January 28, 2014 10:25:49 AM
JACKSON -- The board that runs Mississippi's prepaid college tuition program said Monday that it wants the Legislature to decide whether the state should reopen the plan to new enrollments or close it.
The plan allows parents or grandparents to pay the cost of tuition at a state community college or university in advance.
If reopening is the answer, the college savings board said it needs $7 million a year over the next 20 years to make up an $83 million shortfall. Closing the plan would be even more expensive, requiring $11 million a year for 20 years.
The plan is backed by the full faith and credit of the state, meaning the board isn't allowed to pay less than full tuition for enrollees.
Board members said they favor reopening, but said they're likely to charge more in the future to cushion against shortfalls.
"The sense of the board is the Legislature is the 800-pound gorilla and the policy-making body for the state of Mississippi, and at least you need to know what the issues are," said Community College Board Executive Director Eric Clark, a member of the savings board. "But the sense of the board is, we want to keep the program open."
The board, under Republican Treasurer Lynn Fitch, declined to open the program's enrollment period in fall 2012, citing an accumulating shortfall. The plan also stayed closed in 2013.
Today, the plan has 21,000 contract holders. At the end of the last budget year, the plan had assets of $295 million and was 80.2 percent funded. That's a shortfall of nearly $83 million.
"We've got to address the shortfall, and a cash infusion by the Legislature is one way to do that," board member Cory Wilson said.
Lawmakers said they would act, but could tell the board to reopen the program without providing any money.
Lt. Gov. Tate Reeves, a Republican, said the board's decision to decrease the amount it projects to earn from investments makes the plan look worse than it otherwise would. He also questioned whether Mississippi's public colleges and universities will continue to increase tuition at the rates they have over the past six years.
"They've changed a number of the assumptions to make the plan look as bad as it looks today," Reeves said.
He said fluctuations in the funding share are normal.
"Is it possible, at some point in the future, that additional monies will need to be put into the plan?" he said. "It's possible."
Reeves was state treasurer for eight years before being elected lieutenant governor. If the Legislature had to add money for the tuition program, it could reflect badly on his management. The lieutenant governor has another reason to want the program to continue: He owns contracts for each of his three daughters.
Wilson said it's unrealistic to expect investment returns to make up the gap and said the lower rate of return is more realistic.
It's unclear what the savings plan board will do if lawmakers don't act. They can close the plan on their own, but only if they make immediate refunds to every contract holder more than five years from college.
Even if the plan reopens, contracts could cost a lot more. The board projects that if it had taken new enrollees in 2013, it would have charged at least $27,281 to enroll a newborn. Board members want to add a "risk premium" of 5 percent to 10 percent to that amount to cushion against future market swings. At 10 percent more, a newborn would have been charged $30,009.
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