A proposal in the state Legislature to change Washington’s Guaranteed Education Tuition program lost some momentum Wednesday when the State Actuary released report saying the prepaid tuition program has a slim chance of running out of money.
The results of the report featured prominently in a House Ways and Means Committee hearing this morning on the Senate Bill 5749, a proposal that would reform GET in an effort to keep it from becoming a financial liability to the state, and they led some state representatives to argue that creating a new “GET 2” won’t be necessary.
“My conclusion is that, A, the GET program is in great shape and, B, that GET 2 is not a good idea,” said Rep. Larry Seaquist, chair of the House Higher Education Committee after hearing the results of the study.
Though he voted to pass the proposal out of his committee last week, Seaquist, D-Gig Harbor, said now that he had seen the report he planned to work with the prime sponsor of the bill, Sen. Lisa Brown, to make some minor changes to GET management, but leave most of the existing program as it is.
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According to the report, the existing GET program, which allows people to buy credits at today’s prices that are guaranteed to cover future tuition at the state’s most expensive university, has a 0.7 percent chance of requiring a state bail-out over the next 50 years. Under a worst-case scenario, though, the program could cost the state $4.6 billion.
The changes to the program, proposed in Senate Bill 5749 would probably reduce the amount that GET units would appreciate over time. Rather than guaranteeing that 100 units would be worth a year of tuition at the most expensive state university, GET units would appreciate based on a weighted average of all state college and university tuition increases.
Those changes, which would only affect units purchased after July 31, 2011, could reduce the chance that the program would become a financial liability to 0.4 percent, according to the report, unless its lower payout leads fewer people to buy into the program.
If that happened, though, GET 2 could get risky. The report said if the changes lead people to purchase 50 percent fewer units per year, GET would have a 7 percent chance of costing the state about $16 billion.
Testifying at today’s hearing on the GET 2 bill, State Actuary Matt Smith said Texas and Illinois had tried reforming their prepaid college tuition programs and had experienced a decline in enrollment, but their changes had been different than those suggested in Washington. At this point, he said, nobody knows what GET purchaser behavior would look like under the bill.
Larry Lee, Deputy Director of GET, called the existing program “a viable and popular savings vehicle.”
He said he had concerns about the proposed changes to GET because the weighted average approach would make it more difficult for families to save for the cost of more expensive state research universities and would be difficult for GET to calculate.
Furthermore, he pointed out, the Office of Financial Management estimates that the bill to change GET would cost about $329,000 in 2012, mainly to change computer programs and marketing materials.
Supporters of the bill, which is sponsored by the Senate majority and minority leaders, have said that the impetus for changing GET came from uncertainty in the Legislature over how much to raise tuition and cut state funding for higher education in Washington.
In Gov. Chris Gregoire’s proposed budget, she recommended cutting funding to higher education in the state by about $447 million and raising tuition by 9 to 11 percent per year. Another proposal under consideration in the Legislature, House Bill 1795, would give state universities tuition-setting authority