The state treasurer says a Republican bill to cut college tuition would damage the state’s prepaid college-tuition program, but Republicans say they believe the Democrat’s letter was politically motivated.
A Republican proposal to slash public four-year college tuition by 25 percent would have “damaging effects” on the state’s prepaid college-tuition plan, and could leave the state vulnerable to lawsuits from investors, state Treasurer James McIntire said Monday.
Republicans promptly accused McIntire, a Democrat, of playing politics — a charge he denied.
In a letter to legislators, McIntire wrote of his “deep concerns” about the effect of a tuition cut on the Guaranteed Education Tuition (GET) program.
It would be “next to impossible” to manage the fund if the GET committee had to anticipate the possibility that the Legislature could step in at any time and retroactively adjust GET rates, he wrote.
Most Read Local Stories
McIntire serves on both the State Investment Board, which invests the money, and the GET committee, which manages the program. He said he wrote the letter out of a sense of fiduciary responsibility for GET.
“The program, the statutes, the contract — everything about that program was designed around tuition going up,” McIntire said in an interview Monday. “If all of a sudden you have a decline, do we know if that’s a one-time effect, or not?”
Sen. John Braun, R-Centralia, the chief architect of the plan to cut tuition, said he was disappointed by McIntire’s letter and pointed out that state Actuary Matt Smith’s analysis showed the proposal could make GET more financially sound because tuition hikes would grow more slowly.
“We are doing things that fundamentally help GET holders,” Braun said.
GET is sold in increments called units, and 100 units are guaranteed to be equal to a year of tuition and fees at the state’s most expensive public university at any given time.
The 17-year-old state-run program is a way of prepaying for college tuition, but investors pay a premium in exchange for the guarantee. Currently, one GET unit costs $172 and can be redeemed for $117.
A new price and payout value is set annually.
But McIntire said Smith’s analysis also shows “how convoluted the assumptions are that you might need to make” to decide how much a GET unit should cost, and how much its payout value should be worth.
“You’re not actually keeping to a long-term trend,” he said. “It makes it much more difficult to price it, and manage it.”
If tuition is cut, the payout value of each unit would also be cut. Braun’s bill would provide a kind of “stock split” in which GET investors would gain more units to make up for the tuition cut — under one scenario, they’d gain roughly 33 percent more units. The value of their account would remain the same.
McIntire said it wouldn’t be that simple. He said the program is based on long-term trends, and managers would not want to make a one-time adjustment based on a tuition cut that occurred in one year.
He noted that the Washington Legislature has changed tuition statutes 17 times since 1981. “I don’t feel comfortable trying to predict legislative behavior around tuition-setting if in fact we’re going to be engaging in these wild swings,” he said.
Braun’s legislation would tie tuition to the state’s average annual wage, which has gone up 3 to 3.5 percent a year. He acknowledged that a future Legislature isn’t bound by what the current Legislature passes, but because the policy is both in a bill and in the budget, it would be harder to alter.
“We’re proposing a serious, long-term policy commitment,” he said.