March 16, 2009

Lindsey says state college tuition program 'troubled'

STAFF REPORTS

Last week over 48,000 families that participate in the Prepaid Affordable College Tuition (PACT) program found out they don't have the pact they may have thought they had with the state of Alabama.

The program, created in 1989, lets people pay a fixed amount when a child is young in anticipation of having his or her tuition and fees at an in-state university paid when they graduate high school.

But the program's assets have dropped by almost 50 percent since September 2007, from $899 million to $463 million. Later this month, State Treasurer Kay Ivey and the 10-member PACT board will hold a public meeting to decide what to do about the massive shortfall.

State Rep. Richard Lindsey, D-Centre, released a statement Friday explaining why the money parents have been paying into the program, which invests heavily in the stock market, is not guaranteed.

“Alabama is one of three states that offers no government backing at all, because our state constitution prevents taking on such liability,” Lindsey said.

Lindsey said one reason the plan has gotten into trouble is that college costs have increased steeply in the decades since the plan was created.

“Back in 1990, the buy-in cost was around $5,100,” he said. “Today, it is up to $25,000.”

But Lindsey also admitted there are questions about how competently the program has been managed – especially since the economy has taken a turn for the worse.

“The Retirement Systems of Alabama, the pension fund for teachers and state employees, has lost 23 percent in the same time frame,” Lindsey said. “A tough loss, for sure, but nowhere near the catastrophic loss suffered by the PACT program.”

Lindsey said state lawmakers will watch the March 24 meeting carefully but plan to wait for recommendations from Ivey and the board members before considering legislative solutions to the problem.

“There is little doubt the PACT system is troubled,” Lindsey said. “The economic crisis has put so much of the future into question, but the last thing anyone wants is for the current difficulties to rob the young of a better future.”