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Axing college savings plan: Jury is out

Rodney Tom would like to cut off families' option of saving for a child's tuition at a state college. Key leaders have yet to jump aboard in support.
A scene from the University of Washington campus

A scene from the University of Washington campus Allie Holzman/Flickr

A wait-and-see stance emerged Thursday on what to think about a recommendation to close the Guaranteed Education Tuition program — dubbed  "GET." 

A legislative panel chaired by Majority Leader Rodney Tom, D-Bellevue, has recommended that the GET program be phased out as a budget-balancing measure. Tom leads a 23-Republican-two-Democrat alliance that controls the Washington Senate. The recommendation is to allow people currently in the GET program to stay but not to let new people join it.

"We're going to have to let this sink in," said Sen. Barbara Bailey, R-Oak Harbor, chairwoman of the Senate's HIgher Education Committee. Don Bennett, chairman of a state committee that watches over the GET program, said that group would have to review Tom's panel's recommendations before voicing an opinion on them. Democratic legislative leaders want to keep GET in place.

Bennett and State Actuary Max Smith briefed the Senate Higher Education Committee Thursday about the GET program. The GET program allows families to make advance payments for state university tuition years in advance of a child actually attending college, with the program — not the child's parents — compensating for any increased tuition. For example, someone paying $40 into the program in 1998 would have $112 applied to his or her college tuition today. 

GET accounts have been set up for 146,000 college-bound Washingtonians of all ages, including babies. These people have invested $2.1 billion of their own money into accounts, which were then invested and are now worth $2.9 billion. About 86 percent of the GET investors attend college in Washington.

If everyone — including the most recently enrolled infants and toddlers — were to suddenly seek to pay for college today and withdrew their money, the GET fund would be $631 million in the red. Another way of saying that, however, is that even if everyone used it at once, the fund could handle 79 percent of its obligations. At its present rate of growth, it would be at the 100 percent level in 2032.

The financial health of the GET program is tied to Washington's college tuition increases, which are tied to the amount of appropriations that the Legislature allocates to higher education, Bennett said. 

Preliminary estimates are that tuition at Washington's public colleges will grow 12 percent in 2013-2014 — compared to 19 percent in 2011-12 and 15.2 percent in 2012-13. Subsequent predictions are a 10 percent tuition increase in 2014-2015, a 10 percent increase in 2015-2016, and an 8 percent increase in 2016-2017.

If the tuition increases are 20 percent annually for a few years, or balloon up to 50 percent, that would wreck the GET program, Bennett and Smith said.

John Stang covers state government for Crosscut. He can be reached by writing editor@crosscut.com.


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Comments:

Posted Fri, Jan 18, 1:44 p.m. Inappropriate

It seems that our State owned college, and university system has tuition that is out of reach for most citizens. The estimate in the article shows a 74.2% increase in tuition between the years between 2011 and 2017. It shows a 34.2% increase between 2011 and 2013. That is not inflation. That is pricing citizens out of their own schools. Our secondary education system now only benefits foreign students, and those wealthy enough to pay the tuition.

It does not suprise me that Rodney Tom of Medina, who is an operative for billionaires, wishes to dump the GET program. Billionaires do not like an educated citizenry.

jhande

Posted Sat, Jan 19, 1:13 p.m. Inappropriate

The GET program is in deficit and the only way of getting back in the black without dipping into state coffers is to charge future enrollees more than they would likely pay for tuition at a state college if they saved elsewhere. I cannot see how the decision whether or not to get rid of it or not has anything to do with reserving state universities for the wealthy. Indeed if GET is eliminated and the State is faced with the certainty of making up the current deficit, the state might be more and not less inclined to restore the funding to higher education so that tuition rates do not increase as projected. This will benefit everyone.

WSDW

Posted Sat, Jan 19, 3:35 p.m. Inappropriate

The pricing at "state" colleges and universities are higher than citizens can afford. Wealthy kids of foreigners go to the schools, and wealthy out of state individuals go to the schools.

It used to be possible to pay for college with a summer job, or a part time job during the school year. That is nowhere near possible today. The tuition increases price citizens even further out of these schools. That is a system designed to benefit only the wealthy. What is worse is that it is designed to bnefit the wealthy from around the world. The wealthy kid of a China corporate executive is more welcome at the UW than a kid of a Washington State non-wealthy citizen.

The GET program would only have a fiscal problem if every citizen enrolled in it wished to use the funds at the same time. That would not happen, not many two year olds, five year olds, ten year olds, 14 year olds, or 16 year olds are going to use the funds at the exact same time. Your contention that there is some fiscal crisis with GET is incorrect, and shows little research into the details of the GET program.

The state needs money? How about cutting subsidy to wealthy individuals, and business.

jhande

Posted Sat, Jan 19, 3:56 p.m. Inappropriate

The GET program could fund current enrollees with new enrollees contributions - that is known as Ponzi scheme and it is not generally considered desirable. The GET program is by law required to adjust the cost of GET credits so that the program is fully funded based on the anticipated rates of investment return and tuition increases. If only the same was true for public sector pensions throughout the country or for that matter with social security or medicate!

