Wednesday, September 19, 2012

Fitch defends MPACT suspension to legislature

The Board* of the Mississippi Prepaid Affordable College Tuition Program (MPACT) voted unanimously on August 23 to suspend new enrollments in the program until the completion of an actuarial audit. Treasurer Lynn Fitch said this was the first time an such an audit had been made of MPACT.

Ms. Fitch cited several reasons for the suspension in a presentation to the Joint Legislative Budget Committee today. Copy of presentation Ms. Fitch said the program never met its target rate of return of 7.8% as the investments yielded of 4.8% since its inception. MPACT investments yielded a rate of return of only .6% last year. The funding level fell from 83% last year to 76% this year. She said the program had not achieved a funding level of 100% since 2000 (see the chart she distributed to the media and legislators below and (;30 in the video.).

Time and time again the Treasurer pointed out to a committee that included her predecessor the rate of return was sharply outpaced by tuition increases that were over 7%. She said the board had to do something about "the gap". Ms. Fitch said there are 22,293 participants enrolled in MPACT and the plan has $265.1 million in assets. She only spent a few minutes on the program as part of her presentation. However, several legislators brought the spotlight back to MPACT when given the chance.

Senator Pro-Tem Terry Brown (17:00) forcefully told the treasurer he was "deluged with phone calls" by people who enrolled their children in the program. Senator Brown accused Ms. Fitch of keeping the legislature in the dark about the decision by the MPACT board to suspend enrollments. Ms. Fitch said they were "just taking a pause" in the MPACT program and just "doing an actuarial audit" to see where the program stands. She said the legislative liasons "were apprised" of board decisions. She called the measure "proactive and one of due diligence" and that current enrollees are protected by the "full faith and credit of the state". Ms. Fitch said many states had made adjustments to their programs. Some closed them, some contributed more money, and others sold bonds.

Senator Brown asked the treasurer how long the suspension would last only to be told by Ms. Fitch she didn't know how long it would be. Ms. Fitch told Representative John Moore MPACT had been underfunded since 2000. Lieutenant Governor Tate Reeves asked the treasurer at the end of the hearing if she recommended suspending new enrollments in PERS since PERS was only funded at a level of 62%, far below the 76% funding level of MPACT. Ms. Fitch replied she couldn't answer for PERS. This correspondent also asked Ms. Fitch what level she considered to be well-funded for the MPACT program. The Treasurer would not provide a percentage she considered to be a "well-funded" level.

Tomorrow: JJ reviews the MPACT 2012 audit and market summary.

Earlier MPACT posts: Cecil & Tate trade licks, 2010 report says MPACT only 75% funded *Board members present: Ms. Lynn Fitch, Dr. Hank Bounds, Dr. Eric Clark, Ms. Jessica Dupont, Ms. Rita Wray (Representing Kevin Upchurch, DFA Executive Director), Mr. Len Blanton, Mr. Kenneth Goza, Mr. Kevin Upchurch Legislative Advisors: Representative Greg Holloway, Senator Steve Hale


Anonymous said...

More outstanding primary sourced fact based reporting by Kingfish.

Action talks. Treasurer Fitch should be commended for actually doing something to address a structural shortfall instead of pretending it doesn't exist.

notthethirdhusband said...

The Board voted on August 23rd? A month ago? And just now announcing it to the public - and telling the legislature? What's the matter - too busy going to Alaska and cleaning up the dead rats on Hancock beaches?

The Tater-haters on here try to put the PERS problem on Reeves - but evidently give Ms Fitch a pass there; its not her responsibility even though way more underfunded than MPACT. Both have problems - both need fixing. Legislature's too generous changes caused the problems and its going to take the legislature to fix. Too bad it took so long to get this message across West Street to those that need to kill this beast.

Anonymous said...

Fitch is a bought for politician no doubt. That is why the legislators and Reeves are nervous-not so much about MPACT itself but the audit. The audit can show the quality of investments and the relationships with investors. uh oh. Tate may be a little nervous. Fitch and her motives may be all good but time will tell several years from now.

Anonymous said...

Go Go Fitch!!! Tater Tot Reeves has hidden the facts!!!

Shadowfax said...

