A little-known state fund flush for years with forgotten insurance policies and utility deposits soon will get lots of attention with projections its open spigot for college scholarships will run dry.
The Escheats Fund, now with $584 million, could go broke in 2012 if the Legislature doesn't find another way to pay for student financial aid that's drawing down its balance rapidly.
The fund is expected to provide at least $210 million in financial aid to college students this fiscal year, helping, among others, 54,000 students at University of North Carolina system campuses.
Lawmakers "need to sort of make a decision: either they find other sources for scholarships or reduce the rate that they're paying out," said new State Treasurer Janet Cowell, whose office manages the fund. Otherwise, Cowell said, future students won't have as much access to grants and loans.
Lawmakers have tapped into the fund's balance with increasing frequency in recent years. They're aware of the trend, although fixing it is not as urgent as this year's budget troubles.
"It was done to help more kids go to college, very simply," said House Speaker Joe Hackney, D-Orange. "We have an entire session to figure out what we're going to do about scholarships this year, and we re-examine that every single year."
Cowell's office estimates that without changes, the fund's value will drop to $297 million by mid-2010 and fall to $83 million in 2011.
The demand for scholarships will only grow as the UNC system projects student enrollment to grow by 50,000 students, or more than 20 percent, in the next decade. At least one Republican said the dwindling Escheats Fund is a symptom of a larger problem with legislative budget-writers, most of whom have been Democrats.
"The creative financing that's been used in recent years is catching up with us," said Rep. Nelson Dollar, R-Wake, vice chairman of the House education university subcommittee.
The Escheats Fund is a pot of money where property unclaimed or forgotten by its previous owners are sent to Cowell's office by banks, utilities, government agencies or insurance companies.
The treasurer tries to return held funds to their rightful owners and invests the rest of the money. The state constitution requires proceeds go toward aid for needy students attending public higher education institutions, including community colleges.
Valued at $184 million in 1998, the fund's size has soared as companies sent more held cash. The additional money outpaced efforts by then-Treasurer Richard Moore to promote an online database that helped return up to $41 million annually to their owners.
Lawmakers historically used interest earned on the escheats for financial aid. But this decade, they have eaten into the fund's principal, swapping out scholarship money paid through the state's general operating funds.
The Escheats Fund transferred $101 million in principal to scholarship programs for the 12 months ending last June 30, according to the treasurer's office.
This fiscal year, the principal will be doubled, mostly due to a $60 million requirement through Gov. Mike Easley's EARN Scholars initiative, which funds $4,000 grants to students in low-income families so they can obtain a college degree debt-free.
"It's a way that can really cut back on the amount they borrowed for college," said Steven Brooks, executive director of the N.C. State Education Assistance Authority, which distributes student aid. "It's a wonderful public policy."
Easley had wanted to use taxpayer money for the program when he introduced it in 2007. But the General Assembly decided last year to earmark escheats for more than half the grants in part due to worsening budget numbers, said Sen. Tony Rand, D-Cumberland.
"The revenue estimate went down and the amount of money available," Rand said. "It was simply a matter of trying to find available funds to allow this to happen."
Budget-writers now must decide whether to spend another $40 million on the EARN Scholars program next year. Gov. Beverly Perdue is promoting college affordability. And the UNC system is seeking $23.4 million more for financial aid.
"We understand that we must protect the integrity of the Escheats Fund," said Rob Nelson, the UNC system's vice president for finance. "But we also know that we want to have enough need-based grant money so that every student ... who is eligible receives those funds."
A state law that says the Escheats Fund can't fall below $400 million can be changed. Shifting scholarships more to taxpayer money may be difficult in a year when lawmakers may have to narrow a $3 billion spending gap.
Cutting scholarship aid would seem to be a bad political move.
Hackney and Rand said they understand that the fund's faucet can't be a torrent forever.
"This fund has existed for a long time to help students," Rand said. "We really have to be careful.
Source
No comments:
Post a Comment