The price of college and the GET program are related in that the GET program has liabilities that exceed its assets because college tuition has gone up much much faster than the return on investments. When GET started you could buy GET credits at the current price of tuition. That is no longer true. The current price of $17100 to buy 1 year of tuition credits exceeds tuition at the UW by nearly $5000. The GET program is no longer a means to provide affordable access to college.

Your comments about the elimination of the GET program being linked to the desire to exclude lower income people from college are to say the least tangential. Affordable access to higher education would come from higher levels of state support to public higher education institutions and that could happen equally well with our without the GET program

WSDW

Posted Sat, Jan 19, 5:31 p.m. Inappropriate

Spare me, nothing is being proposed at all to lower the price of these schools for citizens.

I said nothing about "low income" citizens. The attempt to segment and marginalize citizens does not work on me. I said non-wealthy citizens. Quite a difference that you "overlook". Don't even try that focused group crap on me.

GET is not in any financial crisis. So, why is it being brought to the frontburner by the Microsoft owned Tom? There are no more pressing concerns? We are not all fools. I know it is the hope of wealthy individuals to have us all be fools, and these wealthy individuals work very hard to bring universal foolery to what they contemptuously call "the masses"; but we are not there yet.

As for Ponzi Schemes; everything is a Ponzi Scheme in our economy. Everything is debt in business, in government, and most individual citizens. Everything based on debt, and interest payements/debt service, means nearly this entire economy, and the component parts, are Ponzi Schemes. When everything is a Ponzi Scheme, the accusation of something being a Ponzi Scheme does not matter much.

jhande

Posted Sat, Jan 19, 5:56 p.m. Inappropriate

So how does keeping a GET scheme that charges $17,100 for a year of college tuition benefit non-wealthy citizens?

WSDW

Posted Mon, Jan 21, 9:29 p.m. Inappropriate

Impossible today? No.

What is impossible is the fact that parents and society tell kids today NOT to try to get a job, that they "need" to study. Translate: binge drink and party.

Posted Mon, Jan 21, 9:27 p.m. Inappropriate

I paid my own way thru community college, university and grad school. All of it. No parental help, no military help, no corporate help. I did get a few grants and loans, which I paid back willingly.

Seems like a reasonable expectation that students could work, and save, and pay at least half of their educational costs, don't you think?

Posted Sun, Jan 20, 2:55 p.m. Inappropriate

Because the tuition cost is projected to be over 17,000 dollars by 2017. So, if you have a 13 year old kid that would enter college in 2018, you would come out ahead. There is no pressure in the slightest to lower tuition.

Tom is not proposing to cut subsidy to business in order to have funds to lower tuition.

Microsoft gets over 300 million dollars a year in subsidy from State Government, and further subsidy from the Federal Government, and local governments. Microsoft works as hard as it can to pay no taxes to Washington State. Microsoft then places demands on our infrastructure, and our education system, and Microsoft is invited in to help create infrastructure, and educational policy; even though they don't pay. Microsoft is just one of the businesses/corporations receiving subsidy, and tax benefit in Washington State.

The subsidy in Washinton State given to business by municipalities, and local governments, is estimated by a New York Times study to be 2 billion dollars a year. The State adds tens of billions a year to the subsidy. Shoot, even the proposed arena, and NBA team, would be completely Seattle tax exempt. There is a shortage of money, because business in Washington State does not pay its way.

These same businesses demand that the educational system focus on training citizens for the businesses' needs. The same businesses that do not pay. Most STEM degrees are nothing but vocational training. The tax avoiding businesses wish the taxpayer to cover the cost. There is your problem with funding for almost everything in the state. Businesses are subsidized, avoid taxes, and are a net loss to the citizenry. The citizens end up paying money to have the non-paying businesses in the state.
That is what needs to be reformed.

The GET program is a good deal, that serves a purpose to benefit the Citizens of Washington State. That is why governments are formed, to benefit the Citizenry. Our State Government needs to realize what its purpose is. Its purpose is not to rule citizens for the benefit of corporations/business; but to be a citizen driven entity to benefit citizens.

jhande

Posted Sun, Jan 20, 11:10 p.m. Inappropriate

And what is the point of closing the program exactly? It's completely self-funded by the people who choose to participate. It doesn't cost the state a dime right now, but closing it sure will. If terminated, they have to pay out to every person with an account and there's definitely not enough money to do that. If they close it to new customers and allow the existing customers to stay in, there will have to be some way to pay staff to keep it open until the last one is done - which will be decades. Even former Gov. Gregoire opened an account for unborn grandchild. The program isn't hurting anyone, it's actually helping the middle class who will eventually get squeezed out of higher education at the rate things are going.

argh2013

Posted Sun, Jan 20, 11:13 p.m. Inappropriate

p.s. the program is not currently operating at a deficit according to an actuary and the state treasurer -- but it cost the state plenty if you close it. and the program doesn't charge tuition, the public universities do.

argh2013

Posted Mon, Jan 21, 8:17 p.m. Inappropriate

I agree about the business's not paying their fair share of tax's and getting subsidies from the state. But at the same time saving something for tuition is better than saving nothing and "adult" parents should be able to see that and make decisions accordingly.

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