Mar 9, 2007 By Alison Hawkes For The 4 min read

HARRISBURG – The state’s student loan agency is developing a tighter policy on travel reimbursements in the wake of a flap over its spending, but a critical sideshow remains about their role as a public organization competing against private industry. The Pennsylvania Higher Education Assistance Agency (PHEAA) has justified what many would consider lavish spending by saying the costs are necessary to court clients in the cut-throat world of college student loans.

The problem, however, is that a public agency’s spending on Lear jet trips, fancy resorts and dinners in the Caribbean, and tuxedo rentals doesn’t sit well with a public struggling to afford increasingly higher tuition costs. A new spirit of reform in Harrisburg is also sparking a backlash against such spending and the secrecy surrounding it.

PHEAA’s 19-member board, comprised almost entirely of current and former lawmakers, is vowing belt-tightening. Sen. Tommy Tomlinson, a Bucks County Republican and PHEAA board member, said Thursday that board members dropped the ball on oversight and would now strive to correct that.

“I was shocked. I didn’t realize the extent of it,” Tomlinson said of the spending. “Have we stepped out of line? I’m here to say yes. I let this get away from us. I was not paying attention, other members weren’t paying attention. We were focused on our successes.”

PHEAA’s $261 million operating budget is self-funded through serving as a student loan guarantor and servicer in Pennsylvania and around the nation. But the agency also receives $500 million a year in state tax dollars to give grants and subsidies to in-state students.

Gov. Ed Rendell, who has been critical of the agency in the past, this week called for a “total housecleaning” of the agency “if PHEAA is going to remain in existence.”

Two years ago competitor Sallie Mae offered $1 billion to the state to buy PHEAA. Though the offer has expired, some are saying the idea of selling or privatizing the agency is worth reconsidering, given the state of confusion in the agency about its public role.

“What’s the justification for this being a public agency rather than a private competitor?” said Nate Benefield, director of policy research at the Commonwealth Foundation, a conservative think tank. “The governor has come out and said it needs to clean house. We hope he’s looking at all the options and possibilities of making PHEAA a private entity rather than a public agency. That’s driven by the fact that what’s going is unbecoming of a public agency.”

For now, PHEAA has said it’s moving towards a stricter travel reimbursement policy, particularly in the area of client entertainment. The existing seven-page employee travel policy prohibits reimbursement of all sorts of personal expenditures, including shoe shines, dry cleaning, movie rentals, and alcohol.

PHEAA Spokesman Keith New said a balance must be struck when considering expenses related to clients.

“Could that dinner have been made at the Olive Garden? Perhaps,” he said. “But it should not jeopardize millions of dollars.”

Tomlinson, who chairs the executive committee that’s drafting a new travel policy, said board members would be included too.

PHEAA discontinued board conference retreats after news reports two years ago of trips to lavish resorts costing nearly a million dollars over a five-year period.

Tomlinson said he’d attended some retreats in states surrounding Pennsylvania, which he called “very nice” and valuable for PHEAA’s business. He said they included full morning seminars and planning sessions, and dinners “pushing business” with clients.

Nevertheless, he said the agency needs to apply some restraint. He couldn’t provide specifics yet on what kinds of spending should be eliminated in a new travel policy.

“I was on some of those trips and thought they were valuable but I really believe on some of the staff things we’ve got to tighten it and have a new policy,” he said.

As to selling or privatizing PHEAA, Tomlinson said he’s not heard such discussion of late, but is not against the idea if the price and conditions were right to ensure Pennsylvania students are not harmed.

“We’re happy to entertain it,” he said “We’d be foolish not to look at other possibilities.”

Alison Hawkes can be reached at 717-705-6330 or begin ahawkes@calkins-media.com ahawkes@calkins-media.com end