TALLAHASSEE — End the Florida Prepaid College program
That's the proposal released Thursday by the Senate higher education budget committee.
The popular program is the nation's largest and has sold more than 1.4 million plans since 1988, letting parents lock in present-day tuition and fees for their future students. Nearly 20 percent of undergraduate students at Florida universities have a prepaid college plan.
But Sen. Evelyn Lynn, R-Ormond Beach, the committee chairwoman, questions its long-term viability and wants to suspend enrollment. No current participants would be affected.
"The stock market, as you know, the last few days has been dropping," she said in pitching the idea. "Should the investments prove not able to take care of the promised contracts, the state of Florida is totally responsible, and that means for everything that is sold, as of this moment, we are totally responsible. And that's a huge liability — far larger than pension, far larger than most anything we have."
David Bishop, a spokesman for Senate President Mike Haridopolos, said Lynn "misspoke" and the program's liabilities are nowhere near the state's pension obligations, which are close to $140 billion.
Florida Prepaid is about $500 million in the black, with $10 billion in assets covering its $9.5 billion in liabilities. Indeed, just two years ago Lynn and other senators talked about borrowing from the fund to address budget shortfalls.
Stanley Tate, the Miami businessman who is the founder and namesake of the program, said news of the proposal "was a shock of shocks."
He said nearly all of the program's investment portfolio are in government securities. "We don't have stocks!" he said.
Families pay the tuition, dorm costs or university fees all at once or in installments, locking in current rates. They can buy the plans from the time a child is a baby, all the way up through high school, potentially saving thousands in college costs.
The program was built on the assumption of tuition increases no greater than 7 or 8 percent annually. But tuition went up 15 percent last year and could go up another 15 percent this year.
Naturally, those contracts have gone up with tuition. Now, it's roughly $46,000 that can be financed over 18 years, said Tate.
That tuition cost is the problem, said Sen. Stephen Wise, R-Jacksonville, a member of Lynn's committee.
Wise said that just 14 years ago he paid $11,000 for each of his two grandchildren. He has another grandchild born in May but said he can't afford to buy into the program for her.
Though he acknowledged the current financial health of the program, he said that he expects fewer families to buy in as the costs increase.
"Guess who's going to be left holding the bag?" he said.
Tate, too, has warned that tuition increases threaten the program's viability. But he said that three years ago, the program built in assumptions of 15 percent increases.
Lynn's counterpart in the House, Rep. Marlene O'Toole, R-Lady Lake, said she has not read Lynn's proposal and could not comment on it.
The Florida Prepaid College Plan started in 1988 with a promise aimed at the state's middle-class families. Then-Gov. Bob Martinez kicked off the first enrollment period by buying contracts for his twin granddaughters. The program sold 58,651 tuition and housing contracts in that first year.
Lynn's plan would leave in place new enrollment for the so-called STARS program, which provides a matching scholarship for at-risk kids to attend college.
Tabi Deneweth of Brandon said she had already signed up her 5-year-old daughter, and was planning to enroll her two younger children. "That would be a shame if they ended it," she said. "I personally have a lot of student loans, and I wouldn't want my kids to have that burden."
Niel Eyde, 42, of Gulfport has a prepaid plan for his 2-year-old son and had hoped to buy one when his second child, a girl, is born in three months.
He understood that he might have to pay a cost differential under the new rules. "But I still saw this as the right thing to do," Eyde said. "I want to be a responsible parent."
He thinks the idea would be shortsighted for the state.
"The reality of it is that the Florida prepaid program was getting you to commit to a Florida school from day zero," he said. "Now, all of a sudden, parents will not be looking at a Florida school. It surprises me. … Adjust the program. Don't get rid of it altogether."
Times/Herald staff writers Mary Ellen Klas, Marlene Sokol and Tom Marshall contributed to this report. Jodie Tillman can be reached at email@example.com or (850) 933-1321.