BIRMINGHAM – Jeremy Sherer, Democratic candidate for Alabama State Treasurer, commented today on the annual report released on the financial status of Alabama’s Prepaid Affordable College Tuition Program (PACT).

“The PACT financials released today surprise no one”, stated Sherer. “However, the numbers still have the capacity to cause one to ask ‘how is this possible’.”

“PACT has not been fully funded since 2001. The entire term of Kay Ivey as Treasurer has been marked by PACT operating deficits. Though the stock market troubles over the last two years have exasperated the problems of PACT, instability was present within the program long before the recent recession”.

Further, Sherer states, “PACT was fundamentally flawed in its inception. PACT, in an effort to outpace rising tuition, was dependent upon either continuing to win while playing the stock market, or by having an ever increasing number of new contract holders to pay for the immediate financial obligations of the program.”

“Some critics of PACT fault rising tuition rates for PACT’s troubles. However, four of the eight years since 2002, the annual rate of return on investments outpaced the annual average tuition rate increase by colleges and universities. Though stabilizing tuition rates among colleges and universities is part of the solution, it is only part of PACT’s problems and not the cause of them.”

“I am committed to honoring Alabama’s contractual obligations to the 48,000 remaining PACT families that prepaid college tuition through PACT. The Retirement Services of Alabama, in its August financial analysis of PACT stated that if Alabama compromises or breaches its contractual obligations, the State will find itself as a defendant in court and will ultimately be held liable for the breach.”

“Therefore, in an effort to make PACT work as it was intended, I will seek to reduce the administrative costs of PACT and increase the return on PACT investments. Also, as Treasurer, I will seek to utilize some of the approximate $400 million that resides in the Unclaimed Property Fund, which is managed by the Treasurer, as bridge funds to stabilize PACT investments until a long term financial solution can be enacted by the Legislature.”

Please contact Jeremy Faulkner at (205) 446-1342 with any questions.

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