— Press-Register, Mobile, on the state’s PACT:
The state’s Prepaid Affordable College Tuition plan was a beautiful thing when it was introduced two decades ago. Families could buy into the program and be assured that their children’s in-state college tuition and fees would be covered in the future.
At the time, no one could have foreseen the events that would bring the program to its knees 20 years later: an unlikely combination of skyrocketing tuition and a crashing investment market. Estimates now say that PACT could go broke in three years.
However, action by state lawmakers may save the ailing program, and it’s worth trying. No one wants to pull the plug and refund families’ money when the long-term goal is to send more Alabamians to college.
Twice in the past, it looked as though PACT’s future had been saved — first when the Legislature approved a bailout in 2010 (which wasn’t enough), and again when a settlement in a lawsuit capped benefits at 2010 rates, requiring families to pay the difference.
But hopes have been dashed. The state Supreme Court threw out the settlement, saying it violated the terms of the legislative bailout from 2010.
This is where action by the Legislature comes in. Supporters of the PACT program are hoping that a bill in the current session can salvage the settlement by changing the wording in the 2010 legislation. This change could be PACT’s best hope for survival.
Indeed, without action the plan will face a big shortfall, and soon, according to Alabama Treasurer Young Boozer.
Just look at the numbers. PACT has about $347 million in investments and is paying out about $100 million a year in tuition to families. A report by Sherman Actuarial Services estimates that the program will need an additional $843.9 million by September 2032 to make the tuition payments of all current enrollees.
Further, it says that PACT will have to pay out $1.6 billion to cover tuition for its 40,000 participants over the next 20 years. (This assumes that tuition will continue to increase and that the fund’s fixed-income investments will show a conservative return — both of which are realistic expectations.)
The Legislature closed PACT to new enrollees several years ago, but the state has an obligation to the people who’d already paid into the program. The plan needs immediate action from the Legislature so that it can continue to help those families send their children to college.