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It is my guess that there will be discussion of the study in tomorrows meetings.
it is my view that as long as the state appears to be in a good faith effort to fund students that there is no reason that people would get out, but people can be irrational.
The state should quickly act to assure participants of financial support for PACT owners.
Procrastination of the state in dealing with PACT will serve no purpose beyond increasing liabilities and by extension increasing litigation for the state.
Arriving at the meeting late, I did not get the attendees names.versus the locations at which they were sitting. Could anyone identify the gentleman sitting on the 2nd row from the left closest to the audience? I was very dismayed at his proposal to reduce four year college tuition payment to the median tuition beginning this fall, or at the latest spring 2010 semester.
i can't identify him because my hands flared up an i can't drive very far at all, but that proposal should be shot full of holes.
if they quit paying the full tuition it is going to cause many people like me with kids already at school to go ahead and go to court where we will not do so otherwise.
Me, too. I've got 3 down there.
and my i say that the people doing the study are not legal minds. they are financial. i was trained in government contract law and we were tough that even a verbal statement that could be miss leading even if not intention could obligate the government. their opinion that the state would get by using the immunity defense is bad advice. the courts will find a way to hear a case when it appears that the state had misleading marketing, especially the federal courts. their only real correct legal advice was that legal cost will be astronomical for the state. they do not want to go there.
Sheila, The "gentleman" who proposed doling out tuition based on the median was Tom Broughton, a banker from B'ham.
From my side of the room, he didn't look too happy when told he was too late to bring that up this year. However, I think we can expect that to come up again if the Legislature doesn't handle this problem.
if the legislature does not handle it, his suggestion will be moot.
First, I agree that the State should act quickly to fund the deficit. Delay will only lead to more cancellations, which then will lead to a larger deficit.
There is a lot of misinformation out there and the purpose of this message is to attempt to put some facts on the table, and then to propose a solution with no losers. I'll divide my thoughts into Legal vs Financial. As I said, I'm going to provide facts and will do so by linking applicable documents for others to reference.
LEGAL
Per our Constitution Section 14
the State of AL has sovereign immunity and cannot be sued, nor can an agency of the state.
However, state officials are not totally exempt from a lawsuit. There are 6 exemptions from the constitutional protection as discussed in this
Supreme Court case (see page 5). With regard to PACT, it seems to me that only #6 has merit since our Treasurers acted 'beyond their authority' when making promises that contradicted what the underlying law seems to have provided for. Thus, Wallace Jr, Baxley, and Ivey may have liability here, and perhaps only the 1st 2 as disclosures seemed to have been greatly improved by Ivey. Victory in these types of lawsuits could possibly only provide whatever personal savings these individuals have.
Thus, a lawsuit doesn't seem to be much more than a threat, but it could nevertheless be expensive (for both sides) to go this route.
As Riley, Folsom, Ivey, and many others have stated, the State has a moral obligation to PACT contractholders. And this is why we should continue pushing for a solution on an expedited basis.
Financial
The recent Actuarial Report is out and could be immediately improved as the deficit is not as bad as it portrays. First, it shows beginning assets of $483M, but this is as of 5/31. The S&P 500 is up nearly 15% since then, so a better starting number is likely around $550M (or $67M less deficit).
Perhaps a bigger problem is the actuary's low hypothetical investment return, starting at 5% and grading down to 3%. He says he does this because of the need for liquidity in this closed block. However, let's compare this to the very same actuary's own recent assumption for the Texas Plan, also a closed block! For this plan he projects returns beginning at 6.80% grading down to 5.40%. Why such conservatism for our projections? My rough calculations show that these higher assumptions would decrease the stated deficit by another $40M or so.
I posted a thought last week that the State should give Bryce Hospital to UA. According to an Independent Report this would be worth $84M, an immediate offset to the deficit (assuming at least $84M of PACT kids will later attend UA).
I'm up to $191M now to cure the deficit. This compares to an immediate required infusion of $642M from the report. With these few adjustments, I can now argue that a better starting number is $443M, and I'm just getting started. Capping tuition increases is huge, which is why it has been a major focus. My $443M uses the report's 7.25% assumption. Using their lower 3.75% would reduce the starting deficit to $422M per their report, and only $231M using my adjustments. We're almost there!
The Poarch Creek Indians want to increase gambling opportunities. I bet they would gladly pay a few hundred million to legalize a few more types of games. Governor Riley needs to adjust his moral compass to cover his moral obligations. To feel better, he can toss in some extra taxes on alchohol and cigarettes.
Problem solved.
Last edited by KBinHoover (08-25-2009 8:59:27 am)
Man I like the way you think. How refreshing! 
Where do you live?
Man I like the way you think. How refreshing!
Guess,
KBinHoover
I like the way he thinks too!!!!! Now he only needs to be heard by those that will listen and put his suggestions into action quickly!! How can we get his ideas to the people that matter??? We must do it now!
I like the way he thinks too!!!!! Now he only needs to be heard by those that will listen and put his suggestions into action quickly!! How can we get his ideas to the people that matter??? We must do it now!
Uh, we're the "people that matter"! (But I understand your question.)
Your not kidding...we, or better yet our children, are the "people that matter". However, getting others to see it that way is the problem. I find that most Senators and Reps that I have contacted "say" that they are in favor of a "save" for us, but actions sure do speak louder than words (or LACK OF ACTION IN MOST CASES). I would love to hear them come up with ideas that sound solid..like your suggestions.