Although the program certainly needs immediate attention and, perhaps, a three month audit, suspending enrollments is probably over-reacting. She says in the paper that Mississippi is the only state that has not responded to the problem. So, did all the other states suspend enrollments?

I don't think we can blame 'Tater' for the ills of the stock market. Tate asked a good question of Fitch: "Should we also suspend new enrollments in the PERS system?"

To me, her decision was over-reaction and a bit like closing down all the gas pumps while we study high prices.

Anonymous said...

So if it was decided to be suspended in August, but only announced this week, were people still being enrolled?

Tired Taxpayer said...

Only the tip of the iceberg. PERS is the elephant in the room. This from the AP in the MS Business Journal:

JACKSON — State government will be asked to put $44 million more into the Mississippi retirement system next year to shore up the program for an estimated 30 years, the system director has told lawmakers.
Pat Robertson, executive director of the Public Employees Retirement System, told lawmakers today public schools and cities and counties would also be expected to contribute more to the system. Dollar figures were not available.
Robertson says she expects the PERS board to implement a new employer contribution rate of 15.75 percent in October. That would be up from 12.93 percent paid into the system by employers in fiscal 2011.
Robertson says there is no plan to increase the amount employees pay into the system.
Robertson says there are more than 91,000 retirees in PERS.

(And they ain't gonna give up the 13th check!)

Anonymous said...

It is obvious how little so many of you actually know about MPACT.

The open enrollment period for new MPACT contracts was/is Sept 1 through December 31 each year. Infants could/can be enrolled any time.

Anonymous said...

KF, I'm not real smart in this area and I could just be making a stupid remark, but I've got a question.

If I have a bowl with $20 in it, add $5 every day, but take $7 out every day, then there's a problem. I don't understand why folks smarter than me don't see a problem year after year--each year, if you're not seeing the return you expected and it can't fund the animal, then why didn't anyone change how its funded?

Anonymous said...

I posted this on another thread here but thought it was relevant here as to her competency and organizational skills:

"I just got my mail and it includes a flyer from, of all people, Lynn Fitch encouraging me to invest in (wait for it) MPACT.

Usually we make snarky comments when different people work at cross purposes - "the left hand doesn't know what the right hand is doing", etc. In this case, maybe she's got Multiple Personality Disorder and can blame it on that :-)"

Shadowfax said...

The funding of PERS has been changed year after year after year with increases in both employer and employee contributions.

Its my understanding that the legislature has numerous times given away the ranch and the riding cultivator by approving such dumb ideas as fully retiring with 25 years regardless of age, doubling their own retirement and ultimately attempting to double it again but getting caught.

However, the market and recession have had a dramatic effect on the ability of the system to remain anywhere close to fully funded. The problem with your analysis is 'the bowl' at one time contained close to a billion dollars (or thereabouts) and was among the soundest of all state retirement systems nationwide. I believe that was in the 80s. PERS is simply one among many Ponzi schemes. Not much different from unemployment insurance, social security, Impact or a household drowning in credit cards.

This may also be a good time to remind ourselves that Mississippi's retirement system DOES NOT grant medical coverage after termination of employment. Imagine what PERS would look like if retirees received lifetime healthcare after retirement, as is the case in many states.

Anonymous said...

9:00 - or why do you keep on doing it at all?

Anonymous said...

1. Shadowfax is right (never thought I would say that) about the closing of emrollments being an over-strp. The original legislation contains a clause that allows pre-8th grade (5 years from college) enrollees to be dropped with only a full refund and not a paid college education. This can/could be done with new enrollees if the system is shut down later. Thus, no need to stop enrollment.

2. What Rhodes Scholar on Fitch's political staff decided to break this story right before budget hearings?? Cant think of a way to amplify the story and do more damage to Fitch politically.

3. Regardless of all of this, an audit is needed and overdue. Changes to the system could include raising the monthly amounts that are contributed by new enrollees.

Anonymous said...

Beyond the fact that both programs are underfunded any other comparison between PERS and MPACT is a non sequitur 'apples-to-oranges' observation.

Properly priced and managed MPACT is a self-sufficient voluntary program that doesn't cost the taxpayers a dime beyond the staff it takes in the Treasurer's office to administrate it.

bill said...

