"We don't need to be in that business," state Senator Rodney Tom (R-Medina) insisted about Washington's GET program (Guaranteed Education Tuition) while speaking at yesterday's AP forum in Olympia. It was a sentiment with which Senator Steve Litzow (R-Mercer Island) and Representative Ross Hunter (D-Medina) later agreed.
That's three lawmakers from two of the wealthiest zip codes in the state dissing a program that has proven a godsend for tens of thousands of middle class families statewide.
Talk about being out of touch.
GET is Washington's prepaid tuition program, a variant of the federally sanctioned tax-free "529 plans." Families buy their children college credits at today's prices, plus a (sometimes hefty) premium, and then cash out in the future, tax free, at the value of the tuition and fees at Washington's most expensive university. One hundred GET units equals a full year of tuition and fees, and the current $172 unit price represents a 39 percent markup over the University of Washington's $12,401 tuition and fees for the 2012-13 academic year. Tuition can't (and won't) keep rising at 20 percent a year forever, so as an investment, GET isn't particularly a very good value at the moment; there are many other financial instruments that promise a higher rate of return.
But what GET does buy participants—what no other college savings plan can possibly offer—is peace of mind. As its name implies, GET is guaranteed, backed by the full faith and credit of the State of Washington to deliver the college credits purchased. From the GET program's web site:
With a college savings plan, you shoulder all of the investment risk and worries associated with volatile financial markets. With GET, the state assumes the investment risk so you don't have to worry.
In that sense GET is more of a college insurance plan than it is an investment. Families buy into the program knowing they can likely get a better return on investment elsewhere—but no other investment guarantees that their children will get the college education they're paying for, regardless of market fluctuations and state budget turmoil.
And that's exactly why we bought into GET more than a decade ago.
In 2002, when my daughter was five, we spent $16,800 ($41 per unit) to prepay four years of college tuition and fees through GET. I'd just been divorced and recently lost my job in a post-9/11 layoff, and had no idea what the future might bring. But I thought it prudent, while we still had the cash on hand, to purchase the credits now, so that no matter what might befall us—financial hardship, illness, death, bitter post-divorce infighting—our daughter could at the very least rest assured that she could afford the best Washington state public university she could get into.
In retrospect it turned out to be a damn smart move (tuition has nearly tripled over the past 11 years), but at the time most financial advisors cautioned that such "529 plans" were way too conservative for families investing that far in advance. For decades, college tuition had been rising at about twice the rate of inflation—but historically, average annual stock market returns were closer to 10 percent. I suspected that Washington tuition rates would likely rise faster than in the past, but I certainly had no expectation that GET would beat the market. By the time my daughter graduates in 2019, our annualized return will almost certainly exceed 11 percent.
But again, that's the wrong perspective on GET. If my daughter attends a Washington state public university, as most GET participants do, she'll get the same education that she would have received had tuition continued to rise at its previous 6 percent-or-so annual rate. There is no windfall. The return on investment is her education, not the dollar value of the tuition. That's what we purchased back in 2002, and that's what she'll eventually get, regardless of what Senators Tom and Litzow do to the program. Because it's guaranteed! That's the whole point!
Hunter at least, while far from a GET booster, isn't particularly enthusiastic about shutting down the program, if only for pragmatic reasons. Once the program is closed off to new purchases, the state would be solely responsible for making up GET's shortfall, at a potential cost of hundreds of millions of dollars. GET, Hunter admitted yesterday, is "difficult to eliminate."
To be clear, GET's financial problems are not due to financial mismanagement. GET's investment portfolio took a hit like everybody else did during the recent financial meltdown, but has since recovered along with the markets. GET's shortfall is due to the fact that it was structured to anticipate 7 percent average annual tuition hikes rather than the double-digit increases of the past four years. It is the legislature that is responsible for GET's hole, through years of higher education funding cuts, not GET. Lawmakers understood this consequence when they allowed tuition to spike.
Some lawmakers would like tuition to rise substantially further—a high tuition/high financial aid model that might make reasonable sense if we'd actually fulfill the second part of that equation (which we don't)—a policy to which GET is a major impediment. Tom and others also lament GET as an obstacle to moving toward "differential tuition" pricing, a model in which universities charge more for certain high demand/high return majors like engineering and business management. I suppose the arguments for such "reforms" might be genuine, but they're hard to see as much more than excuses for further cutting state support of higher education, shifting more of the cost onto the backs of students.
Regardless, these are the policies that now have GET caught in legislative crosshairs. GET is perceived to be an obstacle to change. I understand that.
But what I truly resent is the manner in which a handful of political ideologues and out-of-touch rich white guys appear to dismiss GET as some sort of Ponzi scheme that's gumming up the works for everybody else. Men like Tom and Litzow and Hunter, who have no concern for how they are going to pay for their own children's education, also appear to have little concern for how the real middle class is going to pay for theirs. That they begrudge us this scrap of economic security—that they privately accuse people like me of reaping a windfall at taxpayer expense—is insulting.
It is also generational warfare.
Talk to many of the white-hairs in Olympia and they'll moralize about how they worked their way through college with little help from the government, apparently oblivious to the 90 percent state subsidy resident students enjoyed a few decades ago. They seem oblivious to the fact that this is no longer remotely possible. The same inexpensive public college education that ushered so many of our current business and political leaders into the middle class and beyond, is being denied to current and future generations of children. This wasn't inevitable. It was a political choice by a generation that got theirs, but is apparently unwilling to pay it forward.
As a result, my daughter and the rest of her cohort are being denied access to the same affordable higher education enjoyed by prior generations. Hell, some of our lawmakers even resent that we managed to lock in for her the tuition price that was available when she was five years old, purchasing a bit of educational security that is otherwise unavailable on Stranger wages. Because, you know, college age kids today are much less deserving than college age kids were even a decade ago. Or something.
Had we not bought into GET—had we not insured our college savings against being upended by legislative fiat—I'd be forced to sell my modest house in a few years to pay for my half of my daughter's college expenses. But, "we don't need to be in that business," says Tom. Screw you.
No, GET isn't the solution. It's only an economic salve for those fortunate enough to have the spare cash on hand to invest in it. But GET isn't the problem either.
The problem is a political establishment that has gutted state higher education funding in the name of "fiscal conservatism." It's not GET that needs to be eliminated; it is those who are unwilling or incapable of seeing its value.