■ Her detractors, however, have faulted her for the near-collapse of the state’s prepaid college tuition program, PACT. The program, which allowed parents to pay into a state-managed account, began struggling in 2000 and declined further under Ms. Ivey’s watch. The Legislature bailed the program out, pledging $538 million to support it. “Ivey assiduously blamed the fall of the U.S. economy,” Roy S. Johnson, a columnist for AL.com, wrote in a recent piece. “But others have not been as forgiving. Nor have they forgotten.”
The US economy and market tanked, that led to financial products tied to the market tanking. (Just like the pensions in Alabama, which the media pretends are fiiiiiiine.)
The idea was simple: Parents pay a fixed amount in expectation their child will receive four years of tuition at a state university after graduating from high school. A state board invests the parents’ payments and uses the earnings to pay tuition.
That worked well until tuition rose faster than expected and investments plunged in value. Now, it could take anywhere for $236 million to $1 billion to meet all obligations, depending on how fast tuition rises and the investments recover.
Wallace’s earliest contracts for PACT and his promotional literature used the word “guarantee.”
When Baxley succeeded Wallace in 1995, she said she asked the PACT staff if there was a guarantee and the staff told her no.
“I said, ‘Why do we have it in the material?’ They said, ‘We just started off that way.’
“I said, ‘I want us to go through every PACT printed material we have and take out the word ‘guarantee’ because we can’t make it 100 percent sure.'”
Wallace is running for state treasurer again as a Republican on a platform of getting the PACT program on sound footing once more. He disagrees with Baxley’s interpretation of the law. He said the original law made it clear there was an obligation by the state to cover tuition.
“I believe we have a legal, moral and contractual obligation. It’s a matter of honor,” he said.
No matter who is right, the Legislature changed the PACT law in 2001 to say the program is not a debt or obligation of the state.
Even with that change, State Treasurer Kay Ivey, who succeeded Baxley in 2003, put out for a time promotional literature saying PACT “will provide a child’s undergraduate tuition and mandatory fees up to 135 semester hours at any Alabama public university or community college.”
It was a garbage program with no guarantee.
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