Unless the Legislature steps up, the Mississippi Prepaid Affordable College Tuition Plan (MPACT) will become insolvent in less than 10 years, says state Treasurer Lynn Fitch.
MPACT’s deficit was $126.4 million deficit as of June 2016, the end of the previous fiscal year. In the past three years, the College Savings Board has requested an infusion of funds to close the shortfall in the savings plan, and the Legislature has ignored all requests, Fitch says. The board will make its fourth request in the amount of 10% of the shortfall ($12.6 million) today.
“Each time that I’ve worked with legislators, notably Rep. Nolan Mettetal, R-Sardis, chairman of the House Universities and Colleges Committee and Rep. Gregory Holloway, D-Hazlehurst, vice chairman of the House Universities and Colleges Committee who are two legislators who sit on the College Savings Board of Trustees, the Legislature has failed to take the bill up,” says Fitch.
“Eventually, if the Legislature does nothing, the Legacy program is expected to become insolvent in 2025,” she says.
The idea is to try to cauterize Legacy’s wounds and stop the hemorrhage of money, says Fitch. MPACT is currently funded at 72.1%.
Participants in MPACT prepay the cost of tuition and mandatory fees at Mississippi institutions of higher learning and are protected against any future rise in college tuition. MPACT offers plans for universities, community colleges or a combination of the two. If a student attends an out-of-state or private school, the plan will pay Mississippi’s average tuition rate.
When Fitch took office in January 2012, the deficit in funding already existed. The College Savings Board, which she oversees, decided to suspend the program in fall 2012 and reopen in fall 2014. During this period, the board deferred enrollment, analyzed MPACT and restructured it in ways that will be more cost efficient for savers and self-sustainable, says Michelle Williams, chief of staff in Fitch’s office.
The board also separated the existing program, called Legacy, and formed a new savings plan called Horizons. The original financial model did not have enough money coming in to pay for all that was going out, says Fitch.
“Horizons plans are structured differently in customers’ investment options,” says Williams. Horizons is also cost-neutral to taxpayers and more cost-effective for its savers, she adds.
While Horizons is meeting its funding goals and should remain healthy under all current assumptions, Holloway describes the future of the Legacy program as “troubling.”
Since 2014 legislative session, Holloway says, the House of Representatives has worked to create bills that will reduce the size of the deficit and market investments. Subsequently, House bill 1293, sponsored by Mettetal and co-sponsored by Holloway, died in committee this session.
The program bears the full faith and credit of the state, which means “no matter what” legislators are responsible for delegating how state dollars will be generated to sustain the program, says Williams.
The future of the program is “very troubling and the deficit is too deep to invest your way out of,” says Holloway.
“The limitations in our statute keep us from fully diversifying our portfolio and taking advantage of asset classes that could improve our investment returns,” Fitch said during a recent briefing for the Legislature.
‘The PERS (Public Employees Retirement System) investment statute used to mirror the MPACT law, but unlike MPACT’s, the PERS statute was updated. Improving our investment revenue won’t solve the shortfall entirely, but it can help,” Fitch says.
“We are discussing resources for our students,” says Hillman Frazier, D-Jackson, vice chairman of the Senate Universities and Colleges Committee. “We understand the importance of such programs and its benefits for students and the society they serve.”