For all the Tate hating and Fitch bitching that's going on here, do any of you not agree that an audit is in order? I'm not going to cut and paste my comments from yesterday, but isn't that the real issue here? We can complain about Tate not doing one during his tenure as Treasurer and we can complain about Lynn not communicating her plan to the legislature, but the real issue is the condition of the system and the need for the suspension and audit. I think the Treasurer is doing the right thing. Bill Billingsley

Keith Plunkett said...

Good point Bill. No doubt she is putting the interest of the taxpayers first in doing this. If you look at the numbers it can be argued that Tate may should have done the same thing at least once when he was Treasurer. Ultimately that was his decision, and he has different view of long-term investing.The PERS comment is a red herring. The simple truth is the program has never been valued as a good program, despite Reeves best efforts as Treasurer. My wife and I looked at it closely a few years ago for our children, and our advisor steered us away for the very reasons Mrs. Fitch is concerned. It's good to see she is willing to take a hard look and face down the political pressure.

Keith Plunkett said...

BTW, Very good stuff KF. Keep up the good work, my friend.

KaptKangaroo said...

Um. I think the suspension and dismantling of the fund is prudent at this point given the abysmal returns and the expected payout.

As to PERS. I think we ought to give Sfax the mic. He suddenly is a guru and deserves the opportunity to present us lowly, misinformed, unedjumicated folks what his plan for PERS is.

It is not like we have all be reading the financial statements or anything of the sort, for years. We just sit back on the couch in our underwear and bitch. Oh wait. Nevermind.

I do think an audit is in order. However, it is only going to confirm what we already know. Both MPACT and PERS are insolvent in a few years and the taxpayer WILL BE on the hook.

Anonymous said...

Who will do the audit?

Anonymous said...

Yes. Interested in who does the audit as well. Worldcom passed their audit with flying colors. Just sayin. I can assure you that 4.5% is a good expectation of annual return since 2000 but 7.6% is not a good expected return without taking on a great deal of risk. However with the amount invested the earnings should never be less than 1%. The investments should also never be touched by banks. I believe the legislator from Columbus was upset because a friend, who is a banker, called him about the suspension of MPACT. Pay attention. If the funds were getting a lower rate of return than expected over a given time period then we need to know who and where they were invested and what the going rate of fees and commissions were and relationships that exist between Tate and other elected officials.

Anonymous said...

To clarify about the mailout received by some in the mail this week....I got it too. I am looking at it now. It was for the Mississippi Affordable College Savings Program (MACS) not MPACT. Big differnce. MACS is still open according to my conversation with her office. However,it does not carry the guarantee of paid tuition.

Anonymous said...

So, with enrollment suspended, are the people and companies who have the sweet contracts promoting MPACT going to continue to get paid, while doing nothing?

Anonymous said...

What about the $52,000 + Fitch spent on new office furniture. She's about to take over the 11th floor of Woolfolk! She's spending money everywhere. She bought 2 bid screen TVs for her offices! At least Tater didn't do that! She has 2 Deputy Treasurers whereas Tater only had one. Talking about a fiscal conservative - she's not that - there have been some raises given at the treasury since she took over. LBO needs to look at her entire office!

Anonymous said...

You ought to see her budget request. I'm shocked no one has mentioned what she asked for as she was informing the lbo of mpact. A whooping 500,000 increase on what is only a 3 million dollar budget plus all her new furniture she needs AGAIN

Anonymous said...

Reeves didn't need any approvals or blessings to fix MPACT. He wasn't hindered in any way from addressing the underfunding.

Would have been happy to support new furniture for Reeves if it meant he would have actually done the job as Fitch is now.

Anonymous said...

Tate lost billions by investing in sub-prime investments (you mean derivatives) that were highly rated. However, had Tate been given access to the internet (and done a little research) he would have been forewarned about the dangers (regardless of their AAA rating). Of course, the individuals who advised Tate to invest in the crap are the same people who provided him with his campaign war chest.

Fitch is a bitch; but, Tate is a fool.

Shadowfax said...

Kangaroot; I replied to your personal attack and bullshit; however, the board moderator typically doesn't give voice to the attacked.

Anonymous said...

