Spokane7
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February 17, 2011 in City
State struggling to keep up with education fund
Lawmakers seek fix to keep tuition program solvent
Washington state has to change its popular prepaid college tuition program or risk financial problems down the road, a legislative panel learned Wednesday.
The Guaranteed Education Tuition Program could face insolvency in the long-run because the fund’s return on investments isn’t keeping pace with rising tuition costs.
“I don’t think we have a serious problem at this time,” said Senate Majority Leader Lisa Brown, D-Spokane. “We are trying to avoid creating some kind of unfunded liability problem in the future.”
Since 1998, nearly 120,000 families have opened GET accounts, buying future college tuition at current prices. Under the program, participants buy a GET unit with a price calculated through a formula in which 100 units equals one year of tuition and fees at the University of Washington. The units are worth a comparable value whenever they are used. In other words, the state guarantees that 100 units bought in 2011 will be worth a year’s tuition at UW in 2021 or 2041, regardless of how much tuition costs at the time or what school the student attends.
Money used to purchase GET credits goes into a fund managed by the state investment board, which averages a return of about 8 percent, Brown said. But some years, college tuition has gone up faster than that.
A state actuarial report released earlier this year says that under some scenarios, GET could run short of money, and the state would be on the hook for the difference. If the program stays as is, “the chance that the state would have to make contributions over the next 50 years is low, but should it occur, the dollar amount is very high,” the report warned. Changing the plan would lessen the risk the state would have to pay, actuaries said.
Brown and Senate Minority Leader Mike Hewitt, R-Walla Walla, are among sponsors of a proposal to change the GET plan later this year. All units purchased before the changes become law would be redeemed at the original rate, but units purchased afterwards would come under new rules:
• The units wouldn’t be tied to UW tuition, which is the highest of any state college in Washington; instead they would be tied to the average tuition at all state colleges, with a formula that accounts for the number of full-time students at each institution.
• The calculation would no longer include the cost of student and activity fees. Students would have to pay those when they enroll.
• Once a beneficiary starts using his or her GET units, all units would have to be used within six years.
• The state could impose new limits on the number of GET units purchased. Right now, the state can’t limit GET purchases to less than the cost of four years of UW tuition.
• The state would still give full refunds at current values if a beneficiary dies or becomes disabled, but could give a smaller refund for beneficiaries who choose not to attend college.
Sponsors are open to other suggestions, Brown told the Higher Education Committee, which got its first briefing on the bill and took no action Wednesday.
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oneanddone on February 17 at 4:06 a.m.
I can envision the day when the state tells parents, “sorry, we’re welshing on our promise. Just one of those things, you know”? Social security, medicare, yada, yada. The new truth about gov’t is that their promises are meaningless. Except for themselves of course. The French proletariat had the right idea.
berrybestfarm on February 17 at 7:23 a.m.
This issue again begs the question. What is it that is driving the rising cost of college education?
westerly on February 17 at 8:15 a.m.
berrybestfarm:
Rising costs? Probably 70-80 percent of college fees goes to college employees..hey they are not making $50,000 a year. Profs are pulling in $100k a year and there are thousands of them..plus golden retirements, pensions, health care. Like all government entities…..employee costs are the biggest chunk of money in the whole system.College tuition is rising much faster than inflation..inflation is zero along with cost of living, according to the feds..but the state is still giving out lots of COLA’s and step raises to their employees.
btles on February 17 at 1:51 p.m.
Westerly, you may be right in some cases, especially when it comes to the big 4 year institutions, but I work at a community college. Faculty are hired at around $40k/year. Average classified staff earns $30k or less. I, nor my staff colleagues have had a COLA years. The fact is that our net income is less than last year due to increases including rising health care costs.
While personnel costs are the largest expense, this is true of most any employer. When it comes to education there is a certain level of personnel that must be maintained to deliver the education – no employees = no classes = no education. And it must be recognized that there are a number of processes going on outside the classroom that makes education work. Employees dedicated to registration, financial aid, counseling, and computer support are just a few examples. The major reason tuition is rising is because the state continues to cut funding for colleges and authorizes the tuition increases to make up for the lack of funds.
Look to the administration for cuts. Should the new chancellor of the community colleges of Spokane really be making more than Gary Livingston did? In private industry there is normally a cost savings when positions turn over. Should a dean make $76k/year? Instead they cut front line positions earning less than half that amount. And the community colleges are the best deal going…