According to the Sacramento Bee (May 13, 2008, “EdFund executives seek at least $3 million in severance”), “Seven members of EdFund’s executive staff could each receive two years’ worth of salaries, bonuses and medical coverage.” The high-ranking officials “would be entitled to as much as $20,000 each to help them find new jobs. EdFund would also be on the hook for any “golden parachute tax” the lucky few “would have to pay the state and federal governments.”
EdFund’s golden parachutes will undoubtedly undermine Governor Schwarzenegger’s attempt to sell the nonprofit agency for cash to decrease California’s multi-billion dollar budget deficit. Currently, the plan is to “sell the nonprofit public benefit corporation for $500 million [to private investors], half of what the governor was hoping [for].”
Ironically, this will not be the first time EdFund has cost Californians millions of wasted dollars. “The California Student Aid Commission voted in 2005 to oust six of EdFund’s 13 board members. A 2006 audit found that management problems resulted in a loss of $24 million in federal funding when a contract negotiation lapsed.” The seven executives who survived that embarrassing and costly debacle are now eligible for EdFund’s latest fiscal disaster – irresponsible golden parachutes.
The lucky seven are: Sam Kipp, president; Martin Scanlon, chief financial officer; and vice presidents Therese Bickler, loan operations; Len Hyde, default management; Diane Manning, audit services; Patrick Pendleton, information technology; and David Reid, legal services.” Kipp, who “received an annual salary and bonus of $338,951 in 2006-07”, stands to walk away with close to $750,000 in total benefits and lump sums.
While Kipp and his associates hope their internally devised severance package will float off unnoticed, some are beginning to raise questions. Sen. Bob Margett (R-29) has been highly critical of EdFund’s golden parachutes, saying the package smelled of “cronyism.”
“I can understand if they were merging a corporation with another,” Margett said, “but we are servants of the people. That doesn’t mean we take from the people.”
Others even fear that the plan would “hurt EdFund’s efforts to assist schools with loan processing and help delinquent borrowers put their loans back in order.”
“The board should carefully consider the impact of the proposed severance package on EdFund’s student financial aid programs,” said Emily Rusch of the California Public Interest Research Group. “Especially in light of rising tuition and textbook costs, California should be striving to maximize financial support for the students who depend on it.”
California can no longer bear the burden of such blatant fiscal irresponsibility. EdFund, in particular, has dabbled in what Senator Margett correctly identified as cronyism and has continued a long-standing tradition of wasteful spending and mismanagement. Californians deserve protection from state employees who treat their hard-earned dollars like golden parachutes.
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