RSA has low outlook for PACT
Published 10:00 pm Tuesday, June 30, 2009
For those hoping for a miracle cure for Alabama’s faltering prepaid tuition plan, the word from the Retirement Systems of Alabama surely came as a disappointment.
RSA said the only thing that can save the Prepaid Affordable College Tuition program is a huge bailout from state taxpayers. “It’s going to take a ton of money to fill a very big hole,” RSA Deputy Director Marc Reynolds told The Huntsville Times.
That’s unfortunate. The state is already struggling to keep up with the other pulls on taxpayer funds, and it doesn’t have hundreds of millions of dollars to spare for essential services, much less to rescue PACT. Although Reynolds threw out the idea of some kind of tax increase just to salvage the program, the political winds in Alabama are rarely favorable for sailing in that direction.
But the other option — stiffing those who purchased PACT contracts, thinking they were securing their children’s and grandchildren’s futures — is hardly politically palatable, either.
PACT was sold to the people of Alabama as a safe vehicle for paying today’s prices for a college education tomorrow. The early contracts even used the word “guarantee” to describe the benefits. Even after the word was removed, the sentiment was certainly implied in the program’s marketing and sales pitch.
That was before college tuition costs soared, and other college-savings options started getting more takers — and before the stock market, in which PACT was heavily invested, took all of its passengers on a sickening downhill ride.
In our view, it’s time for PACT officials, perhaps in conjunction with the RSA, to study the outstanding contracts and begin devising realistic remedies to deal with this deficit, if there are any out there.
It may be that PACT can honor the older contracts and issue refunds to those who bought into the program later. In any case, PACT officials need to do what they can to come up with alternatives that are as fair as possible to the PACT participants and to the taxpayers of Alabama.
If the RSA’s assessment is right, bailing out the whole program may be more than taxpayers can reasonably be expected to do.
—The Birmingham News