PHEAA still a mess, Rendell says
The student-loan agency hasn't implemented reforms, he said, as expenses outstrip income.
HARRISBURG - Pennsylvania's student-loan agency is apparently not on sound financial footing and its leadership has failed to implement "far-reaching reforms" of its business practices, Gov. Rendell said in a letter to the group's board of directors.
Operating expenses at the Pennsylvania Higher Education Assistance Agency grew 70 percent faster than its operating revenue in the first nine months of the 2006-07 fiscal year, compared with the same period in the previous year, Rendell said in Tuesday's letter.
Additionally, PHEAA's operating income decreased by more than $1 million and net assets declined by $11.5 million during the same period, Rendell said, citing PHEAA's third-quarter financial report issued in March. Rendell also repeated his earlier criticisms of PHEAA's travel spending and more recent decision to give more than a half-million dollars in bonuses to top executives.
"It is clear that PHEAA has not done enough to streamline its operations and become more efficient on behalf of the taxpayers it serves," Rendell wrote.
Agency spokesman Keith New disputed Rendell's interpretation of the financial results. Among other things, he said, changes to federal rules concerning government subsidies paid to lenders cost PHEAA more than $29 million for nine months.
"That had nothing to do with efficiencies" in spending, New said. "It was totally beyond our control."
Additionally, the decline in net assets represents money that PHEAA spent on a range of student-aid programs, including grants, loan forgiveness and scholarships, New said.
"It's an accurate statement, but the conclusion being drawn is disingenuous," he said.
Sen. Sean Logan (D., Allegheny), vice chairman of PHEAA's board, has said officials are considering restructuring executive salaries and ending the bonuses. Neither he nor Rep. William Adolph Jr. (R., Delaware), the board's chairman, returned telephone calls yesterday seeking comment on Rendell's letter.
New also said the board had taken significant steps this year toward making the agency more accountable to the public, such as adopting stricter limitations on travel expenses and a code of ethics for its lending practices.
Rendell said he was working with other lawmakers who had expressed concerns about PHEAA's spending to explore privatizing the agency, or reorganizing its board and management structure.