Associated Press
MONTGOMERY, Ala. (AP) — A Montgomery County circuit judge approved a settlement Wednesday that will allow parents who bought contracts in the state's Prepaid Affordable College Tuition program to be paid in the future at the level that was due to them in autumn 2010.
The settlement will allow students to attend college with much of their tuition paid, but the students will have to pay any increases in tuition since last fall.
The state started PACT more than 20 years ago with parents paying in a fixed amount of money, expecting that after graduating from high school, college tuition would be paid. The program worked well until 2009 when plunging stock prices and rising tuition costs combined to put the program in financial jeopardy.
The co-founder of the group Save Alabama PACT, Patti Lambert, described the settlement as bittersweet.
"It's not what we paid for and not what we wanted but it's better than the alternative," Lambert said.
Attorney Doyle Fuller, lead attorney for plaintiffs, said he was pleased, but not surprised that the judge approved it because within three years, the program would have completely run out of money.
"Thousands of people would have lost everything they put into it," Fuller said. "It was really the only reasonable thing to do."
Fuller said he wishes that participants could have gotten everything that they signed up for but that the reality is that the program does not have the money to do that.
"As somebody said ... You can't get blood out of a turnip. This settlement at least got the turnip."
Fuller said that at least the children will get something significant out of the program. He said the average amount paid in is $7,300 and the average pay out for four years of college is $33,000.
"They're getting a fairly good return on their investment," Fuller said.
In approving the settlement, Judge Johnny Hardwick also approved an agreement for attorneys to be paid almost $5 million from the settlement for plaintiff's attorney fees.
The judge said in his order that he found the attorney fees to be "fair and reasonable" and significantly lower than normal fees in such complicated cases.
Alabama Treasurer Young Boozer, a member of the PACT Board, praised the settlement.
"The settlement provides benefits for all contract holders, preserves substantial value and protects the program with a long-term financial plan," Boozer said. "This is the best possible outcome for PACT participants, given the available assets."
In his order, Hardwick found that there are about 40,000 PACT contracts that represent about 30,000 individuals.
Hardwick said the program does not have the assets to assure payment of full tuition and expenses for all of those contracts.
"The proposed settlement would serve to address the undisputed funding shortfall by establishing parameters for an equitable distribution of the limited assets," Hardwick said.
The Legislature in 2010 passed a bill to pump about $548 million into the program over about the next 15 years, but attorneys said that is not expected to be enough to fully fund all contracts.
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Associated Press writer Jim Van Anglin contributed to this report.
The settlement will allow students to attend college with much of their tuition paid, but the students will have to pay any increases in tuition since last fall.
The state started PACT more than 20 years ago with parents paying in a fixed amount of money, expecting that after graduating from high school, college tuition would be paid. The program worked well until 2009 when plunging stock prices and rising tuition costs combined to put the program in financial jeopardy.
The co-founder of the group Save Alabama PACT, Patti Lambert, described the settlement as bittersweet.
"It's not what we paid for and not what we wanted but it's better than the alternative," Lambert said.
Attorney Doyle Fuller, lead attorney for plaintiffs, said he was pleased, but not surprised that the judge approved it because within three years, the program would have completely run out of money.
"Thousands of people would have lost everything they put into it," Fuller said. "It was really the only reasonable thing to do."
Fuller said he wishes that participants could have gotten everything that they signed up for but that the reality is that the program does not have the money to do that.
"As somebody said ... You can't get blood out of a turnip. This settlement at least got the turnip."
Fuller said that at least the children will get something significant out of the program. He said the average amount paid in is $7,300 and the average pay out for four years of college is $33,000.
"They're getting a fairly good return on their investment," Fuller said.
In approving the settlement, Judge Johnny Hardwick also approved an agreement for attorneys to be paid almost $5 million from the settlement for plaintiff's attorney fees.
The judge said in his order that he found the attorney fees to be "fair and reasonable" and significantly lower than normal fees in such complicated cases.
Alabama Treasurer Young Boozer, a member of the PACT Board, praised the settlement.
"The settlement provides benefits for all contract holders, preserves substantial value and protects the program with a long-term financial plan," Boozer said. "This is the best possible outcome for PACT participants, given the available assets."
In his order, Hardwick found that there are about 40,000 PACT contracts that represent about 30,000 individuals.
Hardwick said the program does not have the assets to assure payment of full tuition and expenses for all of those contracts.
"The proposed settlement would serve to address the undisputed funding shortfall by establishing parameters for an equitable distribution of the limited assets," Hardwick said.
The Legislature in 2010 passed a bill to pump about $548 million into the program over about the next 15 years, but attorneys said that is not expected to be enough to fully fund all contracts.
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Associated Press writer Jim Van Anglin contributed to this report.
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