Miss. Prepaid College Tuition Plan’s Future UnclearNovember 20, 2013 |
JACKSON Miss.—It’s still not clear whether Mississippi’s prepaid college tuition plan will reopen for additional enrollments, or when that might happen.
But if the plan does reopen, price increases of at least 20 percent could be needed to keep the plan afloat.
The board that runs the Mississippi Prepaid Affordable College Tuition plan voted Wednesday to ask actuaries to prepare figures for how much the plan would have to charge in the future to avoid deficits.
The board also voted to explore using income from the state’s unclaimed property program to pay down a projected deficit of at least $82 million in the current plan.
That hole opened because of bad investment performance and higher-than-projected tuition increases. But actuaries have also told the board the plan’s previous design was flawed because it didn’t set aside extra money to cover unforeseen bad events.
The board, at Treasurer Lynn Fitch’s request, has not sold contracts during the last two fall enrollment periods. On Wednesday, Fitch again noted that many other states have shuttered their prepaid tuition plans.
“The flavor across the United States is people are getting out, closing it down,” she said.
However, she said those comments shouldn’t be construed as meaning she’s in favor of closing Mississippi’s plan, which has sold more than 20,000 contracts. If the state did close the program, actuaries say the shortfall would rise to $143 million.
Actuary Ken Alberts estimated prices would have to rise 20 percent to 30 percent to make future contracts sustainable. That wouldn’t collect anything from future contributors to pay down the current shortfall and might not set a reserve aside to cover future unforeseen problems.
“It’s going to be a significant increase,” Alberts said.
Community College Board Executive Director Eric Clark suggested using revenue from the state’s unclaimed property program to slowly pay down the deficit. He said that’s a better alternative than forcing community colleges and universities to give tuition breaks to make up for underfunding.
The treasurer’s office has a budget of almost $5 million this year, which all comes from money it generates from the unclaimed property program. If some or all of that money is diverted to paying down the deficit, the Legislature would have to start funding Fitch’s operations out of general tax revenue.
“Obviously the Legislature would have to be major-league on board with this,” Clark said.
Lawmakers who were present didn’t object to the idea, but didn’t pledge immediate support.
“I think we need to do everything we can to keep the program open,” said Sen. Steve Hale, D-Senatobia.
Mississippi continues to enroll new entrants in the separate Mississippi Affordable College Savings Program. In that program, people invest money and don’t have to pay taxes on gains, but don’t lock in a price for tuition at a Mississippi public university. So savers might come up short, or might end up with more money than needed for college. Fitch said her office is working to emphasize that program, trying to set up payroll deductions with large employers.
“People who can put up $25 a month can participate in that program,” she said.