Alabama’s Legislature continues to deliberate on the fate of PACT. Few believe the PACT board’s December recommended action – which would prorate payments to colleges and universities, while likely shouldering contract holders with any shortfall in tuition payment, and requiring over a one-quarter of one billion dollars from Alabama’s budgets.

The proposals discussed the most thus far by the Legislature involve either taking monies from the Education Trust Fund or capping tuition payments to higher education institutions.

I maintain that: 1) Alabama must honor its entire commitment to PACT families; 2) Alabama must not rob Peter to pay Paul, in taking money from primary education to pay higher education; 3) Alabama should not prorate funding to higher education institutions, which have already had their funding cut by hundreds of millions of dollars over recent years.

The most prudent, fair way to address PACT’s shortcomings is to make PACT work most efficiently and productively as possible. PACT had suffered years of deficits prior to the recession of 2008-09, and the issues leading to those deficits still remain in PACT’s operations. PACT has the hands of too many financial advisers, nine in total along with the investment manager, trying to stir the pot. Further, PACT’s investment strategy has reacted too slowly to conditions within the financial markets, exasperating losses and minimizing gains. PACT must reduce costs and improve profits, before state taxpayers and educators are penalized due to PACT’s faulty structure and poor management.

Finally, there exist non-budgetary sources of monies controlled by the State of Alabama that could potentially be tapped to supplement funding for PACT, while protecting Alabama’s already strained budgets and taxpayers. Alabama’s $2.6 billion Alabama Trust Fund or the $340 million Unclaimed Property Trust Fund are logical sources of funding that might secure Alabama’s contractual commitments to PACT families, and protect taxpayers as well as those dependent upon the state.

Regardless of the method by which we honor PACT, it is incumbent upon our legislators that they do in fact extend the state’s promise to the 45,000 PACT families which await such a sign of good faith in upholding PACT’s promise.

I’d like to wish everyone happy holidays, and best wishes as we close out 2009 and embark upon 2010. I sincerely appreciate the support you’ve lent to me and our campaign for Treasurer. 2010 is set to be an eventful year for the campaign and State of Alabama as a whole. We will continue to advocate on behalf of the 45,000 PACT families who merely wish the State of Alabama uphold its promise to the children and grandchildren who will one day be the leaders of our state. Further, we will continue to craft a vision to build a more prosperous, economically secure Alabama for all within it.

Safe travels to all, and I look forward to continuing our campaign to restore competency, integrity, and honesty to Alabama’s Treasury come 2010.

In the last week, Sherer In 2010 has been to Phenix City, Oneonta, Florence, and Spanish Fort, taking the campaign to the Wiregrass, the Appalachian foothills, the Tennessee Valley, and the Gulf Coast. It really has been amazing traveling our beautiful state as the seasons change.

Sherer In 2010 continues to advocate on behalf of PACT families, and the honoring of their 48,000 contracts for college tuition. The solutions that Sherer In 2010 has put forth in regards to PACT involve utilizing the Unclaimed Property Fund to infuse funding into PACT, stabilizing budgetary funding for higher education in an effort to stabilize tuition, reducing PACT operational costs, improving investment performance, and working with the Legislature and Governor to formulate a long-term financial solution for PACT.

Our recent events in Oneonta and Phenix City were Democratic Party events at which Sherer In 2010 stressed the need for Alabama to strengthening our local socioeconomic community by increasing the State’s investment in Alabama’s community banks. By supporting our state’s community banks, we support their local efforts to encourage job growth, small business and entrepreneurial development, and home ownership.

I believe it is incumbent that the Democratic Party chooses a party nominee that reflects Democratic values of community development, equal economic opportunity, and wealth creation.

I view the Treasurer’s office as one that diligently manages Alabama’s investments, securely guard our savings, and supports efforts to develop the economic structure and opportunity of our state.

We will continue to advocate for what is morally and legally appropriate for PACT families, and we will continue to make Alabamians aware that more can be done from the Treasury to make our state better.

