The program, which guaranteed participants tuition to Mississippi’s public universities at the cost when they entered the program, was a hit with many parents and grandparents. It was a way to save and to avoid the sting of accelerating tuition costs, which weren’t going up as fast then as they are now.
The program worked for thousands of Mississippians. Unfortunately, it is no longer working from a state financial standpoint.
MPACT, administered by the state treasurer’s office, anticipated a 7.8 percent annual return on investment of the money paid in. The average since the program’s inception has been only 4.3 percent. For the past fiscal year, it was less than 1 percent, though it’s up to 5 percent the first six months of the current year.
Obviously, those are rates that make the program unsustainable – especially with tuition rising so fast. Since the program is fully backed by the state, the MPACT board prudently placed a moratorium on new enrollees last August and commissioned a study by Michigan-based Gabriel Roeder Smith & Co., which Treasurer Lynn Fitch discussed last week.
The news wasn’t good. The state currently has only 77 percent of the funds needed to cover future costs. Fitch said that should be 100 percent, though not since 2000 has that been the case. The consultants recommended, among other things, that participants be charged more on the front end.
Anything that encourages college savings and access is valuable. But the state can’t continue to guarantee something that it likely won’t be able to pay for.
Other states are in the same boat. More than 20 once had such plans backed by their full faith and credit. Now Mississippi is one of only three.
The state should make sure that the 22,000 current enrollees are taken care of. That’s a compact that shouldn’t be broken.
Fitch says it will be a few months before a decision to reopen the program to new enrollees, scale it back or end it. Prudence is the best course. Mississippi has too many pressing financial needs to risk making new guarantees the data suggest it won’t be able to keep.