• Registered: 06-18-2009
  • Posts: 4

Topic: An Open Letter from Jeremy Sherer, Candidate for State Treasurer

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.

  • Registered: 08-10-2009
  • Posts: 71

Re: An Open Letter from Jeremy Sherer, Candidate for State Treasurer

JPS,

Thanks so much for your support of PACT! I agree w/ you on the obvious next step that our official representatives need to change the law to include the same guarantee already in our contracts.

I like the thought of siphoning off of the unclaimed property, but that sounds like a slippery slope. The only reason the state has this property is to allow entities previously owning the property, but owing it to others, to pass the debt off to the state and thus to cleanse both the asset and the liability from its books. I think that if the state started trying to write off the liability but keep the asset, then the previous owners would scream foul and ask for it to be given back to them instead, or perhaps they would stop passing it along to the state in the first place. But, I'm all for the state attempting to gift this to PACT if you can find a way to do it!

Finally, instead of giving higher predictable income to the Universities so that they can cap tuition, why not just give that money directly to PACT? What am I missing here?

KBinH

Last edited by KBinHoover (08-29-2009 3:09:25 pm)

  • Registered: 06-18-2009
  • Posts: 4

Re: An Open Letter from Jeremy Sherer, Candidate for State Treasurer

KB,

First of all, in regards to utilizing the unclaimed property fund, I likely wouldn't have suggested it if other states were not doing the same thing to secure their college prepayment programs (I know KY does it, and I believe FL does the same). The unclaimed property fund might not be the total solution, but I do believe it is a good start - especially politically speaking, because technically, the funds are not presently dedicated to any entity with political power adverse to PACT owners. Moreover, it is a fund that is already under management by the Treasurer, thus reducing the likelihood of any power struggle over the funds. Frankly speaking, please keep in mind - right or wrong - that politics more than anything else will dictate where any financial fix comes from.

You are correct that giving money directly to PACT instead of higher education would be a more direct "fix" for PACT. In fact, the higher education budget for a single year is presently ~$1.2 billion - a single year of higher education funding is more than the entire +20 year obligations of PACT.

However, leveling higher education costs is the means to limit the future funds necessary to make PACT solvent. Unless higher education is treated as a partner in PACT's solution, it has the capability of negating any increased investment in PACT by increasing the cost of its yearly tuition.

So, let's break it down as an either/or problem. The State has an extra $X, either it invests it directly into PACT or it gives all or part to higher education. In my opinion, if money is taken or not shared with higher education, it will increase tuition on all students - including PACT students, thus increasing the funds necessary from PACT to afford tuition.

For instance, if in 2012 the State invests $50M in PACT. For all intents and purposes the $50M is divided up over the life of PACT. Meaning, we are actually talking about $50M divided over 20 years of obligations. Thus, the net result for a single year of that $50M investment is $2.5M.

If there are ~5,000 PACT students enrolled in AL higher education institutions for that same year, and if in response to PACT receiving the influx of $50M, higher education raises its tuition by an amount more than $500 per student (a ~7% increase on a $7000 tuition rate), the overall effect of the $50M influx is negated, and the burden of PACT increased.

Does my math make sense?

However, if higher education is "incentivized" by the legislature to stabilize costs so that tuition rates are more predictable, a more suitable/effective PACT investment strategy can be made.

For PACT investments to succeed, universities cannot abruptly raise tuition by rates up to 22% as Alabama State did last month. For an investment strategy to be effective, future costs must be more predictable.

Thus, in my opinion, we must make the most out of present PACT funds through operational cost cuts and better investments. And, we must also control annual tuition payments to maximize the longevity of present PACT funds, and to establish a better investment strategy.

I think by giving higher education a "carrot" we can do this, while also limiting the amount of future supplemental funding needed for PACT.

Thank you for your input, and feel free to respond further,

jps

  • Registered: 08-10-2009
  • Posts: 71

Re: An Open Letter from Jeremy Sherer, Candidate for State Treasurer

Thanks jps. If other states have been able to access unclaimed prop, then I'm all for following their lead, especially if it goes to PACT, but even if only to the general revenue.

Regarding money to Universities, it's all in the promises and the math. If an agreement can be struck to cap tuition, then that does mitigate a huge unknown risk and that might be the best course. But, since money given to a college can be spread across the entire student base where money given directly to PACT only covers PACT students, that could also be preferable. It's all in the promises and the resulting math.

Did you see my post about Bryce? Any thoughts here?

Let's keep thinkin' and talkin'. Any ideas are good ideas. And it's gonna take a bunch of ideas added together to pull this off w/out upsetting any one group too badly.

  • Registered: 06-18-2009
  • Posts: 4

Re: An Open Letter from Jeremy Sherer, Candidate for State Treasurer

KB,

In regards to Bryce - I think it is worth a shot. However, Bryce to the best of my understanding is owned by the Department of Mental Health. I have a feeling that any revenue from the sale of Bryce would likely stay in the budget of DMH, or at least the General Fund.

As stated earlier, any "extra" money that is found or created in Montgomery will have more than one hand reaching out for it. Luckily, though it does sound like a lot of money (and is), the $50M per year figure that PACT requires is relatively small in comparison to the entire budget. Regardless, PACT will have to make the most of what it has and take what it can get where it can find it - and that source might change from year to year. But, the goal is to be creative, not unduly target any specific area of the budget, and not raise taxes.

I do believe this is something we can do, if we have the proper leadership and collaboration from all parties.

jps

  • Registered: 03-28-2009
  • Posts: 26

Re: An Open Letter from Jeremy Sherer, Candidate for State Treasurer

Dear Friends,

Our local Tuscaloosa/West Alabama PACT group will meet at the Courthouse Annex Auditorium in Tuscaloosa on Monday, September 28, 2009 at 7 pm.  It is located at:

2501 7th St
Tuscaloosa, AL 35401

Get Directions
(205) 469-6463

http://maps.google.com/maps?f=s&utm … m_term=map

We have invited the local news, local politicians, and candidates for Governor, Dr. Robert Bentley and Artur Davis.

If you have additional questions or need last minute driving directions, I can be reached on my cell phone at 205-792-1517 or 205-799-6521.  Feel free to arrive anytime between 6:30-7:00 pm to get a good seat.

If you have PACT children who would like to attend, we encourage you to bring them along.  We want our politicians to meet the faces behind the PACT.

Any questions, please contact me.  Thank you for your support!  Ruth Gray

  • Registered: 03-28-2009
  • Posts: 31

Re: An Open Letter from Jeremy Sherer, Candidate for State Treasurer

Ruth,
I have a packet of meeting materials that we used at the Montgomery area meeting.  It would be easy to update it for the Tuscaloosa area.  If it's something that you think might be helpful, send your e-mail address to me at kittycollier@savealabamapact.com and I will send the information to you.

Good luck!
Kitty