I am committed to fixing the problems from the last eight years that have emanated from the Treasurer’s office, and completing the hard work that is already expected from the Treasury over the next four years.

Over the last one and one-half weeks, I’ve attended meetings of Save Alabama PACT chapters in Mobile, Lee, Houston and Tuscaloosa counties.

I truly believe the urgency of solving the fiscal crisis within PACT is becoming apparent to Alabamians. Among all of the issues that face our state, and that require action by our state’s leaders, PACT is the most urgent. This urgency is due to the PACT Board only guaranteeing tuition payment through the Spring Semester of 2010. Further, the incumbent Treasurer has stated that any further action related to PACT must be taken by the Legislature. Thus, in the upcoming legislative session, beginning in January of 2010, it is incumbent upon the Legislature to assure Alabama’s PACT families that we will honor the contractual commitments of PACT.

Over the last two weeks, I’ve begun hearing from legislators, who also attend the meetings of Save Alabama PACT, that they agree with me that a resolution must be passed in the upcoming legislative session. Months stand between where we are now until that point that a resolution is passed, and PACT families must use this time to secure the legislators’ support.

I believe the work of Save Alabama PACT has been nothing short of admirable and courageous. Each PACT function that I attend, I express my sympathy for those families having to attend a meeting of such a nature that they never foresaw when they first enrolled their children in PACT. I also tell them that they, not any elected official, will be the unlikely heroes who save PACT through their activism and courage in refusing to be victimized.

Thursday night, it was my distinct pleasure to be the guest speaker to the Limestone County Democrats. There was a great crowd of ~80 loyal Democrats, with solid representation from local Democratic officials. It was a great opportunity to be around a county party that is energized and ready for the 2010 cycle.

I took the opportunity to inform the crowd about the major issues in the upcoming Treasurer’s race: resolving PACT; strengthening community banks; increasing financial literacy; and improving financial reporting systems so as to reduce financial mismanagement and corruption.

The message was well received by all, and I truly felt welcome. The Limestone County Dems are truly a great group of service minded individuals.

Also, today the Shelby County Reporter ran my retort to a speech that Treasurer Kay Ivey recently gave to the Calera Chamber of Commerce (Ivey Speech to Calera Chamber). Ivey stated to the crowd that PACT is “going fine” and that so long as the economy doesn’t take a turn for the worse, it will continue to be fine. Upon hearing her comments, I took great exception to them and for the sake of honesty and governmental integrity, I felt that I must share the whole truth regarding PACT’s financial state.

Below are the comments that I sent to the Shelby County Reporter in response to Ivey’s speech:

As a candidate to succeed Kay Ivey as Treasurer of Alabama, I was disturbed in reading the Shelby County Reporter’s article regarding Ivey’s speech to the Calera Chamber of Commerce. Ivey’s statements to the Chamber were disingenuous due to her glossing over the financial predicament of Alabama’s Prepaid Affordable College Tuition Program (PACT). Ivey’s assertion that PACT “is going fine” is formed in either ignorance or her own political protectionism. Ivey states, PACT is financially viable until approximately 2015. However PACT has financial obligations until 2032, and approach nearly one billion dollars. Simply because Alabama can afford the costs of PACT today, yet presently has no ability or plan to satisfy the increased costs of tomorrow, does not warrant Ivey to say that everything “is going fine”. Treasurer Ivey did preface her contentment with PACT’s present status in stating that all should be well “unless the market goes down further”. However, this past June the Retirement Systems of Alabama (RSA) stated that the nation’s stock market would have to more than double its volume to approximately 20,000 to recover the more than $300 million in PACT devaluation that occurred under the oversight of Ivey. Ivey further misinforms by stating that RSA’s study on PACT’s viability found no evidence of financial mismanagement on Ivey’s part. However, RSA’s study did not evaluate Ivey’s past management of PACT. Though, the RSA study did vary numerously its forecasts of future costs and earnings versus those used by Ivey in her financial management of PACT. As Alabama’s next Treasurer, I will be committed to honoring Alabama’s PACT commitments and managing PACT more effectively than Treasurer Ivey. I will also speak with greater candor, in a spirit of principled, public service rather than the political protectionism evidenced by Kay Ivey in Calera.

