There's word this morning that a legislator wants to spend $30 Million to "save" the PACT program, the college-tuition program that was supposed to help parents pay for tuition on the installment plan. I realize it has become a populist cause celebre, and as a blogger I'm supposed to scream about the state screwing the little people, but if the folks who put their money in PACT are going to get "saved", how about the rest of us who followed the advice to put our money in the stock market via IRA's? Will legislators come to our rescue as well? Surely the PACT parents aren't saying they didn't know there was risk involved...that the interest they were earning wasn't guaranteed? As I recall, wasn't it the tax benefits of PACT that were the big draw? Where did the PACT parents think the interest they were earning was coming from, if not from investment in the market? And if the State Treasurer's Office didn't make that clear in selling the program, why isn't that financial fraud? Will the Alabama Securities Commission start an investigation? In the Birmingham News story today, it's noted that "Efforts to reach State Treasurer Kay Ivey, whose office oversees the PACT plan, were unsuccessful Tuesday." Sure. Ms. Ivey is running for Governor and away from this mess. Earlier she cautioned parents not to pull their money out of the PACT accounts because there are tax consequences. I suspect there will be other consequences too.
Tim, you raise some truly excellent - and disturbingly difficult questions.
ReplyDeleteYet, that's what excellent investigative journalists do.
And frankly, in my opinion (and in the opinion of others, as I understand) it's a tragedy that APT's Director Allan Pizzato thought so little of the good people of Alabama that he felt it necessary to eliminate Alabama's only statewide news program "For The Record."
Unfortunately, he has done the people of Alabama a genuine disservice.
His mis-steps come at a most inopportune, yet highly needed time.
Thank you Kevin.
ReplyDeleteTim, Just a few comments on your post.
ReplyDeleteI didn't "invest" in anything. I purchased a contract that "guaranteed 8 semesters of undergraduate tuition at a public Alabama institution." There's nothing ambiguous about the wording in my contract for "prepaid" tuition. Now, I know that the wording in later contracts was changed, but the program was initially sold over and over (through banks, PTA meetings, school handouts, etc. as "paying for college tomorrow at today's prices."
Parents purchased contracts knowing, in many cases, that there was a potential for higher upside if they invested the money themselves. However, I and many other parents bought these contracts as a firewall just in case the worst happened: lost jobs, death in family, etc. We were guaranteed by our state officials who administer the program that we could pay now so our kids could go to school later.
We're NOT the people living beyond our means and hey, I've lost plenty in my 401k and IRA's too. But I knew when I "invested" in them that it was a possibility. I didn't "invest" in PACT; I bought a contract and I expect the state to honor it.
Yes, there are many, many questions about mismanagement on the part of the PACT board. Why the heck were they so shocked in February that the fund balances had fallen? Don't you think someone on the board would have thought to check into it last September, at least?
I have all those questions and more. But one thing I don't question is that the state marketed and sold this plan as a prepaid guarantee. Parents bought in good faith and we expect the same good faith from our state government.