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Tomorrow Never Dies

Lobbyists and lawmakers are fighting to preserve the terms of the contracts signed by parents who enrolled in the Texas Tomorrow Fund prepaid college tuition plan.

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The Texas Tomorrow Fund was set up to remove uncertainty about the future costs of college for parents willing to put up the money now to lock in current tuition rates. But recent attempts to change that arrangement raised the hackles of a couple of lawmakers-turned-lobbyists who want the state to honor the terms of the contracts signed before the program was effectively shut down in 2003.

Despite assurances from Comptroller Susan Combs, whose agency adminsters the Texas Tomorrow Fund, former state Reps. Curtis Seidlits, D-Sherman, and Keith Oakley, D-Terrell, have launched the Tomorrow Families Fund to hold the state accountable to owners of those contracts. After the fund's board announced and then rescinded a change to Texas Tomorrow Fund last year, Seidlits and Oakley — who had enrolled in the program themselves soon after it went into effect — worried that no one was standing up for families in the negotiations. “We’re concerned, and we want to ensure that the path the Legislature takes leads to a full funding and honoring of this obligation,” Seidlits says.

Introduced in 1995 and constitutionally guaranteed to 1997, the Texas Tomorrow Fund offered three prepaid plans, priced accordingly for four-year private, four-year public and two-year community colleges. In 2003, when lawmakers deregulated tuition, making it impossible for actuaries to set prices on the prepaid plans, the fund was temporarily closed and has remained so: Investment income hasn't covered the gap between expected costs and available money, and the state will likely be forced to use tax and other general revenue to make good on outstanding contracts.

Those contract holders don't need to worry, says R.J. DeSilva, a spokesman for the comptroller’s office. “Your payments are coming to you,” DeSilva says. “They are constitutionally guaranteed, so if the fund runs out of money, the state will put money in to cover [them].”

That’s small comfort to Oakley, who notes that the Legislature can change the terms of the contracts. “There are no guarantees in life,” he says of the constitutional provision. He pulls out a letter from last fall that announced that the terms of the contract had changed: Past a certain date, parents who backed out of the deal before their children enrolled in school would get a smaller amount money returned to them than they had been promised. “Although the rule change does not in any way impact the true purpose of the Plan,” reads the letter, there’s been a “… unanimous decision to limit refunds to the actual amount of contract payments (less administrative fees.)” 

Within a couple of months, Oakley and other contract holders had a new letter rescinding the changes, but not before close to 7,000 families rushed to cancel their contracts and asked for their money back. Just as worrisome as the changes, they say, was the process behind them. “Most of the notices that we received were after the fact,” Seidlits says.

State Rep. Scott Hochberg, D-Houston, agrees. “There was a pretty serious attempt made to change the terms of the deal,” says Hochberg, who chairs the House Appropriations Subcomittee on Education. “That didn’t happen ultimately, but it could have, and nobody was really watching this for the families.”

At the time, Hochberg joined a long list of House Democrats who wrote to Combs arguing against the decision. “To change the terms at this late date is to break faith with parents who put their trust in our state,” the lawmakers wrote.

Seidlits and Oakely hope to use their influence as former legislators to keep the House and Senate committed to fulfilling the contracts as originally written. That’s easier said than done, however. According to DeSilva, as of the Aug. 31, 2009 actuarial report, the program's unfunded liabilities were at $605.6 million. That's up from $206.3 million in unfunded liabilities in the 2008 report.

"Texas still has an obligation"

Oakley and Seidlits announced their plans in a March 17 press release but kicked off their effort formally last week at a Senate Finance Committee hearing on the Tomorrow Fund. “Our goal," Seidlits said in his written testimony, “is to find and locate these families, address the central issues of full funding of the contracts, and advocate on their behalf.”

Hochberg says that from what he’s seen, their work could prove very valuable for the families impacted, since the Legislature will be under tremendous pressure to act in the interest of the budget and not of the contract holders. “I can envision circumstances where the easy solution would be to order changes to be made to the contracts rather than … coming up with the money,” he says.

Lawmakers would be within their rights to do so. “The contracts themselves have a clause saying the state can choose to change the terms, so from a technical standpoint, even dishonoring the contract is honoring the contract,” Hochberg explains. Yet state Rep. Rob Eissler, R-The Woodlands, who chairs the House Education Committee, says that just because the state can change the terms doesn’t make it an ethical decision. Unlike California, he says, “Texas still has money. And on top of that, Texas still has an obligation.”

Based on the number of fans of its nascent Facebook page — eight as of March 30 — the Tomorrow Families Fund is getting off the ground slowly. Seidlits and Oakley hope to use social media and other forms of outreach to attract attention, and they'll need it: The state's list of Texas Tomorrow Fund contract holders is private, so there's no easy way for the new group to recruit members.

Both men say they aren’t receiving payments for their efforts — there's no client footing the bill, they say — but they plan to charge those who join the effort a $40 fee that will go toward covering costs. Of course, DeSilva reports that there are currently about 97,000 contracts and that if every one of them joined, which is unlikely, they would have $3.9 million to mount a campaign.

Oakley’s not holding his breath. “It looks like we’re going to be doing this out of the kindness of our hearts," he says.

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