Alabama Representatives Craig Ford and Johnny Mack Morrow have taken a step toward finding a way to stabilize Alabaman’s Prepaid Affordable College Tuition program by introducing two bills to provide funding from the state. They are referring to the PACT fiasco as Alabama’s version of AIG.
One of the bills will provide short-term funding from the state’s unclaimed property and capital improvement funds. The other will provide $150 million over the next five years from the Alabama Trust Fund. This is a welcome development. Too much of the discussion among policy-makers has been behind closed doors up to this point. I am glad to see someone finally stepping up with a public proposal. It would be an even better proposal if it included a provision for some type of public accounting for the way the PACT money was handled.
Reps. Morrow and Ford have expressed hope that the money provided by these bills will be enough to allow PACT to meet its obligations until the economy starts to improve. The video below is from a press conference the two held in Montgomery yesterday.
There will be a lot of debate over this, no doubt. Even among people who agree that the state must find a way to ensure PACT contracts are honored, there is disagreement over where the money should come from. And of course, a healthy segment of the population is equating the effort to stabilize the fund with the massive transfer of wealth to Wall Street.
I’ve heard people saying that this is no different than giving state money to people who have lost value in their 401Ks, which completely ignores the fact that the state sold this program as pre-payment, and then invested more that 70 percent of those payments in stocks. I’ve even read comments where ignorant people compared stabilizing the PACT fund to welfare.
Given the level of anger over AIG, Wall Street, and those 401Ks, this could get ugly. There are only a couple of weeks remaining in the legislative session. State Treasurer Kay Ivey, who chairs the PACT board, appointed a subcommittee of three board members to work with the legislature on the issue at the meeting yesterday. The subcommittee consists of herself, Lt. Governor Folsom, and Bradley Byrne, chancellor of the two-year college system. All are prospective candidates for governor.
Ivey has also made it clear that she wants the legislature to give the PACT board the authority to dissolve the program if conditions warrant. As Mooncat noted last night, that would put the board in a position to issue an ultimatum and force PACT contract holders to either accept whatever the board proposes, or see the program dissolved.
We are encouraging people to contact their legislators and tell them that the state must honor the contracts. My fear is that the legislature will pass bills in both houses, use that to lull participants into assuming that the program is saved, and then grant the board the authority to liquidate the program during conference.
Given the reporting I have seen so far, I don’t trust the media to give people any warnings if this happens. I am watching this as closely as I can. I am also checking the PACT website and the Secretary of State’s office daily for meeting notices. I don’t want the board to catch us off-guard with a last-minute “special called meeting.”