Full faith and credit means by grandkids college money is safe?Right?

Anonymous said...

This is all a manufactured crisis to make Tate look bad. The establishment is terrified of his leadership and popularity.

Anonymous said...

I would take Fitch seriously if she went after PERS with same tenacity.

Anonymous said...

The MPACT audit is only the beginning. Fitch exposing Reeves on PERS is next.

Anonymous said...
This comment has been removed by a blog administrator.
Less Than Living Wage Slave of Anderson's Crap Sandwich Shack said...

Look at what is happening.

Media up and down the state smells blood and has placed former Treasurer Reeves on the defensive with stories like "Lt. Gov. surprised by the halting of the state's tuition program". Surprised? Really? After the data revealed on JacksonJambalaya?

Reeves oversaw the program for years during his time as state treasurer and campaigned on it during his run for lieutenant governor. Current state treasurer Lynn Fitch ordered the freeze and audit after questioning the programs financial sustainability.

If Reeves was smart (and sometimes it is extremely hard to tell) he'd preemptively suck the oxygen out of Fitch's PR tent by coming out HARD for ASAP changes to PERS. This is not the time nor environment to advocate for waiting on hopes and prayer. NOTHING will get Reeves face time as a reformer on the TV Newsers faster and more frequently like saying PERS has got to be fixed and fixed now.

Fitch has snatched the narrative. If Reeves doesn't go bold FAST he loses and attacking Fitch for nipping a "small" fiscal problem (vs PERS) in the bud (the failing gambit now being discussed within the Reeves' team) is a losing proposition.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

IF,.Lynn is playing politics then she is coming out of gate to strong.unless she is getting encouragement by Phil. Tate will eat her lunch.

Anonymous said...

what did the one in Ocean Springs look like?

Anonymous said...

Bill - how would you feel if you knew there has been an Audit done on MPACT every year since 1997?

Anonymous said...

There has NEVER been an actuarial audit performed on the program since its inception....just a financial audit. Not the same thing.

Shadowfax said...

Then why did not Tater, the state master financial wizard, have an actuarial audit performed?

Anonymous said...

Everyone should read 12:07 pm's comments again...and again until they sink in.

4:49 pm also alludes to the problem , but not as elegantly.

Investment which was, once upon a time rather reliably divided according to risk, is no longer reliable. Some institutions, such as savings and loans, banks,insurance and retirement programs could be depended upon not to engage a significant portion of the money they received in high risk investments. High risk was for Wall Street. That is where you went to roll the dice and seek high returns.
That is WHY, decades ago, the S&L scandal WAS a scandal.
Once upon a time, after the lessons of 1929,our investment system operated well.
The S&L scandal was a warning that lessons learned were being forgotten and briefly the rules were tightened up again.
But, again, the scoundrels lobbied to get the laws and regulations and enforcement funding diluted so that Ponzi schemes and the scam of derivatives and mortgage fraud could take place.
No one, not even rating services can count on the information provided by companies seeking investors as being reliable and accurate anynore. No one can rely on the accuracy of appraisals anymore. You cannot rely on your investment advisor anymnore because he is actually just a salesmen who is relying on information that he has that is not likely reliable.

Are there good companies out there that still report accurately? Of course there are. But, save for long term performance, it's pretty damn hard to tell the good guys from the bad guys. World Com should be the poster child for why it's hard.

And, THAT is what no one wants to discuss.

Recent Comments

Search Jackson Jambalaya

Subscribe to JJ's Youtube channel


Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).

Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

Donna Ladd of The Jackson Free Press will give several classes on learning how to write. Smearing, writing without factchecking, and reporting only one side of a story will be covered. A donation to pay their taxes will be accepted and she will be signing copies of their former federal tax liens. Ms. Ladd will give a dramatic reading of her two award-winning essays (They received The Jackson Free Press "Best Of" awards.) "Why everything is always about me" and "Why I cover murders better than anyone else in Jackson".

In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.

In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

Trollfest '09 is a pet-friendly event as well. Feel free to bring your dog with you and do not worry if your pet gets hungry, as employees of the Jackson Zoo will be on hand to provide some of their animals as food when it gets to be feeding time for your little loved one.

Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS.

Trollfest '07

Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS