SEPTEMBER 3, 2009

PHEAA Wrongfully Collected $92 Million From Taxpayers

PHEAA is being sued, along with other student loan agencies, for taking advantage of a federal government loophole allowing them to wrongfully collect $92 million. In the 1980's, the federal government enacted a subsidy program guaranteeing a 9.5% return on a limited class of student loans. By reusing older loans and packaging them with new ones, PHEAA reaped millions in profits at the taxpayer's expense.

When confronted with this serious case of fraud, the Department of Education didn't even attempt to recover the funds. A 2007 settlement with Nelnet--the worst abuser of the scheme receiving more than $400 million in over payments--did not require the loan company to repay the federal government. It was left to a DOE researcher, Jon Oberg, to bring the suit on behalf of the federal government.

PHEAA was among the first agencies to employ the scheme--clearing the path for other agencies to follow. The lawsuit implies PHEAA relied on the authority of the Education Finance Council to justify their practices; this is disconcerting since the group has close ties with the Department of Education and Republican staff on the House Education Committee.

It's amazing that such flagrant abuse of the system was disregarded for so long. This is a perfect example of why state and federal governments should not be in the student loan business.

posted by ELIZABETH STELLE | 09:26 AM | 0 comment

FEBRUARY 18, 2009

Piccola Offers Alternative Plan for PA Higher Ed

State Sen. Jeff Piccola has a new proposal to offer additional grants directly to Pennsylvania students for higher education, and tie this funding to both schools' holding tuition costs down and to student maintained adequate academic performance. Here is the news release from Piccola's office and a story on the Patriot News website.

This proposal mirrors some of the reforms outlined in our Policy Brief on Pennsylvania higher education.  Our five reforms were:

1. Immediately halting all state higher education subsidies and making any increase contingent upon freezes in tuition costs and greater spending transparency for taxpayers.
2. Replacing direct state subsidies to universities with scholarship grants to students.
3. Holding students, colleges, and universities accountable for the taxpayer support they receive.
4. Re-focusing all state institutions on teaching, rather than research.
5. Considering a re-organization of state higher education, including the possibility of severing the taxpayers’ financial support to state, state-related, and state-aided universities. 

You can find our news release on the Piccola proposal here, and you should list to a recent program of The BOX on higher education reform.

posted by NATHAN BENEFIELD | 02:00 PM | 0 comment

AUGUST 24, 2008

Is PHEAA reformable?

The Pittsburgh Tribune-Review questions whether PHEAA can be reformed, as the Auditor General suggests, given that the legislators who dominate the PHEAA board don't think legislators should vote to reduce the power of legislators in PHEAA.

posted by NATHAN BENEFIELD | 02:16 PM | 0 comment

AUGUST 20, 2008

Phix PHEAA

Pennsylvania Auditor General Jack Wagner has released his audit of PHEAA, recommending among other things that PHEAA's board not be dominated by legislators (news release here).  Wagner does not go as far as he should, and suggest PHEAA should be fully privatized.

To shock of many, legislators on PHEAA's board defend having lots of legislators on PHEAA's board.  Of course, they can't say that it is because they likes the perks of office, but point to a bogus concern that "it might effect their tax exempt status" as though having legislators on the board is an IRS criteria for tax exemption, or that for-profit companies (like most of PHEAA's competitors) can't provide financial aid.

I didn't think I would have to point this out, but there are millions of nonprofit organizations across the country and in PA (including the Commonwealth Foundation), and only a handful have boards dominated by legislators.  Those that are dominated by legislators seem to occur all too often in PA, and between PHEAA, Mike Veon's BIG, and Vince Fumo's Citizens Alliance they have a pretty consistent record of pilfering taxpayer money to the benefit of their legislator-board. 

posted by NATHAN BENEFIELD | 09:40 AM | 4 comments

JULY 17, 2008

PHEAA Must Phace the Phacts.

The Board of Directors of PHEAA (Pennsylvania Higher Education Assistance Association) too umbrage with our highlighting that government agency's misuse and abuse of taxpayer dollars.  Our response is below:

July 16, 2008

Board of Directors
Pennsylvania Higher Education Assistance Agency
1200 North Seventh Street
Harrisburg, PA 170102-1444

Dear PHEAA Board of Directors:

Thank you for your letter dated July 7, 2008, in response to our informational postcard which referred to the past excesses and abuses at the Pennsylvania Higher Education Assistance Agency (PHEAA).

