Alabama’s Prepaid Affordable College Tuition (PACT) program has been in trouble since the stock market took a tumble last year. The fund’s managers now say that the program, which invested 70 percent of its assets in stocks, cannot meet the long-term obligations to those enrolled in the program.

The program was designed to allow parents, grandparents or guardians to pay a fixed amount when a child is young in return for getting four years of tuition at an in-state college when the child finishes high school. The program invested the money, mostly in the stock market, in anticipation that the earnings would grow faster than tuition.

In years past, that did happen. According to the Associated Press, “as of Sept. 30, 2007, the program had $899 million in assets, which would have covered 97 percent of its future obligations for tuition. But then the turmoil on Wall Street plunged its assets to $431 million on Feb. 28.”

The reasoning for investing so heavily in the markets was to keep up with the rising cost of college tuition. In the past, stocks would have allowed for a return on the initial investment that would make up for any rise in tuition costs in the state.

But after realizing that the money coming out of the investments in the markets were not matching up with the amount that was needed, the PACT managers are now asking the Alabama legislature for help in funding the tens of millions of dollars in deficit.

Last week, PACT issued records that showed that there was a $306 million deficit at the end of the 2008 fiscal year. Without a $306 million influx of money, the 49,000 prospective students enrolled in the program would face the uneasy situation of having their investment lose money.

But that won’t happen according to board member and Lieutenant Governor Jim Folsom, Jr. Folsom and two other board members, Alabama Treasurer Kay Ivey and two-year college Chancellor Bradley Byrne, were appointed last week to work with the Legislature on creating a bill that would help raise money to fix the deficient funds problem in the program.

Last week Folsom, who presides over the state Senate, was quoted as saying that the Legislature will be able to fix the problem before year’s end.

He also said that it would be in lawmaker’s interests to freeze tuition rates at state colleges for PACT participants.

He also proposed that a state fund be set up to ensure promised tuition rates to PACT enrollees.

The PACT issue has a legal side that is getting uglier as the weeks roll on. A recent lawsuit filed in Calhoun County cited that enrollees were not told of the program’s stock market options and that the language that participants saw never mentioned those types of investments.

PACT contracts originally guaranteed that students’ tuition would be paid, but the state has now said that it didn’t have the ability to guarantee the payments and that it is not obligated to pay tuition if the program’s funds cannot meet the obligation.

Another stickler in that argument is that PACT representatives weren’t required to disclose the program’s stock market risks since the program’s trust fund is not registered as a security with the Securities and Exchange Commission or the Alabama Securities Department.

The PACT debacle has cast an overbearing shadow on several of the state’s gubernatorial candidates.

Ivey, for example, has expressed an interest to run for governor, but the PACT issue has many pundits expecting her to possibly lower her sights and aim for the lieutenant governor’s seat.

Because of Folsom’s ties to the program, it is also expected that he may run for re-election instead of seeking to take the reigns at the governor’s office.

Byrne has been taking heat for his inability to forsee the PACT crisis, though many are expecting the Republican to enter the governor’s race later this year.

Republican Jack Hawkins, who is the chancellor of Troy University, moved to waive tuition for PACT enrollees at Troy and has encouraged other colleges to do the same.