By Sid Salter
STARKVILLE – State Treasurer Lynn Fitch – like Evelyn Gandy, Amy Tuck and other strong women in Mississippi politics – isn’t afraid of kicking political ant hills.
Fitch drew mixed reactions during the Joint Legislative Budget Committee hearings when she told the legislative leadership that she had convinced the Mississippi Prepaid Affordable College Tuition (MPACT) program board not to accept new enrollment in the college savings program and suspend it until an actuarial audit and other program evaluations can be completed.
Fitch’s move brought criticism from lawmakers like state Sen. Terry Brown, R-Columbus, who said lawmakers were not advised of plans to halt the program in advance of the budget hearings and bluntly pointed out that he felt lawmakers should have been consulted during the 2012 regular session.
Lt. Gov. Tate Reeves questioned the wisdom of suspending a “defined benefits” program like MPACT because of short-term market conditions.
According to the National Conference of State Legislatures, lawmakers in 49 states and the District of Columbia have authorized 529 plans (named after Section 529 of the Internal Revenue Code, which created them in 1996).
NCSL defines two different types of 529 plans: prepaid tuition and college savings. Mississippi has both. MPACT is the prepaid plan. There is also the MACS plan, which is Mississippi’s version of the college savings plan.
Fitch claims that MPACT is struggling financially. She told lawmakers that MPACT – with 22,293 families enrolled – is only 76.8 percent funded, leaving a $94 million shortfall. Fitch also told legislative leaders that MPACT investment earnings since inception had performed at 4.8 percent against an assumed performance rate of 7.8 percent.
Reeves, who oversaw and promoted the state’s college savings plans during his tenure as Fitch’s predecessor in the treasurer’s post, asked Fitch a pointed question: “Would you also suggest we stop taking new enrollment in Public Employees Retirement System?”
The question is legitimate. If poor market performance of investments is a legitimate reason to suspend new enrollment in MPACT, then what about the giant state public employee retirement system which literally dwarfs MPACT in size, scope and dollars. PERS impacts 91,000 state retirees and 163,000 state employees.
If Fitch is alarmed at MPACT being 76.8 percent funded for 22,293 families, then why not the same concern for the 154,000 families depending on PERS?
Fitch will either emerge from this as a fiscal Paul Revere or a fiscal Chicken Little. Suffice to say that she has succeeded in getting the attention of MPACT investors and lawmakers alike.
But across the country, states are facing hard questions and hard realities about public pensions and about college savings programs. Fitch’s decision from a public policy standpoint is likely sound, but that won’t shield her from the corresponding political ramifications – a reality she seems willing to weather.
Sid Salter is a syndicated columnist. Contact him at (601) 507-8004 or firstname.lastname@example.org.