Thursday, Feb. 6, 2003 | 10:56 a.m.
CARSON CITY -- The rates for the state's prepaid college tuition program need to be raised by as much as 60 percent, and the state should spend $370,000 on advertising for the program, state Treasurer Brian Krolicki told lawmakers Wednesday.
But Krolicki's plans for the financially troubled program didn't sit well with several Assembly members.
His announcement that stabilization of the program would require rate increases of 40 to 60 percent came just two months after he said the increase would be 30 to 50 percent. The committee that runs the program will meet March 1 to set the new rates.
And as for the proposed advertising budget, Assemblyman David Goldwater, D-Las Vegas, said $370,000 was excessive. That's enough money for 148 scholarships, Goldwater said.
There are presently 9,600 students enrolled. Under the current system, a parent of a newborn can guarantee payment of tuition for four years at a Nevada university by making a $7,460 lump-sum payment to the program or by paying $149 a month for five years. A parent of a ninth grader can make one payment of $9,630 or can make 41 payments of $266 a month.
The prepaid fund currently has $36 million, but for the state to fulfill its commitments it needs to have $40 million, and the gap is expected to grow, Krolicki said.
"We need to make sure the fund is strong enough to cover future liabilities," Krolicki said.
Krolicki also told the committee that he is taking money from another college saving system to prop up the prepaid tuition plan. That prompted Assemblywoman Chris Giunchigliani, D-Las Vegas, to complain that Krolicki was "now moving money back and forth to keep (the prepaid plan) afloat."
Goldwater emphasized that if the treasurer's portfolio does not perform, "the state will have to step up. The state is on the hook."
Krolicki said the big challenge in keeping the fund solvent is the rising costs of tuition at the university system. The program was pegged for a five percent increase a year. But the Nevada system's tuition rose 15 percent in the last two years. That has the program looking at an average increase in tuition of 7 1/2 annually as opposed to 5 percent.
The stock market's poor performance has exacerbated the program's financial problem, Krolicki added.
Nevada is involved in another college savings plan in which parents can invest money to save not only for tuition but also for other costs. Nevada has joined with national financial firms in that plan.
Goldwater complained that Nevada's performance on its stock investment in that plan, through the firm of Strong Capital, was the worst in the nation, Krolicki said. It dropped by 22.3 percent.
Krolicki said later that the full Standard & Poor's 500 stock index fell 21.8 percent so Nevada was not that much below that index. The treasurer said salaries of some of his staff are paid with earnings from investments of the college savings plan funds. He said he has eliminated two staff positions that should save $100,000.
The Assembly members said that while they like the program, they are worried that the state will wind up being forced to subsidize something that was supposed to be self-supporting.
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