Conflict of Interest – Part 4

The Absence of Independent Legal Counsel

We previously asserted that “The absence of independent legal counsel has enabled major conflicts of interest to exist, distort and, in some cases, defeat both the spirit and letter of Act 188 of 1982, as enacted.”  But such an absence was planned a long time ago when Act 188 was first drafted.  And what might the reason have been for that decision?  Simply put, it was in the Governor’s best interests.

Recall the dictionary definition of conflict of interest: “A conflict between the private interests and the official responsibilities of a person in a position of trust.” 

Recall also that a conflict of interest exists whether or not decisions are affected by a personal interest; a conflict of interest implies only the potential, not the likelihood, for bias.

Conflicts of interest must be avoided—if the public trust is to be preserved—because whenever such potential exists, individuals will turn it not only into a likelihood for bias but, in fact, a near certainty.

That the Office of General Counsel (OGC) still provides legal counsel—even now that PASSHE majority stakeholders pay more than 70% of the cost of education—raises concerns that the Governor’s interests will always supplant theirs whenever a legal matter comes up and the two sets of interests differ.

A specific source of suspicion is that a governor’s preference for lowest possible tuition rates may have more to do with his private interests than his official duties—the very definition of a conflict of interest.

For example, Act 188 does not call for the lowest possible PASSHE tuition.  It calls instead for the lowest possible “cost to the students”—i.e., the “bottom line,” and not the “sticker price.”  The practice by governors, and compliant BOG members, to focus on the lowest possible sticker price instead of the lowest possible bottom line suggests either that a) they haven’t read the law—which is very unlikely or, b) that governors may have a private interest in keeping the PASSHE “sticker price” as low as possible.  

There are at least three potential reasons for such a private interest by governors regardless of party:

First, tuition hikes at “public” universities typically cause negative media coverage as well as complaints directed at elected officials by students and their parents.  Elected officials concerned about their poll approval numbers might wish to keep the PASSHE annual tuition increases low for that very reason. 

Second, another possible motivation for governors of both parties to try to hold down PASSHE tuition rates has to do with the State’s longtime and largely unsuccessful efforts to slow down the rapidly increasing tuition rates at Pennsylvania’s state-related universities.  Recall that state-related universities receive substantial sums of State appropriation each year but, much to the annoyance of elected officials from both parties, set their tuition rates at levels which their politically appointed governing board members don’t like, but can’t block, because they hold only a minority (one-third) of the seats!

Such a strategy, although decidedly harmful to the PASSHE universities, is doomed to failure in terms of holding down state-related tuitions because there currently isn’t sufficient competitive overlap between the two “public” sectors to put a substantial brake on the tuition increases at state-related universities.

History shows that state-related tuitions, and average annual state-related tuition increases, are both double what they are for PASSHE.  And, except at the margins, the two sectors don’t currently compete sufficiently with each other for one sector to be seriously affected by the tuition policy of the other.

Third, a powerful motivation for governors from both parties to limit PASSHE tuition rate increases—having nothing to do with what’s best for PASSHE students or universities—is the “Pennsylvania 529 Guaranteed Savings Plan,” which is described as follows on the PA Treasury Department website:   

“Treasury invests all participant contributions through professional investment managers, who buy and sell stocks, bonds, and other investments with the specific goal of seeing that the growth meets or exceeds tuition increases.  Meeting this investment growth is the obligation of the GSP Fund.  This means that the Fund, not each account owner, assumes the risk for covering tuition inflation increases.”

A way for the Governor to hedge the State’s investing bets is “to put his finger on the scale” by holding down tuition rates and hoping to avoid big State losses on its 529 Plan.  But at a time when PASSHE continues to fail to deliver its statutory purpose, such a ploy is a private interest of the Governor that imposes a staggering burden on PASSHE’s 112,000 students and 700,000 alumni and is, by definition, still another egregious conflict of interest that is hurting both the PASSHE universities and the PASSHE students.