Mobile Press Register

March 24, 2009

By George Talbot

Davis: PACT hearing 'a failure'

U.S. Rep. Artur Davis, D-Birmingham, criticized board members of Alabama's Prepaid Affordable College Tuition program today for not doing enough to help participants.

Davis said PACT board members, who met today in Montgomery, failed to take the steps needed to reassure the 48,000 students and families enrolled in the program that the state will honor its financial commitments.

"There is no question that there needs to be a searching debate over how to fund the state's commitment, but that debate must begin with a statement that Alabama keeps its promises," Davis said in a news release.

"For parents waiting for that commitment, today's hearing was a failure."

The PACT program has been stung by investment losses that have caused its assets to decline sharply. The plan now has less than half the money needed to pay its future tuition obligations.

PACT board members today voted to keep paying tuition to current participants, but halt new enrollments in the financially ailing program. The board also agreed to ask the state Legislature for help making tuition payments this fall.

"This program is going to survive, and we are going to fix this problem in the Legislature," said Lt. Gov. Jim Folsom, a member of the PACT board. "Anything less is unacceptable."

Davis, running as a candidate for governor in 2010, could face Folsom, a former governor, in the Democratic primary. Here's his full statement:

"I am concerned that when 48,000 Alabama students and their families were waiting for a solution, the PACT Board's actions were limited to three things: they hired lawyers for themselves; they appointed a committee; and they put a band-aid on a festering problem. Left unaddressed was the question of whether the Board accepts a moral obligation to the parents and students who contributed to PACT, and whether any explanation can be provided for how a fund advertised as a prudent, conservative investment is apparently the only fund in the country in jeopardy of collapse.

"I have proposed to allow families who made contributions but whose children are not currently enrolled to exit the program in exchange for a refundable tax credit that matches the value of their contribution. That way, our families could make their own choice about whether they wanted to bear the risk of future losses. I would also renew my call for a special audit that answers the hard questions of how Alabama families were left in this predicament. Finally, and most importantly, the Board should have issued an ironclad commitment that any students currently enrolled will have the cost of their tuition borne by the State. There is no question that there needs to be a searching debate over how to fund the state's commitment, but that debate must begin with a statement that Alabama keeps its promises. For parents waiting for that commitment, today's hearing was a failure."

The plan's administrators - led by state Treasurer Kay Ivey - have said the tuition plan was invested heavily in stocks, and that its assets plunged along with the market. The fund's assets have fallen to $431 million from $899 million in September 2007. While the program could get a boost if the market recovers, state officials currently estimate a shortfall of more than $480 million owed to current and future college students.