The Legislature’s Business and Economic Development Committee meets today on the possible sale of Maine Educational Loan Marketing Corp.’s $504 million student-loan portfolio to Nebraska-based National Education Loan Network. This transfer of a public resource from MELMAC, a state-sanctioned nonprofit, to NELnet, an out-of-state for-profit, comes from out of nowhere, presented as a done deal only weeks before a new law increasing state oversight is to take effect.

It is a shocking display of arrogance by the MELMAC board. It is a stunning rebuke to legislative intent. Given the past that serves as prelude, it is hardly a surprise.

Lawmakers spent an enormous amount of time and energy last session seeking answers to the question of to what extent a public resource – the portion of Maine’s federal allotment of tax-exempt bonds put into student loans – actually benefits the public. They learned that the complex world of college finance had in Maine become an impenetrable maze. That the staff and finances of MELMAC and its little sister, the quasi-state agency MELA, had become completely subsumed by Maine Education Services, a private nonprofit, through no-bid administrative and marketing contracts. That MES’ millions in revenues in excess of expenses (a nonprofit’s profits), after paying some very rewarding salaries (up to $250,000 for MES President Richard Pierce) and leasing some very pricey office space (One City Center, Portland), had found their way into for-profit ventures (Sylvan Learning Centers and the online Portland College).

The result of this learning experience was modest but worthwhile. A law that kicks in Aug. 11 requires fuller disclosure of loan terms to MES borrowers, a greater separation of the MES/MELMAC/MELA triumvirate, a majority of MELMAC board appointments made by the governor with legislative conformation.

The contract to sell MELMAC’s assets to NELnet was signed June 30; it became public knowledge only last week when MELMAC needed state agencies to sign off on some documents. This conversion of non-profit to for-profit was, Mr. Pierce now says, in the works for two to three years, yet was not reported to lawmakers and its completion just before the reforms were to be implemented were purely coincidental. Also by coincidence, Mr. Pierce spent some of those same two or three years issuing dire warnings of the bad things that would happen if for-profit Maine banks were given access to the tax-exempt bonds.

$30 million question

Lawmakers learned one more thing last session: No issue is so important that it can’t be muddled by accusations of partisan politics. The MES empire has strong Republican roots – Mr. Pierce is a former Republican legislator, as is MELMAC President Wendy Ault. Republican Rep. Jean Ginn Marvin, a member of the Business and Economic Development Committee that meets today, is a recent addition to the MES board. Republican Sen. Mary Small was put on the payroll to help develop the Portland College proposal while the reform legislation was before the Legislature and the online college was before the Education Committee on which she serves. Yet somehow, largely through an ugly public-relations campaign mounted by MES, legitimate public concerns about the use of a public resource were spun into personal attacks and accusations of partisan politics against Democratic lawmakers, particularly Sen. Carol Kontos and State Treasurer Dale McCormick.

Attorney General Andrew Ketterer filed suit Monday to block this transaction. Mr. Ketterer is a Democrat, and he now is being accused of such. Also on Monday, Gov. Angus King, an independent, rightly and strongly criticized the transaction, expressed a feeling of betrayal at the combination of timing and promises made, and conceded he removed himself from the debate last session because he unwisely bought the partisanship line.

What should the committee do today? First, it absolutely must reject the partisanship argument. This isn’t about Republicans and Democrats, it’s about money. Following it can be enlightening.

That $504 million portfolio wouldn’t go from Portland to Omaha nonstop. It first would go to Nevada, where nonprofit MELMAC was converted to for-profit MELMAC Inc. Then, on to Delaware, where MELMAC Inc. was converted to MELMAC LLC. Along the way, 1 percent of that half billion-dollar portfolio was shoved into a bankruptcy shield called MELMAC Enterprises. It was only after detours in two states famous for shielding corporations from public reporting and disclosure requirements that the money derived from Maine’s bond allocation would end up in Nebraska.

The carrot being offered by MELMAC is an education foundation it will create with the $30 million in proceeds from this deal. While education foundations are good, and while it is true that these proceeds on untaxed investments would revert to the IRS if not put into a foundation, the committee must ask whether this is the foundation Maine needs.

With two or three years to plan this conversion, the only concrete plan so far for the foundation is to fund scholarships of up to $1,000 for one student at every Maine high school. That’s $150,000 tops; it leaves a lot of money sloshing around. Ms. Ault, who will head this foundation, says the dozen or so MES staffers who will be out of work once their bread and butter moves to Nebraska will be offered positions at the foundation. That sounds like one staff- and payroll-heavy foundation.

In his work on the Blue Cross-Blue Shield/Anthem transaction, Mr. Ketterer established precedent for public oversight of the charitable foundations that result from nonprofit to for-profit conversions. Lawmakers must apply those principals in this case.

They also should use the three points of Mr. Ketterer’s lawsuit as a guide for their inquiries. The law that created MELMAC and MELA explicitly states their only function is to secure student loans – not to start for-profit businesses or even to fund foundations. The process by which that $30 million figure was derived needs scrutiny, partly to determine if it is fair, mostly to assess how much more affordable student loans would be without it. The AG’s concerns about conflicts of interest need no elaboration here.

These inquiries will take time. The committee, once it clearly asserts that partisanship is a figment of MES’ imagination, must take all the time it needs to get the answers Maine people deserve, even if it requires numerous meetings, hearings, work sessions, even the formation of study groups. The MELMAC board may be in a hurry to get this wrapped up, but no one else need be.