Most of us proudly think of ourselves as steady and responsible, especially when it comes to money matters.
We like the books to balance. We like income to outpace expenses. And when we experience economic setbacks, we take quick and decisive action. We sacrifice luxuries, we nudge the thermostat down a few degrees, and we take scissors to the credit cards.
That’s how to run a tight ship.
Lots of politicians try to convince us that managing household finances is an apt metaphor for running a government. Deficits? Overruns? Under performance? Do something big, do something painful, and do something right away.
This approach can make us feel virtuous, but it can also induce us to throw the baby out with the bath water.
Nine months ago, legislators put our state’s Guaranteed Education Tuition Plan on the chopping block. This program, which allows families to buy future college tuition with today’s dollars, had racked up an unfunded liability of $631 million.
Sometimes, it is tempting to assume problems that are superficially similar must be exactly comparable. An unfunded liability in the GET program evoked the kind of pessimism generated by unfunded liabilities in pension plans or entitlement programs.
Senate Majority Leader Rodney Tom wanted to terminate the program – a move forestalled by public opinion and advocacy by other senators.
It turns out GET was not a tattered failure besieged by intractable problems. It was a victim of unintended consequences arising from impulsive decision-making. During the budget squeeze, the Legislature reduced higher-education appropriations and, instead, allowed universities to institute massive tuition increases. This suddenly obligated GET to pay out far more than it was been taking in.
Last year, the Legislature righted the ship. It froze tuitions for two years, and now GET is back on solid ground. Last week, the state actuary said the unfunded liability has declined to $160 million and GET’s risk of failure is almost nil.
This was a close call. Tuition is an issue that can make or break the hopes of real people: 120,000 state residents have purchased GET credits.
And, it turns out, everyone loves a happy ending. Sen. Barbara Bailey, chair of the Higher Education Committee, played a leading role in rescuing the tuition program. After the actuary’s latest report, she observed, “It is ironic how those who were previously in favor of tuition increases are so quick to take credit for saving the GET program now that they see how important it is to the thousands of families across the state.”
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