SPECIAL REPORT: The PHEAA Scandal

Since Jake Corman is my senator. He voted for the pay raise then tried to give it back. Then lost Perry county in his last bid for election... Time to resign!!!! I say NO more perks!!!!

Democracy Rising PA News

March 4, 2007 tim@democracyrisingpa.com

SPECIAL REPORT: The PHEAA Scandal
Background
Who's Responsible for This Outrage?
The Dirty Little Secret
The Official Response
The Unofficial Solution
Background
Harrisburg has yet another new scandal. It's been brewing for years, and its source is familiar: the Pennsylvania General Assembly.
It joins the list of scandals that, in just the last 20 months, has included:
" The pay raise and the repeal of the raise.
" The Supreme Court's resurrection of the pay raise for judges alone.
" The lame-duck enactment, without public knowledge or public hearings, of unlimited free alcohol for slots players.
" The secret deals that surrounded the election of the Speaker in January.
" The secret deal to appoint a former lawmaker as CEO of the Liquor Control Board.
" The revelation of $215 million in surplus legislative accounts.
" State Sen. Vincent Fumo's indictment on 139 counts.
" The bonus scandal now under investigation by Attorney General Tom Corbett.
The Pennsylvania Higher Education Assistance Agency (PHEAA) is a public agency that this year is receiving $526 million from taxpayers. Established in 1963, its original mission was to oversee grants and loans to college students.
Since then, it has branched out to manage student loans in many other states and recently has become the largest student loan agency for Caribbean countries. 2004 annual report (the most recent available on its web site) says, "We have a unique vision among our competitors in the student loan industry. With no corporate shareholders to consider, we use our earnings to provide the best possible programs and services to the higher education community while providing affordable access to education to student and families."
Apparently, PHEAA also thinks it has no taxpayers to consider. For years PHEAA has refused to release records of its spending. The Harrisburg Patriot-News, Pittsburgh's WTAE-TV and the Associated Press had to file a lawsuit to get access to the records. Last fall, Commonwealth Court ordered PHEAA to release the records. Two weeks ago, the state Supreme Court refused to hear PHEAA's appeal. Here is a summary of the dispute between PHEAA and the news media.
Which bring us to last week when PHEAA released a confusing flood of nearly 13,500 documents about its spending. A team of 30 PHEAA lawyers blacked out much of the information, making it impossible to know what some expenses really were, who was responsible, who benefitted and what was purchased. Worse, the information was released in no particular order and represented only about half of what was requested. Among the revelations so far: " A single dinner costing $1,734 for 15 people at an Arizona restaurant that advertises itself as a place "where price doesn't matter" " A tuxedo rental for a staff member " A business trip to a casino in the Dominican Republic " Expensive brunches, baseball games and golf outings to entertain clients " Chartered Lear jets for business trips
Among the information not released are records of some $885,000 spent on "retreats" for board members at lavish resorts in Pennsylvania, California, Virginia, Maryland and West Virginia. Read today's story by Patriot Capitol Bureau Chief Jan Murphy.
Who's Responsible for This Outrage? Speaking of the board of directors, these are the people who are legally responsible for PHEAA's spending and its refusal to release public documents. So who's on it?
Can anyone be surprised that 16 out of the 20 board members are current lawmakers and two more are former lawmakers? Here they are:
Rep. William Adolph, R-Delaware, board chairman - voted for the pay raise
Rep. Ron Buxton, D-Dauphin - voted for the pay raise
Former Sen. Doyle Corman, R-Centre - voted for the pay raise
Sen. Jake Corman, R-Centre - voted for the pay raise
Rep. Craig Dally, R-Northampton - voted against the pay raise
Sen. Jane Earll, R-Erie - voted against the pay raise
Sen. Vincent Fumo, D-Philadelphia - voted for the pay raise
Sen. Vincent Hughes, D-Philadelphia - voted for the pay raise
Sen. Sean Logan, D-Allegheny - voted against the pay raise
Rep. Sandra Major, R-Susquehanna - voted for the pay raise
Rep. Jennifer Mann, D-Lehigh - voted against the pay raise
Rep. Joe Markosek, D-Allegheny - voted for the pay raise
Sen. Michael O'Pake, D- Berks - voted for the pay raise
Former Rep. Roy Reinard, R-Bucks - retired before the pay raise
Sen. James Rhoades, R-Schuylkill - voted for the pay raise
Rep. James Roebuck, D-Philadelphia - voted for the pay raise
Rep. Jess Stairs, R-Westmoreland - voted against the pay raise
Sen. Robert Tomlinson, R-Bucks - voted against the pay raise
There are two other seats on the PHEAA board. One is reserved for the Secretary of Education. The other is currently vacant but was held by former Rep. Elinor Z. Taylor, R-Chester, who has the distinction of collecting the highest pension of any former lawmaker - $131,000 a year on top of a one-time withdrawal of $187,000 from the retirement system.
The Dirty Little Secret For years, appointment to the PHEAA board has been the plum of all appointments for lawmakers precisely because of the lavish retreats at resorts all over the country - and because they believed the records would never become public. Because of all the lawmakers on PHEAA's board, and because our General Assembly exempted itself from the state's open records law, PHEAA has argued that the spending records should not have to be released. This is the argument that failed at Commonwealth Court and the state Supreme Court.
Question: Do these lawmakers really have the expertise to direct an international agency that claims to manage more than $57 Billion in assets?
The Official Response PHEAA's President and CEO Dick Willey, himself a former legislative staffer, expressed outrage at the revelations. Of the $128 charge for a tuxedo rental, Willey told Patriot reporter Jan Murphy, "When I saw that, I was livid." He also claimed to be "pissed off" about other expenses.
This is something of an about-face for Willey, who has been on notice for more than a year and a half that there were questions about PHEAA spending. In the past, he has personally defended withholding the information from reporters and citizens. On nearly every occasion that reporters have exposed PHEAA's lavish spending, Willey has lashed out at the media instead of taking action to make the public agency more publicly accountable.
Willey also argues that the costs of board retreats are paid by earnings on investments, not by tax dollars. However, as advocates such as Common Cause's Barry Kauffman points out, the earnings used for board retreats and bonuses for PHEAA officials could be used to support the education of many more students, which is the reason PHEAA exists in the first place.
The Unofficial Solution It conspicuously violates the Constitution's separation of powers to have lawmakers serve on the board of executive agencies, much less constitute 80% of the board of an agency to which they appropriate hundreds of millions of tax dollars a year. It is a recipe for self-serving that has produced exactly the gravy train that the Constitution wisely seeks to prevent.
Every lawmaker and former lawmaker who sits on the PHEAA board should resign for violating the Constitution. If there is a law requiring lawmakers to serve on PHEAA's board, it should be amended to replace lawmakers with a combination of citizens and professionals from the financial services industry who will run PHEAA like a public business, not like a private country club.
Keep the faith! We can do this! Join us at www.democracyrisingpa.com.