Some members of the Legislative Budget Committee expressed concerns that the Mississippi Prepaid Affordable College Tuition Plan Commission voted last week to suspend additional enrollment in the plan.
Fitch told the committee Tuesday that because the program is not fully funded, the governing board felt it diligent to "take a pause ... to make a determination on the strength of the program."
Under MPACT, which was started in the late 1990s, the cost of tuition can be purchased for a future student at today's prices. Fitch said the "pause" was needed because earnings on the plan's investments for the past year were less than 1 percent. The assumed rate of return on investment is 7.8 percent, yet it has only produced 4.3 percent since inception.
"We cannot continue at this rate," Fitch said.
Lt. Gov. Tate Reeves, who previously served eight years as treasurer and oversaw the program, said the plan had the same rate of return for the past year on investments as the state's retirement program, yet new membership in that program was not being stopped.
After the meeting, Reeves said he was surprised by the decision to halt new enrollment. He said such defined benefit plans must be viewed in the long term and not by earnings for any one year.
Plus, he said those factors should be weighed against the importance of producing more college graduates in the state.
Fitch, like Reeves, a Republican, said she was only being "a good steward" of the taxpayers' dollars. The plan has the backing of the state, meaning if it does not produce the revenue to pay college tuition for enrollees, it is the state's responsibility to make up the difference.
She said at one time there were more than 20 states with similar plans. But with investment earnings not reaching expectations and with college tuition increasing much faster than inflation, she said many states have either shut down their programs or made changes. Only one other state, Florida, now has a plan like Mississippi's that has the full backing of state's resources.
She said the commission wants to do a comprehensive study of the plan to see if changes need to be made. If so, those recommended changes will be presented to the 2013 Legislature for action.
The plan currently is funded at 77 percent of its projected costs over a 30-year period, which Reeves pointed out is still much better than the funding level for the state public employees retirement system.