By Bobby Harrison
Daily Journal Jackson Bureau
JACKSON – The board that oversees the state-backed MPACT college savings plan delayed any action Wednesday on when and if to re-open the financially troubled program.
The board of the Mississippi Prepaid Affordable College Tuition Plan heard from a private auditing company that the plan faces an $82 million deficit and most likely will go insolvent in the early 2020s unless it receives an infusion of cash. But MPACT, which has not been accepting new enrollees since fall 2012, will face a $142 million shortfall if it is not re-opened.
“Kind of what you are telling us is that we can’t afford to leave it open and we can’t afford to close it,” MPACT board member Cory Wilson of Madison County said to auditors with Michigan-base Gabriel Roeder Smith & Company.
MPACT allows parents and grandparents to pay current tuition levels for their children’s and grandchildren’s higher education in later years. While the program is closed to new enrollees, state Treasurer Lynn Fitch, who oversees MPACT, has stressed that the approximately 22,000 people still in the program are protected by “the full faith and credit” of the state, meaning ultimately the state or its taxpayers are responsible for paying for the cost of tuition for enrollees if MPACT runs out of money as projected.
If the program resumes operation, the auditors told the MPACT board that the cost of the program for new enrollees should be increased 30 percent or more. Still, that increase would not erase the deficit for current enrollees.
Members did point out that if the stock market continues to do well, providing a strong rate of return on MPACT’s investments, the deficit could be reduced in the coming years.
“We have spent a year on this,” said MPACT board member Eric Clark, executive director of the state Community College Board. “At the gut of matter is how do we deal with the deficit and what do we do moving forward.”
The board is asking Gabriel Roeder Smith & Company to determine how much costs to enroll in the program should be increased to ensure its viability. Then, the board must decide whether the increase would be so high that it would discourage new enrollees.
The cost of the program varies based on the age of the child being enrolled and whether it is for a two-year or four-year school.
The board, led by Clark, expressed interest in using money from the unclaimed property fund overseen by the Treasurer’s office to pay off the deficit. The unclaimed property fund such as bank accounts and insurance polices with no heirs, fluctuates yearly, but is enough annually to fund the Treasurer’s budget. But if the money was diverted to pay for the MPACT shortfall, then the Legislature might be forced to fund the Treasurer out of state general funds.
Clark expressed concern that in other states legislators have opted to force the universities and colleges to “the eat the costs of program. “ In other words, the schools had to honor the commitment made to the enrollees even though there was not enough money in the program to pay the costs of educating the students.
Only four states now have plans similar to MPACT that have the financial backing of the state if the plan lacks the funds to meet its obligations. Problems with college savings plans began to surface during the economic downturn as the stock market plummeted and college tuition rose quicker than anticipated.
Fitch said both Alabama and Tennessee closed their programs.
Legislators who serve as advisers to the MPACT Board expressed hope Wednesday the program could be re-opened.
“We have some decisions that need to be made,” said Sen. Steve Hale, D-Senatobia. “But we need to do everything we can to keep it open.”