I firmly believe that not only have the finances of Alabama, and in particular PACT families, been squandered over the previous seven years, but also Treasurer Ivey’s lack of forthrightness has led to an erosion of the trust within the Treasurer’s office. Not only will the next Treasurer deal with the issues that arise over their four year term, they must remediate the damage done over the previous seven years caused by the incumbent Treasurer.

For those who do not know me, my name is Jeremy Sherer, and I am a candidate to succeed Kay Ivey as Treasurer of the State of Alabama. I’ve had the opportunity to meet many PACT contract holders and students over the course of the last two months. I dare say, between the Save Alabama PACT meetings in Madison, Morgan, Limestone, Montgomery and Jefferson Counties, I’ve had the opportunity to meet well over one thousand PACT contract holders. It seems like a lot as I think about it in my head, but as I type it, I realize that the number of you that I have encountered is only 1/48 of the entire population of PACT contract holders. And in that 1/48 of you that I’ve met, I’ve listened to your stories (many of which have a sense of betrayal), I’ve heard about your children, and I’ve grown to like many of you.

As I’ve learned from you and met with administrators of PACT, my position on PACT and its “solution” have gradually come to form – and I fully anticipate, with continued learning, that my position will only be refined further into a more perfect solution.

At each Save Alabama PACT meeting I’ve attended thus far, I’ve had the opportunity to speak to its attendees. In regards to the short term future of PACT, I’ve been consistent in my statements all along – and I truly believe this is a “must” first step. The State of Alabama must give each and every PACT family the State’s guarantee (either through resolution or legislation of the State Legislature) that the full contractual obligations of each and every PACT contract will be honored. I say this because at the moment, tuition payments are only guaranteed by PACT through spring semester 2010. I firmly believe that PACT families deserve more certainty regarding their children’s college future than that. Moreover, I do not believe that the subject of the State upholding its contractual promise to PACT families will be as politically contentious in Montgomery as deciding where, if any money infusion for PACT comes from. As one attendee from this past week’s Save Alabama PACT meeting in Birmingham stated, and many have echoed, he doesn’t care where the money comes from and its not Save Alabama PACT’s job to find the money, that’s the job of elected officials.

Following the State guaranteeing to families that PACT contracts will be honored, regardless of they year they were formed or the year they are to be paid out, the State must begin serious, collaborative discussions on how to make PACT more solvent. If elected to be your next Treasurer, I would most certainly seek to cut administrative costs of PACT and maximize investment returns, by making diligent and studious investment decisions.

However, in the near term, due to the shaky state of the economy, the uncertainty of the present rebound in the economy, and the years of proration that our entire state has endured, I do not believe a permanent long term fix will be found by the legislature within the next year or two. Along with uncertainty of our economic state, our taxpayers cannot afford any addition burden upon them and if any new money were to be found within the State, there would most certainly be other worthy groups in line for it. Frankly, following the State’s guarantee to PACT holder, we do have time to come up with the best solution for PACT. Alabama cannot act hastily in solving PACT, and must guard against creating an inadequate solution that does not fully solve PACT and wastes State dollars. Which is why, we must manage the near $600 million within PACT to the best of our abilities.

Moving towards the long term solution to PACT, some in this state have suggested that we take money from the Oil and Gas Trust Fund. This is because the O&G TF is one of the few areas of our state which is presently bringing in revenue. However, the O&G TF feeds into the Alabama Trust Fund, which in turn feeds into the General Fund, which helps fund Medicaid – healthcare for impoverished, sick children. I do not believe that taking funds from the O&G TF is a moral or politically viable solution for PACT.

