State delegates pledged Tuesday to work with their Senate counterparts to pass bills aimed at overhauling Maryland’s troubled state college savings agency before the legislative session ends in less than three weeks.
Democratic Del. Cathi Forbes of Baltimore County has led House efforts to improve Maryland 529 since December, when parents with accounts in its Maryland Prepaid College Trust turned to legislators for help recouping tens of thousands of dollars in lost earnings.
Maryland 529 is a state agency that allows parents to invest and later withdraw money tax-free to pay for their children’s higher education. Account holders with prepaid trust plans say the agency has for almost a year barred them from collecting interest on their accounts, and in some cases blocked account access, erasing years of investments.
Maryland 529 Executive Director Anthony Savia said the issue may effect all 31,000 trust account holders, including 4,000 currently accessing benefits to fund their kids’ education.
The agency blamed the problem on a formula calculation error discovered during a botched switch to a new program manager.
Parents disputed that explanation, saying the agency’s board reneged on a contract clause that granted them a favorable compounded monthly interest rate for accounts opened before November 2021. They organized to advocate for action in the General Assembly, since the trust is backed by a legislative guarantee that requires the state to pay out all obligated benefits in case of a funding shortfall.
The House Appropriations Committee discussed House Bill 1290, which Forbes sponsored, on Tuesday afternoon, a week after the Senate Budget and Taxation Committee discussed its version (Senate Bill 950).
Neither bill passed out of committee by Monday. That’s a deadline for bills that pass their chamber of origin to be guaranteed a hearing in the opposite chamber.
But Senate President Bill Ferguson, a Democrat from Baltimore, stressed Tuesday the importance of the legislation to move Maryland 529 under the office of the state treasurer, calling it a “big [one] that’s outstanding.”
“We’re working closely with the House on that because we’ve got to get this one as right as possible to give the right tools to the treasurer to make sure that he can make these important choices,” he said.
State Treasurer Dereck Davis, an ex-officio member of the Maryland 529 board and one of its more active participants, joined calls in February to reform the agency.
If the legislation is approved, his office would oversee Maryland 529 by June 1 and would phase out the prepaid trust plan by 2025. The bills would also abolish the agency’s board, and require a workgroup made up of affected parents, 529 staff and other state employees to produce a report with recommendations for further changes by June 2024.
Davis told the House committee Tuesday that he would need additional resources to hire more staff to oversee the agency, and asked for “time and patience” in the first year following the proposed change, as his office would be working to get up to speed.
“We know it’s a mess. We know it’s gonna be a lot of work for you,” Appropriations Chairman Ben Barnes, a Democrat representing parts of Anne Arundel and Prince George’s counties, told Davis. “We need somebody serious in charge. That’s why we’re looking at you.”
Forbes and account holders also testified in favor of the legislation, and said the agency’s independent status, which shields it from direct gubernatorial or legislative oversight, has stymied parents’ efforts to claw back their money.
“The stories are all different, but they all have one thing in common: a yearlong, bureaucratic nightmare,” Forbes said. “As the Maryland General Assembly created this program, it’s up to us to ensure that we are serving families in Maryland.”
Other parents said the agency’s history of manual calculations and paper documents obscured the scope of the problem, and noted some parents with young children are not yet regularly checking their accounts.
“They kept us in darkness for 20 years,” said Kirk Litton, who said he lost $75,000. “All the people behind us are going to have the same [financial] statements … and they’re going to come here next year and the year after that.”
Among those testifying was Baltimore Inspector General Isabel Mercedes Cumming, who appeared as a parent. Cumming opened accounts for her sons, then 4 and 6, in 2002, when she was an assistant state’s attorney in Baltimore.
“I didn’t make a lot of money, but I saved every penny for five years,” she said in an interview with The Baltimore Sun.
Cumming purchased eight semester credits for her younger son to attend the University of Maryland. When he left after a semester, she transferred the remaining seven credits to her older son, who planned to attend Johns Hopkins University for a graduate program in cybersecurity.
When she repeatedly inquired about her $43,000 account balance in the fall of 2021 and early 2022, the agency said it was waiting for a forensic audit, and that she soon would be able to access her account.
“All I kept getting were excuses,” Cumming said.
When tuition came due in February 2023 for Cumming’s son, the agency said her account had dwindled to $15,000, her interest would not be available, advised her to withdraw her account balance, then sent her a letter saying it had cancelled her account.
“I would’ve loved to have just let it figure itself out, but my son is in school right now. This is not something future for me — it’s now,” Cumming said. “How could I be sitting in front of the legislature begging for the money that was guaranteed by the legislature?”
