Designed to fail? The bill to save Alabama’s PACT program contains a poison pill

On Thursday Alabama’s House of Representatives passed a bill meant to salvage Alabama’s Prepaid Affordable College Tuition (PACT) program on a vote 0f 104-0.  The bill (HB228 sponsored by Craig Ford) includes a provision that Mike Hubbard referred to as a “poison pill.”  The Montgomery Advertiser quoted Hubbard, but didn’t delve into the substance of his warning.  The concerns come from a coupling of two provisions of the bill: a cap on tuition for PACT students and a rarely used “inseverability clause.”  Those two provisions create the very real possibility of the entire legislative act becoming null and void.

The bill, which would siphon an estimated $236,100,000 from the Education Trust fund between 2014 and 2021, was introduced as a svelte, six page bill.  It did not include language that would cap what Alabama universities could charge for tuition to PACT participants, which means PACT students would pay the same tuition and fees as non-PACT students.  It did, however, include the following section:

Section 6. The provisions of this act are severable. If any part of this act is declared invalid or unconstitutional, that declaration shall not affect the part which remains.

That is a pretty common clause tucked in near the end of legislation.  It doesn’t make much sense to throw out an entire legislative act if a court later finds some arcane provision unconstitutional.  Provisions such as the one above are inserted to make this “severability” explicit.

On Thursday after the third reading of the bill a substitute bill was offered up.  The substitute bill is similar in overall function.  It would take money from the ETF to prop up the flagging PACT accounts.  It is a more robust 30 page bill and includes substantial details about things like how the board overseeing this would be composed.  But as mentioned above, the new bill includes two big changes.  One is a tuition cap:

Section 3. No public institution of higher learning shall charge the PACT plan or a PACT plan contract owner mandatory fees or tuition per credit hour in an amount exceeding the cost of mandatory fees or a credit hour as of September 30, 2009, except that an annual increase of the lesser of the actual annual tuition or mandatory fee increase or an annual tuition or mandatory fee increase of two and one-half percent shall be allowed for each year thereafter.

The section continues by stating that if the program realizes growth in excess of 5% for two consecutive years that tuition for PACT students could increase by no more than 2.5%.

The concern that Hubbard raised is that the legislature does not have the constitutional authority to set tuition at state universities controlled by constitutionally established boards of trustees.  Such sections of the Alabama Constitution begin as follows:

[The university] shall be under the management and control of a board of trustees…

Now, I’m no lawyer.  Does that statement preclude the legislature from micromanaging the universities and usurping the authority of the trustees?  According to the Advertiser, Ford claims “top lawyers in the state have looked at the legislation and consider it constitutional.”  Maybe.  It does look like there is enough room for interpretation that a legal challenge is likely (I’m assuming the universities aren’t going to be excited about having the legislature forcing them to accept students at a substantial loss).

When I heard about this I first thought of Howard Sanderford’s bill designed to overrule UAH’s policy forcing students to reside on campus.  I asked a local legislator how that bill would pass constitutional muster, but not this one.  He pointed out that the Sanderford bill was carefully written to not trample on the power of the trustees.  So I looked it up (HB520):

Section 1. (a) A public institution of higher education may not require any enrolled student to reside on campus.

(b) It is the intent of the Legislature that constitutionally-created boards of trustees comply with the requirements of this section.

Translation: we order you to do this, but if you don’t want to then never mind.  There is no such statement in the substitute PACT bill.  Seems a bit suspicious to me that Sanderford would take such care to avoid a constitutional conflict in a bill that merely meddles in university policy, while Ford would exercise less discretion in a bill that could cost the universities (actually it would cost non-PACT students) many millions of dollars.  I’ll have detailed analysis of the effect of the tuition cap soon.  Suffice it to say that it is staggering.

That constitutional gray area sets up the second changed provision.  The severability clause in the original bill was eliminated and replaced with an inseverability clause:

Section 9. The provisions of this act are unseverable. If any part of this act is declared invalid or unconstitutional, that declaration shall affect the part which remains.

You read that right, if any part of the act – no matter how trivial – is determined to be unconstitutional then the entire bill is scrapped.  I searched the Alabama legislative database, which goes back to 2000, and found a grand total of only six bills (including this one) that have employed such a clause.

I don’t know about you, but if I was a PACT parent I wouldn’t be too thrilled about the inclusion of a constitutionally dubious provision along with another provision that would eliminate the entire act if the first provision is found to be unconstitutional!

After the substitute bill was offered up Mike Hubbard tried to kill it by tabling it.  Only 29 other legislators joined him (Roll Call 422) and the new bill was ultimately adopted.  Two amendments were offered by Hubbard, both defeated.  Ultimately the substitute bill was passed without a single dissenting vote (no one wants to go on record voting against saving the PACT program).

The million dollar question: why would someone make this change to the PACT bill?  I think it’s more of a $236 million question.  The big loser is the ETF – Paul Hubbert’s baby.  Implementing a tuition cap isn’t necessarily a win/win for Hubbert; more of a win/not-lose-as-much.  If the tuition cap is upheld as constitutional then Hubbert has successfully minimized the impact on the ETF.  It will still be substantial, but not as bad as it would be without a cap.  On the other hand, if the cap is unconstitutional then guess what?  The ETF is completely intact because the entire act is tossed into the dumpster.  PACT parents & grandparents who thought they were saved would be promptly thrust back into a VERY undesirable position.  I suspect the PACT program would actually have to pay back the ETF for any funds transferred before the court ruling.  Hubbert most certainly doesn’t want to overtly oppose a PACT fix even if it takes from the ETF.  I can only imagine how many current and former AEA dues paying members bought into the PACT program and he can’t be seen throwing them under the bus.  Secretly cutting the brake lines on the bus is another matter.

The legislative process is always rough and tumble.  We’ll see if the PACT lobby tolerates this risk to the solution (I call it playing a game of legal chicken with higher ed) in order to keep AEA on the sidelines or if they risk inviting opposition by demanding more favorable terms in the legislation.