HARRISBURG -- Gov. Ed Rendell wants to know whether the Pennsylvania Higher Education Assistance Agency's nonprofit foundation was created to allow a former PHEAA chief to double dip by collecting a state pension and a six-figure foundation salary.
"Since PHEAA is a quasi-state agency, was the foundation created to allow people to both receive pensions and salary? That's something I'd like to look at," Rendell said at a news conference on Wednesday.
The Tribune-Review reported yesterday that Michael Hershock, PHEAA's former CEO, is receiving a $222,173 state pension and $147,000 annual salary from the Pennsylvania Higher Education Foundation, which Hershock created before he left PHEAA in 2002.
A state retiree generally cannot receive a pension and collect a full-time state salary, said Robert Gentzel, a spokesman for the state retirement system. PHEAA, which was set up in 1963 to make student loans more accessible to college students, is considered a state agency but the foundation is not.
While questioning the origin of the foundation's salary arrangement for Hershock, Rendell said it is "absolutely legal."
Keith New, a foundation spokesman, said it was "created initially to help reverse the nursing shortage without having to consume limited taxpayer resources." Most of the foundation's resources are spent on nursing scholarships. He denied it was created to allow Hershock to receive a salary in retirement. Hershock worked for free the first year at the foundation, New says.
Rendell added his voice to calls from lawmakers who want to know more about the one-man, multimillion-dollar foundation that shares office space and some board members with PHEAA.
State Sen. Jane Orie, R-McCandless, said she was stunned to learn of Hershock's continued role at a PHEAA-related agency.
"I am outraged. I am offended," Orie said. "Again, it just renews my call for reform of PHEAA. It is incomprehensible for me to see this occur in a public agency and with a public servant. It's wrong."
New said Hershock, former state budget director under the late Gov. Robert P. Casey, has proven his worth by obtaining $15.8 million in private donations since the foundation was created in 2003. PHEAA cannot accept private money, he said.
The renewed calls for reform followed the announcement Tuesday that the beleaguered loan agency's current CEO, Richard Willey, will retire at the end of the year. Willey, 61, recently received a $180,000 bonus that brought his salary to $469,000.
PHEAA is controlled by a 20-member board, including 16 lawmakers and two former lawmakers. It has been under a cloud since disclosures that it spent $400,000 on a successful legal battle to keep secret records detailing $860,000 in spending on board members' junkets to posh resorts. Then came the executive board's approval last month of $570,000 in bonuses for Willey and several top assistants.
Orie has proposed legislation that would make the PHEAA chief subject to Senate confirmation and establish criteria to broaden membership on the board to include experts in business, finance and higher education.
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