PACT program legally bound to pay for Alabama students
The Legislature passed the Wallace-Folsom Prepaid College Tuition Act in 1989. State Treasurers repeatedly marketed the investment scheme as the PACT program.
I have original documentation sent to investors by George Wallace, Jr., and Lucy Baxley. It is irrefutable that the language in the documentation guarantees college tuition will be paid. Further, participants were encouraged to solicit family or friends to invest in the scheme. Supposedly, the money invested went into a trust fund.
The trust fund is an instrumentality of the State. It was designed to assist payment of tuition costs by allowing participants to purchase in advance prepaid tuition contracts, which obligated the trust fund to pay tuition in full if the child attended a state college. The purchase price was determined actuarially. Payments to the State became public funds, which the State was supposed to invest to generate assets to fund future payments.
In 2001, the Legislature substituted that PACT program with the Wallace-Folsom College Savings Investment Plan and designated the plan as an agency and instrumentality of the State of Alabama. The plan now consists of the PACT Program and the ACES Program.
Current law reads: The plan shall be administered by the State Treasurer. The facilities and resources of the State Treasurer’s Office shall be used and employed in the administration of the plan. The official location of the plan shall be the State Treasurer’s Office.
Now comes Kay Ivey who says the State is not obligated to hold up its end of the bargains made at the outset of the program, despite the plain language inducements or promises to cause investors to pay cash to the program.
Whether you call it a program or plan, I believe the Legislature is obligated to fulfill obligations of the trust.
Perhaps the attorney general should look into whether there has been a breach of duty by the various state officials in the oversight and administration of the plan?
Regardless, there is a potential for breach of contract here, if not violations of securities laws.
Larry E. Darby