By Liz Sidoti
The Associated Press

COLUMBUS - Most of the 20 states that offer prepaid tuition plans are changing their programs to ensure solvency after projecting potential multimillion-dollar deficits - in many cases for the first time.

Some states have limited the number of new families allowed in the programs by shortening enrollment periods.

At least one - Tennessee - considered closing the program to new investors. Most, including Ohio, increased the rates they charge parents.

The plans allow parents to lock in the current cost of tuition for the future either by purchasing "units" of tuition or contracts.

The money is released when the child is ready to attend college.

A projected deficit occurs when future tuition obligations exceed current assets. That means that states wouldn't have enough money to cover all promised tuition if all students in the program started college at the same time.

Because that's unlikely to happen, the money is safe and states have plenty of time to rebuild surpluses, said Diana Cantor, chairwoman of the College Savings Plans Network and executive director of Virginia's fund.

"There's no reason to panic right now," Ms. Cantor said. "It's just an indication that if things continue along the same path, there could be a problem."

States set the cost of units or contracts based on tuition and fees at four-year public universities, which according to the College Board went up 9.6 percent on average nationwide this academic year.

That was far more than states had anticipated when they set their rates.

When the fiscal year ended June 30, many of the 20 states projected that they could have multimillion-dollar deficits over the next 10 to 15 years if the economic downturn continues and tuition keeps rising. Until then, states that opened prepaid tuition plans in the prosperous 1990s had projected surpluses.

"The question for states is, can they make adjustments now in order to maintain solvency in the future?" said Joe Hurley, the Pittsford, N.Y., accountant who founded savingforcollege.com.

Ohio, which projected a $46 million hole, raised the cost of tuition units four times in the past year to $82 a unit, a 53 percent overall increase.

The fund's executive director, Jackie Williams, said the cost could increase again if tuition at Ohio's 13 public four-year universities continues to soar.

The Legislature eliminated a 6 percent cap on annual tuition increases around the same time the economy nose-dived, causing the fund's investments to fall short of its projected 7.5 percent return rate.

Ohio's program guarantees the money, and lawmakers would not have to bail out the program for at least 15 years should all market conditions stay the same, the fund's executive director said.

Facing a similar situation, Washington, which projected a potential $21 million deficit, increased prices 24 percent to help rebuild the $4.5 million reserve fund it drained last year as it paid out previous tuition commitments.

"If we had about five years like this, we may be in trouble," said Betty Lochner, the program's director. "But it's early enough now that we can adjust."

West Virginia's adjustment included delaying its enrollment period two months to Nov. 1 and raising prices 15 percent.

Those moves followed Senate Finance Chairman Oshel Craigo's warning in September that the state would be $16 million short if everyone invested in its tuition fund cashed in.

And in Tennessee, which projected a $6 million deficit, the program stayed open to new families only after lawmakers agreed to provide more money for higher education and capped tuition increases this fall.

The fund still raised prices 4 percent to help build a reserve.

Sandy Baum, an education economist at Skidmore College in Saratoga Springs, N.Y., said that states such as Ohio, which guarantees invested money, could be in trouble if funds continue to project deficits over the next decade because they would have to come up with the money somehow.

Richard Flaherty, president of the nonprofit College Parents of America, said no matter what remedy states choose, the projected deficits mean that parents are losing opportunities to invest and get in on programs when rates are low.