If state universities froze tuition for the next two years, the financial woes of the state’s prepaid tuition plan would practically evaporate.
That’s the conclusion of the state actuary, whose new analysis shows that freezing tuition two years in a row would bring the Guaranteed Education Tuition (GET) program’s unfunded liability to $117 million. The program would be 5 percent underfunded.
It is currently underfunded by more than $600 million — the amount of the shortfall that would occur if everyone with GET credits used them at the same time. The unfunded liability represents about 20 percent of the total value of all GET contracts.
State actuary Matt Smith is to discuss GET during a House higher-education committee meeting Thursday morning.
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More than 120,000 people hold GET credits, which have proved a popular way to pay college tuition.
The program is getting a close look this legislative session not only because it’s underfunded, but also because it has tied the hands of universities that want to charge different tuition rates for different programs.
Authority to charge differential tuition was granted to the universities in 2011, then suspended for a year because of its potential impact on GET.
Charging more for certain programs is a way for universities to expand high-demand programs, such as engineering or computer science, at a time when state funding is tight.
One hundred GET credits are worth one year of tuition at the state’s most-expensive four-year school. State attorneys have said that if universities create a higher tuition category for some programs, that higher tuition would become the new payout value of GET — a move that could drive the program much deeper in the red.
Senate Majority Leader Rodney Tom, D-Medina, led a committee last year that examined differential tuition and ended by proposing that GET be closed to new investments.
But the state actuary has said that closing the program would eventually cost the state $1.67 billion over 11 years beginning in 2025 if tuition continues to go up as expected, because the program would eventually run out of money.
“Closing the program does not help the program, financially,” said GET director Betty Lochner.
Last year, the state began charging a “recovery fee” of about $19 for every GET unit sold.
That money is being used to help erase the unfunded liability and is expected to return the program to fully funded status in about 20 years — if tuition goes up as expected.
Smith was asked by state Sen. Ed Murray, D-Seattle, to examine what would happen to GET if there were no tuition increases over the next two years.
The state’s six four-year college presidents have pledged not to raise tuition if the Legislature gives them an additional $225 million over the biennium.
In recent months, GET has also been helped along by the stock market.
The actuary calculated this summer that GET was 78.5 percent funded. The recent stock market rally has brought its funded status to “north of 80 percent,” Lochner said.
Katherine Long: 206-464-2219 or firstname.lastname@example.org. On Twitter: @katherinelong.