I firmly believe that whatever solution is derived, it will be a compilation of several different procedures. As for a monetary patch for PACT, I am interested in exploring possible options to tap the Treasurery’s Unclaimed Property Fund. The Unclaimed Property Fund is the fund the State manages of abandoned or lost funds belonging to Alabama citizens. The Unclaimed Property Fund is now valued just short of $400 million. I believe we can siphon money from this fund, to help restore PACT investments.

Beyond coming up with a financial patch for PACT, we must also work with higher education institutions to limit the costs of tuition for PACT families. The best way this can be done is by the state legislature giving stable, predictable funding to our higher education institutions. Because, the cost of tuition has jumped significantly in recent years, due to the State’s dramatic funding cuts to higher education institutions.

In developing a financial solution for PACT, state leaders must also appreciate that the best source of revenue in 2012 might not be the best source of revenue in 2020. Our PACT obligations reach until the year 2032, and encompass nearly $1 billion, or approximately $50 million per year until 2032 (which amounts to approximately 0.02% of today’s entire state budget). We must be flexible in our fiscal solution to PACT.

To the members of Save Alabama PACT, and to all PACT contract holders, stay united. If you opt out of your PACT contract and transition into the Alabama Higher Education 529 Fund, you diminish the political power of the entire group. Moreover, financially speaking, there is no guarantee that a 529 account will yield enough return to satisfy tuition demands for today’s or tomorrow’s rising tuition costs. I understand your mistrust of PACT and its operators, but I firmly believe your best financial option is to stay with PACT and continue to lobby state office holders and candidates up uphold PACT’s full contractual obligations to all contract holders.

As a candidate, I want you to know that I am committed to your cause. If elected, I will be an honest, forthcoming servant to you and to your children’s college savings. Please feel free to contact me through www.shererin2010.com and share with me your thoughts, opinions or story. I seek to be your advocate and the custodian of your child’s college savings, and I need your help.

Thank you, and God bless each of you in your efforts.

I was completely wowed on Thursday night as I walked into Homewood’s Dawson Memorial Baptist Church and saw more than 300 PACT stakeholders at what was the first meeting of the Jefferson Chapter of Save Alabama PACT.

I was honored to have the opportunity to share the stage with three Alabama legislators and one of Jefferson County’s US Congressional Representatives, in an effort to inform and encourage PACT contract holders.

After approximately an hour or more, everyone had listened to an exhaustive dissection of the possible financial remedies for PACT. At this point, one PACT contract holder was recognized to speak, and he stated his appreciation for the time and information shared. However, he also stated that it is his belief that the financial solution to “fixing” PACT is separate from the State giving PACT families its guarantee that all PACT contracts would be honored.  Further, he stated his belief that it is the job of elected officials to find the funding for PACT solvency, and that the honoring of the State’s contractual obligations under PACT should not become a politicized fight over funding among Montgomery special interests.  His statement was met by raucous approval from the audience.

My first statement upon introducing myself, was to tell this PACT contract holder and all others in the audience, that I share his sentiment. Presently, the PACT Board has only guarenteed the contracts of PACT payments until the Spring semester of 2010. Unfortunately, I firmly believe that the permanent financial “fix” for PACT will not be decided by that Spring 2010. I told the audience that the State’s first course of action must be to guarentee to all PACT families that their child’s tuition will be paid. PACT families deserve that assurance which they contracted with the State of Alabama for so many years ago.