While we commend the new leadership at PHEAA for implementing reforms to reduce waste and curb the inappropriate use of public funds, I'm sure you'd agree that these changes would not have occurred without organizations like ours holding your agency accountable. I must also respectfully disagree with your implication that you needn't feel obligated to be held accountable with expenditures of PHEAA revenues because they are "NOT TAXPAYERS DOLLARS" (your emphasis, not mine).

While PHEAA likes to claim that its operations, salaries, bonuses, board retreats, and advertising campaigns are not paid for by taxpayers, the "business earnings" that pay for such activities are effectively public funds, a fact that former Rep. Elinor Z. Taylor and chairperson of PHEAA's Board of Directors, has acknowledged in the past. I've enclosed a commentary I wrote in May 2006 that elaborates on the problem of PHEAA's "split personality" in which the agency wants to operate like a private business one day, but then claim government agency protections the next.

The reality is that PHEAA is an agency of state government. Its board consists primarily of persons whose salaries are paid by taxpayers. PHEAA's employees are enrolled in the State Employees Retirement System--which is backed by the full faith and credit of the taxpayers. PHEAA is also exempt from local, state, and federal taxes. These are all benefits that no private entity enjoys. Therefore, as a public agency, PHEAA must he held accountable to the taxpayers, voters, and residents of this state, including how it spends its money.

As to lobbying expenses, I would also point out that our report, Government on a Diet--which referred to PHEAA's expenditures on lobbyists--was released in February, at which time multiple lobbying firms were under contract with PHEAA. In fact, PHEAA's most recent lobbyist expenditure/registration update with the Department of State (dated 4/30/2008) shows a continuing relationship with the lobbying firm of Stevens & Lee along with $30,000 in lobbyist communication expenditures and gifts during the first quarter of 2008.

Your claim that PHEAA has now eliminated all contracts with outside lobbyists is a positive step; however, we are concerned not just with "outside" lobbyists, but agency staffers acting in a lobbying capacity as well. Given that such action would be illegal at the federal level, and the preponderance of legislators serving on the board, I hope you have eliminated all lobbying expenditures.

Furthermore, I would contend that, while the reforms you have taken are a step in the right direction, you have not offered the type of reform PHEAA truly needs. PHEAA operations should be competitively bid to a private-sector operator. There is no reason for PHEAA to continue to be a function of state government, or for its board to continue to be dominated by members of the General Assembly. Our efforts to educate the public about waste at PHEAA and complaints about PHEAA performance all generate from the fact that PHEAA has served, at least historically, as a playground for legislators. Our fear is that although the excesses and abuses may have been discontinued for now, under your leadership, these accountability reforms will likely be short-lived.

Again, thank you for your letter and the opportunity to respond why we believe we must continue to hold government agencies and elected officials such as yourself accountable for your use of power and the public's money.

Sincerely yours,

Matthew J. Brouillette
President & CEO

Enclosure: PHEAA's Split Personality.

cc: Members of the General Assembly

posted by MATT BROUILLETTE | 01:43 PM | 0 comment

FEBRUARY 11, 2008

PHEAA must pay legal fees

The Commonwealth Court ruled that PHEAA must pay $48,000 in legal fees to the AP, WTAE TV, and the Patriot News for "wanton disregard in withholding public records":

Commonwealth Court Judge Doris Smith-Ribner says there's no question that the Pennsylvania Higher Education Assistance Authority acted willfully and disregarded the Right-to-Know Law in a battle over records pertaining to its lavish board retreats.

posted by NATHAN BENEFIELD | 11:11 AM | 0 comment

JANUARY 25, 2008

Vinsanity at PHEAA

Vince Fumo came to the defense of excesses at PHEAA, demaninding that the Auditor General stop auditing. Jan Murphy of the Patriot News has the story.

Fumo contends that Auditor General Jack Wagner is only motivating by politics, trying to garner a lot of publicity by investigating waste and corruption at PHEAA. In contrast, if Jack Wagner were simply following the mandates of his position, he would be ... investigating waste and corruption at PHEAA.

Matt Brouillette gets the punchline of the article,

"Only someone under a 139-count federal indictment for the misuse of public money could believe that PHEAA should be permitted to misuse public money," Brouillette said.

posted by NATHAN BENEFIELD | 09:26 AM | 0 comment