Last edited by tmom (08-25-2009 8:36:16 pm)
KB (in Hoover)...duh, I'm pretty dense some times. Just trying to get everyone I can that lives in Madison County. You do have some interesting ideas.
The best thing Gov Riley could do right now is to appoint a PACT Czar. This person's responsibility would be to talk to every interested party (officials & the public) to brainstorm ideas, and to learn what various officials and Universities would support. It is clear that EVERYONE wants a solution, but thus far nothing has been done in an organized manner. I believe that the gap can be filled but it will take the combination of multiple sources of revenue. No politician wants to sacrifice the overall interests of his/her consituents, but every politician also understands that the 48,000 PACT owners are spread across all regions (and many are owners themselves).
Once all of the ideas are collected, I think an appealing combination requiring some minor sacrifices can be found. This just needs to become a expeditious process instead of a political hot potato. We've had too much blamestorming and not enough brainstorming.
Last edited by KBinHoover (08-26-2009 7:33:01 am)
I absolutely agree . . . but I do not think Governor Riley is going to take a leadership role. On August 7, I wrote a letter to Governor Riley, which requested, in part: "Based on recent news reports, it is my understanding that the RSA report on the PACT contract program will be presented to you in the next couple of weeks. I request that you give this study your full attention when it is released, and that that you use the information in the study to pull together a coalition of legislators, higher education leaders, and state officials to craft a solution for the problem before the start of the 2010 legislative session. In particular, in your role as an ex officio member of the university Boards of Trustees, please persuade the universities to be part of the solution to the PACT problems through responsible policies on tuition increases."
Yesterday, I received his response. "As I have stated previously, I do believe that the state has a moral obligation to uphold its commitment to PACT and PACT contract holders. The RSA study of the financial condition of the PACT program that was ordered by the Legislature during the 2009 Regular Session has been received and is currently being reviewed. Even though I do not administer PACT or serve as a member of its Board of Directors, I have discussed potential solutions with various people, including several members of the Board and members of the Legislature. Now it is up to the leadership of the Legislature to reach a consensus as to how to proceed to adress this issue. I remain willing to call a special session to address the needs of the program if a consensus is reached on the appropriate course of action."
It is clear to me that Governor Riley is sympathetic but uninvolved - he seems to think his only role in all of this is to call a special session once the legislature figures out what to do. He did not even address my comments re: the need to involve higher education leaders and tuition increases, and he is an ex officio member of every university Board of Trustees.
Last edited by kittycollier (08-26-2009 1:27:47 pm)
It is clear to me that Governor Riley is sympathetic but uninvolved - he seems to think his only role in all of this is to call a special session once the legislature figures out what to do.
I received a similar response from Riley last March. I would hope that our Governor would now take the following excerpt from the SJR150 Resolution very seriously. This is, after all, an official document declaring his intentions.
WHEREAS, although neither the Governor nor the Legislature administered the PACT Program, both are determined to preserve the fund that allows many in this state to attend college.
His response to you does not seem to jibe with the official record on his stance and calls his proclaimed determination into question.
You might consider sending his letter back to him with a copy of SJR150 and asking him if this is what he meant when he promised determination, or was SJR150 only intended as posturing and grandstanding?
Last edited by KBinHoover (08-26-2009 1:03:16 pm)
Back to my idea of a PACT Czar. Gov Riley and the Legislature could create a PACT task force. SJR150 called for recommendations from the RSA, but unfortunately the Actuarial Study falls well short of offering solutions.
The Legislature and the Governor, with a sense of urgency, calls upon the Retirement Systems of Alabama to report its findings, conclusions, and recommendations in writing to the Governor and individual members of the Legislature as soon as possible.
Here's an example of a well-defined Task Force created by our Governor and Legislature. Note the very specific naming of parties to be included.
They met formally and recorded Meeting Minutes, and made a very thorough Final Recommendation.
Curing the PACT deficit should be much simpler than curing Autism. Why can't we formalize the effort and get to work? I'm already tired of the political games.
I think the powers that be are in a quandry. They have a legal as well as moral obligation to honor the PACT contracts and they do not want to be the odd ball out. At the same time, they don't want to be the front runner on a solution in case it fails. So they play the old wait and see game hoping that in time the PACT holders will either go away or somebody else will come up with a solution that looks like it will work, then they will claim it was their idea all along.
I also don't think there is much doubt that in the end Alabama will honor the contracts. The title of the program PREPAID Affordable College Tuition as much as states that the contract holder is buying tuition before it is needed. There is a vested right in college tuition implicit in the title of the program. Also, if it was not guaranteed, then why would their be a need for a second 529 plan that states up front that it is an investment with all of the inherent risks. TWO investment plans from one state would be redundant. The state meant for PACT to be what it says...PREPAID Affordable College Tuition and for the 529 plan to be what it says on the State Treasurer's website:
"The Program is sponsored by the State of Alabama and is designed to be a Qualified Tuition Program under Section 529 of the Internal Revenue Code. The FDIC, the State of Alabama, the Treasurer of the State of the Alabama, the Board of Trustees of the Program Trust Fund or any other federal or state governmental agency do not insure or guarantee accounts and investments under the Program."
The PACT page does not state this.
In the end, after all the blustering, postering, and politicking...we will prevail.
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