One Alabama state treasurer, Kay Ivey, helped break PACT. One Alabama Democratic candidate for Treasurer, Jeremy Sherer, is working on solutions to fix Alabama's Affordable Prepaid College Tuition program.
In an open letter to PACT contract holders, he discussing the following issues and possible solutions:
- The State of Alabama must reassure parents and students that tuition will be paid. Sherer: “I say this because at the moment, tuition payments are only guaranteed by PACT through spring semester 2010. I firmly believe that PACT families deserve more certainty regarding their children’s college future than that.”
- Cut the administrative costs for PACT and make better investment decisions. We're paying almost $2 million each year to these investment “manager” who advised the board to “stay the course” last year as the market bottomed out. Countrycat's side note: Our investment advisor moved us out of stocks last summer and we lost less than 10%. And he charged a LOT less than $2 million/year!
- Don't try to rush a solution. With the shaky economy and state budget crisis, we need to carefully design a long-term solution.
- The Oil & Gas Trust Fund shouldn't be our first stop. It funds Medicaid, the general fund, and other state programs. Sherer: “I do not believe that taking funds from the O&G TF is a moral or politically viable solution for PACT.”
- Alabama's Unclaimed Property Fund. Sherer: “The Unclaimed Property Fund is now valued just short of $400 million. I believe we can siphon money from this fund, to help restore PACT investments.”
- Get some cooperation from state colleges. Sherer: “The best way this can be done is by the state legislature giving stable, predictable funding to our higher education institutions.”
- Flexibility is critical. Sherer: “…state leaders must also appreciate that the best source of revenue in 2012 might not be the best source of revenue in 2020.”
Wow. Someone who's giving this careful thought, considering the best solutions, and not looking for a “quick fix” that will help him/her get elected, but could hurt the long-term viability of the program.
That's a candidate I can support. For too long, PACT has been used by candidates to help them get elected or re-elected. This is the case even when other candidates were questioning the program's financial viability, even when actuaries where warning that the program was unsound, and even when the PACT board itself knew in 2004 there were financial problems.
What happened to Ivey and company is that they didn't expect the huge market downturn last year. They all knew there were structural problems in PACT, but they seemed very far away and so Ivey, Byrne, even Folsom seemed willing just to kick the can down the road and leave the problem for someone else.
Jeremy Sherer though, knows what he's getting into and is working for real solutions, not just sound bytes. He has the vote of this PACT parent!
Sherer's entire press release is on the flip.
Open letter to PACT contract holders. August 28th:
For those who do not know me, my name is Jeremy Sherer, and I am a candidate to succeed Kay Ivey as Treasurer of the State of Alabama. I’ve had the opportunity to meet many PACT contract holders and students over the course of the last two months. I dare say, between the Save Alabama PACT meetings in Madison, Morgan, Limestone, Montgomery and Jefferson Counties, I’ve had the opportunity to meet well over one thousand PACT contract holders. It seems like a lot as I think about it in my head, but as I type it, I realize that the number of you that I have encountered is only 1/48 of the entire population of PACT contract holders. And in that 1/48 of you that I’ve met, I’ve listened to your stories (many of which have a sense of betrayal), I’ve heard about your children, and I’ve grown to like many of you.
As I’ve learned from you and met with administrators of PACT, my position on PACT and its “solution” have gradually come to form – and I fully anticipate, with continued learning, that my position will only be refined further into a more perfect solution.
At each Save Alabama PACT meeting I’ve attended thus far, I’ve had the opportunity to speak to its attendees. In regards to the short term future of PACT, I’ve been consistent in my statements all along – and I truly believe this is a “must” first step. The State of Alabama must give each and every PACT family the State’s guarantee (either through resolution or legislation of the State Legislature) that the full contractual obligations of each and every PACT contract will be honored. I say this because at the moment, tuition payments are only guaranteed by PACT through spring semester 2010. I firmly believe that PACT families deserve more certainty regarding their children’s college future than that. Moreover, I do not believe that the subject of the State upholding its contractual promise to PACT families will be as politically contentious in Montgomery as deciding where, if any money infusion for PACT comes from. As one attendee from this past week’s Save Alabama PACT meeting in Birmingham stated, and many have echoed, he doesn’t care where the money comes from and its not Save Alabama PACT’s job to find the money, that’s the job of elected officials.
Following the State guaranteeing to families that PACT contracts will be honored, regardless of they year they were formed or the year they are to be paid out, the State must begin serious, collaborative discussions on how to make PACT more solvent. If elected to be your next Treasurer, I would most certainly seek to cut administrative costs of PACT and maximize investment returns, by making diligent and studious investment decisions.
However, in the near term, due to the shaky state of the economy, the uncertainty of the present rebound in the economy, and the years of proration that our entire state has endured, I do not believe a permanent long term fix will be found by the legislature within the next year or two. Along with uncertainty of our economic state, our taxpayers cannot afford any addition burden upon them and if any new money were to be found within the State, there would most certainly be other worthy groups in line for it. Frankly, following the State’s guarantee to PACT holder, we do have time to come up with the best solution for PACT. Alabama cannot act hastily in solving PACT, and must guard against creating an inadequate solution that does not fully solve PACT and wastes State dollars. Which is why, we must manage the near $600 million within PACT to the best of our abilities.
Moving towards the long term solution to PACT, some in this state have suggested that we take money from the Oil and Gas Trust Fund. This is because the O&G TF is one of the few areas of our state which is presently bringing in revenue. However, the O&G TF feeds into the Alabama Trust Fund, which in turn feeds into the General Fund, which helps fund Medicaid – healthcare for impoverished, sick children. I do not believe that taking funds from the O&G TF is a moral or politically viable solution for PACT.
I firmly believe that whatever solution is derived, it will be a compilation of several different procedures. As for a monetary patch for PACT, I am interested in exploring possible options to tap the Treasurery’s Unclaimed Property Fund. The Unclaimed Property Fund is the fund the State manages of abandoned or lost funds belonging to Alabama citizens. The Unclaimed Property Fund is now valued just short of $400 million. I believe we can siphon money from this fund, to help restore PACT investments.
Beyond coming up with a financial patch for PACT, we must also work with higher education institutions to limit the costs of tuition for PACT families. The best way this can be done is by the state legislature giving stable, predictable funding to our higher education institutions. Because, the cost of tuition has jumped significantly in recent years, due to the State’s dramatic funding cuts to higher education institutions.
In developing a financial solution for PACT, state leaders must also appreciate that the best source of revenue in 2012 might not be the best source of revenue in 2020. Our PACT obligations reach until the year 2032, and encompass nearly $1 billion, or approximately $50 million per year until 2032 (which amounts to approximately 0.02% of today’s entire state budget). We must be flexible in our fiscal solution to PACT.
To the members of Save Alabama PACT, and to all PACT contract holders, stay united. If you opt out of your PACT contract and transition into the Alabama Higher Education 529 Fund, you diminish the political power of the entire group. Moreover, financially speaking, there is no guarantee that a 529 account will yield enough return to satisfy tuition demands for today’s or tomorrow’s rising tuition costs. I understand your mistrust of PACT and its operators, but I firmly believe your best financial option is to stay with PACT and continue to lobby state office holders and candidates up uphold PACT’s full contractual obligations to all contract holders.
As a candidate, I want you to know that I am committed to your cause. If elected, I will be an honest, forthcoming servant to you and to your children’s college savings. Please feel free to contact me through www.shererin2010.com and share with me your thoughts, opinions or story. I seek to be your advocate and the custodian of your child’s college savings, and I need your help.
Thank you, and God bless each of you in your efforts.