Also, I had the opportunity to address the concerns of another PACT contract holder who asked the present political officials whether he should pull his money out of his PACT account and invest it in a 529 Fund, or to place his faith with the State to solve PACT. I took this PACT holder aside and addressed his personal situation. I encouraged him to stand with his fellow PACT holders. This gentleman had only been enrolled in PACT for a few years, and thus had limited funds invested within PACT. However, as the father of two children and the head of a single income family, I most certainly appreciate the value of even a couple thousand dollars. I told him though, that due to the future inflation of tuition rates by the time his child turns eighteen, the amount of funds likely necessary to compensate between the lack of growth in a 529 Fund and the cost of tuition would be more than the amount of money he presently has invested in PACT. Thus, the amount of money his has in PACT – though at risk – is less than what he would have to pay on top of his 529 Fund to afford college tuition. Finally, I told him that I do believe that the State will come up with a solution for PACT within the next year or two, to have faith, and to stay involved with Save Alabama PACT.

As a candidate to become Alabama’s next Treasurer, I greatly appreciate the damage that has been done to the office of Treasurer due to the negligence and uncooperativeness of our incumbent Treasurer. If elected, I will be a diligent servant to the people –  including PACT families – my door will always be open, and I will always be honest and forthcoming when sharing information.

PACT was not just a mismanagement of State investments, it was a mismanagement of the people’s trust. It will be my duty to earn better marks in both regards.

Yesterday, I was listening to National Public Radio’s Martketplace. They happened to air a segment discussing the troubles of Pennsylvania’s college prepayment plan.

Here is the link if you wish to read or listen to the story –  State asks parents to save college fund

It is a fairly brief piece, but it reinforces statements that I’ve been making about college prepayment plans. College prepayment plans while good intentioned are destined to fail or expose states to liability due to rising tuition costs and unpredictable financial markets.

The story concludes with a law professor, that has extensively studied college prepayment plans, states that traditional 529 programs are the best investment for families and governments. Traditional 529 programs do not require governments to secure the funds to the detriment of taxpayers, and forward thinking parents still receive the same tax benefits they would receive by participating in a college prepayment plan.

Unlike others, I’ve been consistent regarding PACT. 1) Alabama must immediately guarantee the 48,000 PACT families that the state will uphold its full contractual obligations to all PACT families; 2) PACT administrative costs must be reduced, while investments must be more smartly managed than they have been; 3) Alabama must work collaboratively to develop a long-term financial solution to make PACT solvent; 4) Alabama’s Oil & Gas Trust Fund, which helps pay health care costs for poor, sick children in Medicaid must not be raided; 5) Efforts to stabilize higher education funding, thus stabilizing college tuition, must be made; 6) Beyond resolving the remaining 48,000 PACT contracts, Alabama must shift its college savings efforts to Alabama’s Higher Education 529 Fund.

I will continue to work to honor Alabama’s obligations to the 48,000 families whose college savings were neglected by the Treasury. I will continue to ensure that no one segment of Alabama’s budget or taxpayers are held to be financially liable for “fixing” PACT. I will seek to tap the State’s Unclaimed Property Fund for any monetary “fix” for PACT. And, I will seek to reduce costs and increase investment yields of PACT.

Thursday, I attended the Board of Directors Meeting of PACT. There was a strong presence from members of Save Alabama PACT, and by the gubernatorial candidates.

Many in attendance, including myself, were intrigued to hear the board’s impressions of the recently released study of PACT’s viability, which was composed by the Retirement Systems of Alabama (RSA). Unfortunately, it was the decision by the board not to address the RSA report due to their receiving it the previous Friday. Other than not addressing the RSA report, the board did discuss pending lawsuits related to PACT, analyze the most recent PACT investment figures, and discuss PACT’s investment strategy.

After the PACT board of directors meeting, there was a meeting of Save Alabama PACT. Four gubernatorial candidates, including Kay Ivey, spoke to the meeting. Each of the candidates had their own spin regarding their solution to PACT. When Treasurer Ivey spoke, the prevailing issue at hand was the ability of Save Alabama PACT to reach out to other PACT members through placing an informational insert into the regular mailings of the Treasurer’s office to PACT families. Despite there being no explicit regulation against it, that Save Alabama PACT would carry all costs, and that no private information would be shared, Treasurer Ivey refused to allow PACT families network with each other via the Treasurer’s office.

