— Tuscaloosa News on PACT participants deserving full tuition:
Participants who signed up for the Prepaid Affordable College Tuition plan before the 2008 financial crisis are due full tuition. It doesn’t matter if it’s convenient or affordable, that is what they were promised.
The PACT plan was developed in the late 1980s when the stock market was booming and wise money managers could get significant returns on their investments. Former State Treasurer George Wallace Jr. hit on the idea of creating a fund that would fully cover tuition costs at state colleges and universities with a lump-sum payment or a series of installments.
It was a popular idea and, for about 20 years, it worked well. But the PACT fund, like every stock market investment, took heavy losses in the 2008 financial crisis. At the same time, college tuition continued to rise. The financial crisis that took such a toll on the PACT fund also cut into state education funding, which meant colleges had to lean more heavily on tuition for funding.
The PACT fund’s principle dropped so low that its board realized that the fund could not meet its obligations. The Legislature provided a partial bailout but it didn’t fully fund the program. This year, the Legislature passed a law that allowed the PACT program to pay participants less than full tuition.
Participants are challenging that law in court. Whether it is illegal or unconstitutional is irrelevant. Shortchanging participants is wrong.
The PACT program’s problem is akin to pension funds with defined benefits rather than defined contributions. It guarantees something that cannot be guaranteed because of the nature of financial markets.
Nevertheless, the program made the promise. Many people chose the PACT program because it was created under the auspices of the state. To many people, that meant it was safe.
It may not be easy, but the state should buckle down and meet its obligations.