Texas taxpayers could get dinged by tuition plan’s financial woes

The Legislature had a good idea in 1995 when it approved a bill declaring "an urgent public necessity to assist young Texans in obtaining a higher education." It established a prepaid higher education program through which parents, grandparents or other interested parties could set up savings accounts and guarantee that, when the time came, students’ tuition and fees would be paid at "the institution that best meets their individual needs."

Texas voters agreed, and in 1997 they adopted a constitutional amendment that put the state’s full faith and credit behind the tuition-payment guarantee.

Nowhere in the language setting up what was then called the Texas Tomorrow Fund was it described as anything other than an investment in education.

Now some people want to turn it into their own financial gravy train at the cost of billions of taxpayer dollars. Worse still, some lawmakers seem to agree. Shame on them all.

Comptroller Susan Combs is the state official charged with administering the fund, now called the Texas Guaranteed Tuition Plan. She sounded an alarm earlier this year, saying that the fund had been hit by enormous increases in the cost of college tuition and fees while at the same time being battered by recession-spurred investment losses.

The fund can no longer afford its overly generous refund policy, she said. That policy had allowed people to terminate their tuition plans and receive not just full refunds but also earnings based on those skyrocketing tuition costs.

That means someone who bought a plan under the fund in 2003 and canceled it in 2007 pocketed a 53 percent return.

Under that policy, by 2015 Texans would be obligated to subsidize the tuition fund with tax money. That’s when the fund’s projected shortfall of $1.7 billion to $2.1 billion could make itself felt, Combs says.

As the leader of the Texas Prepaid Higher Education Tuition Board, she helped approve a policy change that would limit refunds to the amount of money an individual had paid into the fund.

State Sen. Jane Nelson of Flower Mound is one of those who howled in protest.

"Many of the parents would never have invested their hard-earned income into this program were it not for the refund policy, which assured a return on their investments," Nelson wrote in a Sept. 22 letter to Combs.

A group of 43 Democratic state representatives also sent a letter urging Combs and the board to reconsider. One of those representatives, Marc Veasey of Fort Worth, called the policy change "a bad precedent."

Why is it bad to change something that so seriously threatens the solvency of this fund? Nobody who stayed with the plan and sent a student to college would see any change at all. And isn’t there a great difference between getting a return on investments and making a killing at the expense of Texas taxpayers?

Combs has felt the legislative pressure. She’s been warning lawmakers since January 1997 that this situation was approaching. Now, all of a sudden, they are paying attention.

The policy change was not sudden. The board approved it in May to go into effect on Nov. 1. Letters went out to fund depositors saying that they had until Oct. 30 to request a refund under the old policy. Then that deadline was moved back to Nov. 30.

Now Combs is backing down. She says she’ll recommend to the board on Thursday that the previous refund policy be restored until the Legislature can prescribe its own solution to the tuition fund’s financial troubles.

So now it’s legislators’ problem. It’s hard to see how they’ll come up with a better solution.

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