Following the gubernatorial candidates, I shared my thoughts regarding the RSA study and various PACT political solutions with the attendees of the Save Alabama PACT meeting. I told them that I believe the most positive item to come out of the RSA study was the clear and explicit statement that all PACT contracts, regardless of what year the contract was drafted, would hold the same binding legal obligation as earlier PACT contracts. Some in Alabama have contended that later PACT contracts do not guarantee tuition, but as the RSA study points out, this proposition is factually flawed. Further, the RSA study provides a starting point and various solutions to PACT.

I went on to state that PACT is an apolitical issue. It is one that spans party differences and speaks directly to the integrity of our government and its promises. Solving PACT is not politics as usual. PACT families are in the right, and if they maintain their non-partisan stance, grounded purely in obtaining the state’s promise to honor all contracts, I am sure they will have the bipartisan backing in the legislature. But, it will take continued dilligence and advocacy by PACT families to ensure that right makes might in the solution of PACT.

I encourage all Alabamians to support these families and their children in their effort to motivate our state’s leaders to uphold its contractual obligations.

This certainly has been a busy week for the campaign, and the week’s events aren’t done yet. Let me say first that I was very impressed and pleased with the more than 60 Oneonta High School government students that attended Thursday night’s Blount County Democrats meeting. At the meeting, former State Rep. Bob Harvey gave instruction about the state budgetary process, as well as snipits of Montgomery Politics 101. I was afforded the opportunity to follow Bob, and inform the students and Blount County Democrats about our campaign for the Treasurer’s office – giving particular focus to PACT. It was a great opportunity, which was made even more special by the attendance of our local high schoolers.

As for two of the more substantive issues in the Treasurer’s campaign, there were developments this week concerning both PACT and community banking.

The Treasurer’s office is reporting that Governor’s office has delayed the release of the RSA study on PACT, so that the report will not be available for the review of the Treasurer and entire PACT board before the Aug. 19th PACT board meeting.

I was disapointed to learn of the Governor’s position, because I believe that PACT participants should be treated as partners in any solution of PACT. And, this partnership should include the state’s sharing of information regarding PACT’s viability.

Before any necessary solution can be taken by the legislature or PACT board towards remedying the failings of PACT, we must fully understand PACT’s present status and the breadth of challenges in its future. The release of RSA’s analysis of PACT is necessary towards quickly and successfully adapting PACT’s longterm strategy.

I still plan to attend the upcoming meeting of the PACT board, however, without the release of the RSA report, I doubt much will be accomplished at or learned from the meeting.

In regards to Alabama’s local banking system, it is being announced today that Colonial Bancshares will be purchased by the North Carolina banking system BB&T.  BB&T already has a strong presence within Alabama and does have a relationship with Alabama’s Treasury. I hope that most, if not all, of Alabama’s Colonial Bank employees will be retained by BB&T.

However, it must be said that Colonial’s demise marks close of the dissolution of Alabama’s mega-banks that rose to national prominence in the 1990’s and early years following 2000. Eight years ago, Alabama was the South’s second largest banking center, only behind Charlotte, NC.

The Treasurer’s lack of initiative to support local banks, failure to encourage them to invest in Alabama, and failure to closely monitor their stability has only exasperated the affects felt within Alabama due to the national economic downturn.

It would be foolhardy to say that Alabama’s local banking industry will ever have the prominence and recognition that it did when the incumbent Treasurer first came into office. However, I plan to foster a financial environment that is strong at its base, not one that is top-heavy. We will recreate Alabama’s banking industry to be one that is more stable, prosperous, diversified, and invested within Alabama.

My Treasury administration will increase the state’s investment in local and community banks that nurture and encourage economic development within Alabama – particularly in rural and under-served communities. I will also continue the good relations that our state has with those out of state financial institutions that also are good corporate citizens to the communities within our state in which they reside.