Alabama PACT Board Bought Themselves Some Liability Insurance In 2004

by: countrycat

Sat Jun 13, 2009 at 13:45:00 PM CDT

The way things are going, they may need it!

At their 4/8/2004 meeting (page 9), the PACT board approved a motion for the purchase of liability insurance for the board.

Treasurer Kay Ivey "...informed the Board that coverage could be provided for less than $100 per year per member" through the General Liability Trust Fund.

This General Liability Trust Fund is an interesting beast. The insurance is defined as:

36-1-6.1 Insurance coverage for negligent, wrongful acts of state employees or agents, including foster parents and adult foster care providers; duties of Finance Director; self-insurance; service of copy of lawsuit on Attorney General; costs of insurance.

I'm sure that this is standard for the board members of many state agencies.  But I was struck by the timing.  The PACT Board decided they needed liability insurance just a month before PACT parent, Dale Goode, asked them to take steps to strengthen the program and got rebuffed.

Could their sanguinity have had anything to do with their newly "protected" status?

"What Do Parents Think They're Buying?" Alabama PACT Board Discussed This At Meetings

by: countrycat

Tue May 26, 2009 at 15:47:53 PM CDT

In 2005, the Alabama PACT board modified the disclosure statement to put it in a "more friendly presentation by using bold type, space between important paragraphs and that sort of thing..."

The goal was to make it clear that "obligations are limited, payable only from proceeds received on contract sales and earnings from investment. [sic]"

These quotes are taken from the 4/15/2005 PACT Board meeting (page 26 of the 2005 minutes).  It sounds like they're really concerned with full disclosure.  But, three pages later, board member Ricky Jones asks:

"Do people really look at the return on this program, or do they look at the idea that they know they'll have their college paid for?"

MR. SHERLING:  "I think it's the latter.

MS. MOORE:  "I do, too."

MS. EMFINGER: "That's absolutely true.  They're looking to see that once they've made these payments, they don't have to worry about whether or not they're earning 5 percent, 4 percent, 10 percent, or 15 percent.  They just know that if they make their payments, at the end of the day when it's all said and done, their child is going to have their tuition paid."

MS. MOORE: "I think that's why it's important that we did that disclosure in bold at the first of the Rules, that we're not misleading anybody.  That is the psychology of why they're buying it.  But the fact of the matter is, it's not a guarantee.

hmmm... did the new disclosure work?  Because there was absolutely no discussion at that meeting about changing the way the program was marketed or changing the name from, well, PREPAID COLLEGE TUITION to something more descriptive like the "Pay Us Now & Maybe Your Kid Can Go To College Unless We Screw Up Savings Program (PUNAMYKCGTCUWSUSP).  Hmmmm... that's a long acronym.  Let's just call it PUNY for short.

More about what the PACT PUNY board knew - and what they told contract holders on the flip.

True or False: Alabama PACT Parents Were Just Dumb Investors

by: countrycat

Mon Mar 16, 2009 at 18:36:30 PM CDT

It's a question floating around blogs, newspaper editorials and letters to the editor.  Why did PACT parents and grandparents think their investment wouldn't lose money?  Furthermore, the questions ask: "I've lost a lot in the market, so why should tax dollars prop up your dumb investment?"

On Sunday, BlueSeeingRed's diary asked some good, legitimate questions along the same lines - although not in such an ugly way.

...but if it was just some glorified mutual fund, aren't the people who invested in the program culpable also in this matter?

I mean there is something called "Buyer Beware"...that it is incumbent upon everyone that signs a contract to know what they're getting themselves into. Thats why you need to read any contract before signing it, or if you're unable to for whatever reason, to get a competent lawyer to do so for you.  I think, after giving it some thought,  I for one need to see the contract before rushing anymore into this blame game.

 Below the fold, I'll try to answer some of the questions and criticisms I've seen in a FAQ format.  One that I certainly hope is more illuminating than the one the PACT board put up.

Oh, there's also a short video of parents and grandparents at the Montgomery parent's meeting on March 12th.  They tell their stories.  One is a banker who describes how George Wallace Jr. (then state treasurer) solicited the Alabama banking community to sell the program to the public in the early 1990's.  Other parents read from their contracts... words like "guarantee" and "assurance" are in each one.  To my knowledge, the definitions of those words haven't changed in the last 20 years or so.