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I do not remember in the 1991 PACT contract that there were any guarantees issued by the state or federal government. Did the State of Alabama make any guarantees that the funds would be available? If they did not then I ask, why should Alabama tax dollars or any other public funds be used to bail out PACT?
Scott - Good question. Every Alabama citizen has a right to know what was promised by our state.
Here's the 1991 PACT Contract. Please read Section III - Contract Benefits.
The PACT program guarantees payment of undergradute instate tuition ...
The language including the word "guarantee" was included through 1994. After this, the language was changed to
The PACT program provides payment of undergraduate instate tuition ...
From a legal standpoint, there is absolutely no difference in contractually promising that you will do something, and contractually guaranteeing that you will do something. A contractual promise, made in exchange for money, is a legally binding guarantee. The word "guarantee" itself adds nothing from a legal standpoint. Every contract issued by PACT includes a legal guarantee because that's simply what a contract is.
One more thing - this was included in the marketing brochure:
Q. How is PACT guaranteed?
A. PACT is guaranteed through a prudent investment strategy and program safeguards. The Wallace-Folsom Prepaid College Tuition trust fund has many safeguards to insure financial viability.
Oh yeah, the cover of that brochure says "PACT - A partnership between the State of Alabama and its citizens." Every program document was signed by the State Treasurer and delivered stamped by the state seal. There absolutely was a guarantee made by our state and its Treasurer. If the legislature fights or delays action here, they will be spending our tax dollars on legal fees, and will lose anyway. There's simply no reason to delay action here.
Last edited by KBinHoover (01-16-2010 5:22:49 pm)
Great post KB!
What the average citizens don't understand is that we have paid enormous sums of money for these contracts...not a buck or two for a "lottery ticket" or a "chance" at a college education for our kids. Sure, there are some folks who just started making installment payments on their PACT contracts when this collapse hit --- but many more of us have completely paid off contracts.
In our case, we paid $26,000 in a lump sum after getting a life insurance settlement when Alice's dad passed away. We could have put that money into a lake house somewhere, taken nice vacations, bought new cars, boats, jet skis, or blown it away like lots of our friends and neighbors seem to do...but instead...
...we PRE-PAID college tuition for our kids.
And the literature literally (not figuratively) guaranteed our kids would receive that college education, and precisely what they'd get was spelled out. In a contract.
And this wasn't from some obscure investment company that had a lot of fine print in the details - it was from the state of Alabama, on a sealed and signed contract.
If we had wanted to go the "investment" route - trying to time the markets and pick investments that would grow to keep ahead of tuition inflation - we'd have done that. It wold have been MUCH cheaper for us to try that, and potentially, we'd have been sitting on a much bigger pile of money when the market tanked.
But we didn't. When it came to our boys' college education, we wanted the conservative, guaranteed route. We trusted the state of Alabama and gave them ALL of our money, up front, to pre-pay - 17 years in advance - for our kids college.
Our oldest is ready for college in two years. We WILL have our PACT contracts honored, or the state WILL answer in a lawsuit. Period.
Last edited by Jeff and Alice (01-18-2010 8:58:32 am)
I agree that you have a contract with PACT, NOT with the State of Alabama. I looked at the PACT program very carefully in 1991. I now have paid over $30,000 (pretty huge sum Jeff & Alice) out of my pocket for my daughter to attend the University of Alabama for her freshman year. I chose not participate in PACT in 1991 when she was born. My personal investments have not done any better than PACT. Why would I agree to allow my tax dollars to be used to fund others investment losses? How about the state bailing me out of the 1,000 shares of Colonial Bank stock that I lost? That was supposed to be used for my daughters education, what's the difference???? Would that be OK with SAPACT, to use your tax money to bail out my losses? No one paid for college tuition in advance, they made an investment that was supposed to pay, guaranteed by PACT, managed by Kay Ivey (unfortunately).
A partnership between PACT and the State of Alabama is not a guarantee. Show me the guarantee made by the State of Alabama, there is not one.
Scott, the PACT board was set up by the state of alabama, it has its logo on every piece of information. I am sorry you feel this way, but back in 1991 when I looked at trying to set up education for my children, I looked at several options. PACT was sold to us then, as that your childs tution would be paid for. We still had to come up with the other monies to cover, books, housing, and food, but PACT was sold as guaranteed, by the state of alabama.
Last edited by lrterry (01-21-2010 12:37:00 pm)
Scott, you didn't buy a contract with the state of Alabama. We did. The only question to be resolved is whether the state of Alabama will honor its contract with us. That's up to the elected officials to decide - but if they can't honor the commitment in our contract, we'll sue. Parties fail to honor contracts all the time - and courts enforce terms of contracts. That's part of the reason we have courts.
In short, we have a contract; you don't. We have standing in a court; you have no standing.
You purchased your own investments and made your own choices. We prepaid college tuition - there is no comparison. Back in 1991 you made a decision which left you with no legal recourse.
Literally - not imaginary, Scott - our boys' CONTRACTS (a legal term with implied enforcement) are on State of Alabama Sealed letterhead, signed by an Officer of the State, for the consideration of PREPAID College Tuition.
If you've got something that looks like that, Scott, I say you should take it to court and see what you can get for it.
Last edited by Jeff and Alice (01-24-2010 7:51:26 am)
If ALDOT, as an entity of the State, has a road construction contract with, for example Dunn Construction, and Dunn completes that project per the contract stipulations, would the State be able to refuse to honor their contractual obligation of payments?
If Ivey's Treasurer's Department purchases supplies or office furniture, can they simply say they have squandered their money in bad investments, therefore they do not have the funding to pay?
Could the Treasurer's Department be held responsible for PACT out of THEIR budget for mismanagement since it was under their control?
We have three attending Alabama after taking classes at a community college. Our decision to purchase PACT was to have a stable base of tuition prepaid for them to help with the unsure expenses of room, board, transportation, etc. Since we knew that there would be neither profit nor loss to be realized by us under the PACT-only the fully paid tuition at the time needed- we could concentrate on those items which we assumed would be controlled by inflation and demand.
Failure to honor the contracts of PACT could be detrimental to any obligation assumed by the State. Should I have a business which contracts with any State entity, I would become very concerned as to whether the State would honor any contracts. I believe even bond insurers would be concerned about any contractual agreements. "Oh, I'm sorry. We just made some bad investments, so we'll have to reduce your payments.". I don't think so.
Also, what do you tell your student when they ask, "Does this mean I have to drop out of college?"
A student loan, part-time job, and parental assistance may be insufficient to cover current college costs when there is an approximate $7500 per year per student deficit which was unplanned, especially when the student is either attending or would shortly be attending college!!!
Yes, all three of our contracts were some of the original pre-1995 "guaranteed" clause contracts. If the State cannot honor PACT contracts, I would probably be in a majority of people who would begin to wonder just what other things the State would attempt to fail to honor.
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