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 (see their letter to us here).

Our response (provided here) and pasted below was sent to all members of the General Assembly...



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 (see http://www.commonwealthfoundation.org/commentary/pheaa-s-split-personality)

cc: Members of the General Assembly