MONEY TREE: Ala. Ponders Rescue of Depleted College Savings Plan
MONTGOMERY, Ala. (AP) — Lt. Gov. Jim Folsom Jr. said he is confident the Legislature will act this year to make sure participants in Alabama’s financially troubled prepaid college tuition plan get the payments they are expecting.
But a three-member committee of state officials looking for ways to shore up the program — which has lost half its assets in the past 17 months – held an initial meeting without coming up with a plan to recommend to lawmakers.
The committee, made up of Folsom, State Treasurer Kay Ivey and state two-year college Chancellor Bradley Byrne, did not immediately schedule another meeting.
Despite that, Folsom said, “I am certain the Legislature is going to address the problem this year.”
All three committee members serve on the tuition plan’s 10-member board, and all three are considering running for governor in 2010. Ivey and Byrne, both Republicans, and Folsom, a Democrat, have been talking about bipartisan cooperation.
“We are working well together,” Ivey said.
Folsom persuaded the Legislature to begin the prepaid college tuition program in 1989. The program allows parents or grandparents to pay a fixed amount when a child is small and then receive four years of tuition at a state college or university upon graduation from high school. The program’s board, headed by Ivey, invests the money in expectation the earnings will exceed tuition increases.
The plan, which has more than 70 percent of its assets in stocks, worked fine until the stock market plunged. Its assets fell from $899 million on Sept. 30, 2007, to $431 million on Feb. 28. That is less than half of its future liabilities for tuition for the more than 48,000 participants.
Since Ivey revealed the program’s funding problems in a letter to parents on Feb. 27, the program has had 700 participants pull out. In a normal month, about 50 to 100 withdraw for various reasons, administrator Brenda Emfinger said.
The program got a break from the State Board of Education, which oversees Alabama’s two-year colleges and Athens State University. The board agreed, at Byrne’s recommendation, to waive for the participants any tuition increases for three years. Alabama State University and Troy University took the same action earlier.
Folsom said he would like to see the Legislature prohibit all state colleges and universities from passing along tuition increases to plan participants for several years. He also suggested the Legislature create a fund the program could use for short-term funding if it is needed.
Ivey recommended the Legislature pass a law saying the state guarantees the program.
Legislators are taking a wait-and-see attitude.
Senate Rules Committee Chairman Lowell Barron, said he’s not seeing any sentiment in the Legislature to put state money into the tuition program, but he said there is a desire among legislators “to do the right thing” for the families in the program.
Barron said it’s too early to say wheat the “right thing” is.