This state has already been billed for too many closed-door, bloated payouts to higher education executives, thanks to the University of California trustees. With a still-rising $15.2 billion deficit estimated for California next year, the last thing taxpayers need is a $3 million to $4 million severance agreement for the seven top managers of EdFund.
Fortunately, a prompt and justifiably irate response by legislators from both parties put this boondoggle on indefinite hold. Instead, on Thursday the EdFund board opted to look into whether any action should be taken to retain key managers if the nonprofit is privatized — which is much closer to what it should have done in the first place.
A copy of the proposed EdFund severance package obtained by the press indicated that the seven top executives — who are paid between $171,000 and $339,000 yearly — were seeking two years of salaries, bonuses and health coverage if they departed when the nonprofit was sold. They also wanted tax reimbursements and $20,000 apiece for job-seeking costs.
EdFund is a state-operated nonprofit established in 1997 to administer California’s federal student-loan program. Its $27 billion portfolio insures loans for about half the state students receiving federal aid. If students default, EdFund takes charge of collection efforts and processes federal reimbursements for state expenditures.
Gov. Arnold Schwarzenegger and the legislative leadership agreed during last year’s budget negotiations to put EdFund up for sale to private investors, estimating that the price could go as high as $500 million. But just this Wednesday, the governor announced that any sale would be postponed until the 2009-10 fiscal year.
Assembly Judicial Committee Chairman Dave Jones, D-Sacramento, distributed a letter blasting the EdFund board for “the proposed size of this compensation package [which] is unreasonable on its face and therefore contrary to law.” Jones also castigated the board for holding closed-door meetings about the “excessive” severance despite warnings from attorneys of the Student Aid Commission and the Office of Legislative Counsel.
EdFund President Sam Kipp claimed the private severance negotiations were “a retention strategy, not an exit strategy” just intended to retain valuable managers throughout the nonprofit’s sale transition. That explanation seems to run remarkably backwards, considering that the package would reward executives for leaving, not for staying.
EdFund’s attempted golden parachute giveaway looks highly embarrassing when exposed to public awareness and the entire confidential procedure is a perfect example of why strongly enforced sunshine laws are so vital to good government.