Honoring PACT contracts morally (and legally) required

Yesterday, “the Alabama Senate voted 33-0 . . . for a bill to give $236 mil­lion to the Prepaid Affordable College Tuition plan over eight years without any caps on tui­tion,” according to the Montgomery Advertiser.This measure would adequately fund the PACT program for the existing 45,000 contracts.

Over the past year, this issue has caused great emotional strain for many families in Alabama. Since the issue first arose, I have always felt the State was morally required to honor these contracts.

However, based on my review of the materials and my experience in civil courts, I have also felt the State would be legally required to pay.  If the State delays much further, families will sue and, I think, have an excellent prospect of success.  Of course, the State would incur hundreds of thousands of dollars in attorney fees, expert-witnesses and consultants, and a host of other litigation-related expenses.

The early contract holders were expressly sold a “guaranty.” While the PACT Board nuanced the “fine print” in later years, the broad scale advertising remained the same. Accordingly, the State would be hard pressed to defend itself over some “fine-print” contractual tweaking.

Accordingly, the State needs to”settle” the issue with these families. As the article points out,  this bill only addresses one aspect of this problem: the duty to honor the contracts.

Richard Huckabee, co-found­er of the Save Alabama PACT parents’ group, said he appreci­ated the Senate’s overwhelming vote Thursday, but he said Little’s bill is not a final answer. “Some tuition mechanism has to be applied, and I think we will see that in the House,” he said.

The Legislature still must address satisfying its moral (and legal) obligation in a fiscally responsible fashion.

Perhaps, this will open the debate on the unnatural increase on college and university tuition and costs.  Since 1982, cost of college tuition and fees have increased 439%. (PDF Report download: Measuring Up 2008 National and State Report Cards)

UPDATE: The Alabama legislature reached a compromise last week aimed at shoring up the state’s prepaid-college-tuition plan with nearly $548 million over the next 17 years and keeping the state’s promise to pay tuition for 44,000 students.


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