a departure from Missouri’s handling of the tobacco settlement, where all the money received has been diverted to general revenue rather than to reduce the damages caused by smoking.
In this case, settlement money is directed to both people and government.
The lion’s share of the funds compensate victims of unfair practices, while the state receives a payment based on penalties and economic harm.
Lawmakers will have the final say on how the money is spent, but alleviating cuts to higher education is a sensible suggestion.
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