A state actuary report released Thursday said there is a less than a 1 percent chance Washington's prepaid tuition program would not be able to meet its financial obligations over the next 50 years, and changes proposed by the Legislature could create a less solvent alternative.
If the current Guaranteed Education Program did have trouble meeting its obligations, the state would have to come up with as much as $4.6 billion to cover the shortfall, according to the solvency analysis.
But in a hearing Thursday morning before the House Ways and Means Committee, State Actuary Matthew Smith emphasized the chance of insolvency is low.
“Based on this analysis, the program does look sound under current terms,” Smith said, but added, “It isn’t without risk.”
Senate Majority Leader Lisa Brown and Minority Leader Mike Hewitt have proposed a bill that would establish new limits on the program that might make it less attractive to buyers.
Thursday’s actuary report said Brown and Hewitt’s proposal would have a lower possibility of insolvency – 0.4 percent versus 0.7 percent for the current GET over the next 50 years – unless the new program attracts many fewer participants.
Opponents of the bill say the new GET is likely to attract fewer participants because investment returns will not be as good. If that happens, the chance of potential state contribution to the program would increase dramatically.
As the GET program currently stands, 100 prepaid units will buy a year of tuition and state mandated fees at the state’s two most expensive public universities – University of Washington or Washington State University – whenever they are used in the future.
Substitute Senate Bill 5749 would decrease the value of GET units for people who buy into the program starting next August. For new investors, 100 units would be worth the average of tuition at all of the state institutions of higher education, weighted by the number of enrolled undergrad students, and would cover some but not all student fees.