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* Steve Daniels at Crain’s…
It will cost an estimated $501 million to bail out what at the end of the day was a relatively small-scale effort, begun in the late 1990s, to help parents pay for college at what was designed to be no cost to taxpayers, according to the Illinois Student Assistance Commission, which has administered the program since its inception. ISAC officials have struck a deal with state lawmakers to bail out the program while closing it to future participants.
More than 73,000 have been or are beneficiaries of contracts to attend state schools since College Illinois was launched, according to ISAC documents.
The $727 million fund backing the contracts is projected to begin running out of money in 2026. Without taxpayer help, more than 2,000 contract beneficiaries would be at risk of being stiffed.
Technically, the bills don’t start coming due for the state until then. But, ISAC spokeswoman Lynne Baker emails, “We have suggested to policymakers that it would be best to start funding the obligation sooner rather than later.”
What had been a $308 million unfunded liability now has mushroomed to more than $500 million thanks to the decision to end the program for all but existing contract holders. The need to more quickly liquidate the fund will reduce the return ISAC can hope to achieve from its investments, draining the fund more quickly, according to a December actuarial update.
Ugh. This state has truly sucked at governing.
* Meanwhile…
Gov. J.B. Pritzker pledged during a visit Thursday at Richland Community College in Decatur that his proposed budget will lead to more funding for Illinois career technical education programs like the ones offered at the college.
More investment in higher education was a key aspect of the budget plan he proposed in February. He said faculty members have left Illinois universities for other states because of a 10-year lack of proper funding and students worry about uncertain financial aid.
“My grandfather once said ‘It takes a lifetime to build a reputation and about five minutes to screw it up,’” said Pritzker during a meeting with The Pantagraph’s editorial board. “In the last four years in Illinois, I would argue that our colleges’ and universities’ reputations got damaged significantly … If you want to fix that problem, you’ve got to make the investment in universities and community colleges.”
Pritzker’s proposed budget unveiled Feb. 20 calls for adding $375 million to the school funding formula — $25 million more than the state is required to fund. It also proposes a 5 percent increase in funding for public universities and community colleges and a boost to the Monetary Award Program that assists low- and moderate-income students.
posted by Rich Miller
Friday, Mar 22, 19 @ 11:46 am
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“ISAC under Gov. Rod Blagojevich compounded the woes with a risky plan—revealed in a March 2011 Crain’s investigation—to plow hundreds of millions into hedge funds, private equity, real estate and other “alternative” investments. It lost nearly $20 million it invested in ShoreBank, the South Side community bank that went belly up in 2010, and Fisker Automotive, an ill-starred hybrid-car maker.”
SMH. Sad.
Comment by Ravenswood Right Winger Friday, Mar 22, 19 @ 11:58 am
College Illinois promised parents they could pay today’s tuition and withdraw an amount equal to tuition when their children were ready for college.
The program started shortly before the state started freezing tuition for current students while raising it for new students. Tuition hikes began to reach double digits when current students stopped complaining about the hikes.
Investment growth did not match tuition growth, so College Illinois began a slide toward insolvency, slow at first but quickening rapidly.
It’s not that College Illinois was poorly designed, but that it was not designed with bigger tuition hikes in mind.
Comment by Anonymous Friday, Mar 22, 19 @ 11:58 am
=It’s not that College Illinois was poorly designed, but that it was not designed with bigger tuition hikes in mind. =
I guess, but bigger tuition hikes, are EXACTLY what the plan was supposed to protect against.
If tuition hikes were going to be very modest, you could just keep your money, maybe put it in a low risk type of investment or a savings account. You did this, if you were worried that tuitions costs may grow drastically.
Comment by Andyillini Friday, Mar 22, 19 @ 12:03 pm
Lot of rosy arithmetic at the beginning of that program, then the crash, then the Blago crew chasing it with risky investments.
Comment by wordslinger Friday, Mar 22, 19 @ 12:14 pm
Good intentions. Unintended consequences. Again.
Comment by Responsa Friday, Mar 22, 19 @ 12:22 pm
I bought 8 semesters back when it started. I considered it an excellent investment as well as insurance in case I went early. I got the last one paid this month.
It was too cheap, I figured it was a guarantee 8% return annually. And that was before the massive tuition hikes.
Comment by Fav human Friday, Mar 22, 19 @ 12:25 pm
Would someone please tellJB he is spending and promising to spend money the State doesn’t have and all of his proposed revenue is xlready spoken for. Unless of course he wants to donate his own funds
Comment by Sue Friday, Mar 22, 19 @ 12:30 pm
Building confidence in state government one failure at a time. This will make a good TV ad for the anti-progressive income tax people.
Comment by Steve Friday, Mar 22, 19 @ 12:33 pm
Interesting that although covering the investors is not a constitutional or even a legal mandate, there seems to be ready acceptance of the state’s assumption of these costs.
Why do many of these same folks resist the state’s payment of constitutional pension obligations?
Comment by Truthteller Friday, Mar 22, 19 @ 12:42 pm
With 10 years reflection, it is truly insane that we hit the perfect storm of the 2008 collapse and Blago at the same time.
(And 1990s folks thinking nothing would ever go wrong and/or change.)
Sometimes it’s pretty amazing we’re still here, fighting.
Comment by lakeside Friday, Mar 22, 19 @ 12:52 pm
The cost of higher education (and health care) have consistently increased more than inflation, often a lot more. Any scheme based upon returns on investment above inflation should’ve been suspect.
Comment by Sir Reel Friday, Mar 22, 19 @ 1:05 pm
This should give taxpayers pause as to allowing the state to take more money from us. The managerial errors here were significant. How is is the State didn’t contract with colleges to cap tuition rates which would be paid at some future date and assumed investment returns would be sufficient. This is akin to what happened with the insurance sold to pay for nursing homes and senior healthcare nog covered by Medicare. Why is the State volunteering to bail out the program unless it is contractually obligated to do so. At a minimum the State should seek some contribution from the schools benefiting from the tuition payments
Comment by Sue Friday, Mar 22, 19 @ 1:41 pm
“We have suggested to policymakers that it would be best to start funding the obligation sooner rather than later.”
Why start now?
Comment by Bruce( no not him) Friday, Mar 22, 19 @ 1:47 pm
There are still options: go with a savings plan.
https://www.collegeillinois.org/PlansAndPricing/Comparing529Plans.html
https://www.illinoistreasurer.gov/Individuals/College_Savings
Comment by downstateR Friday, Mar 22, 19 @ 1:51 pm
===Ugh. This state has truly sucked at governing. === Which is why people really hate the idea of giving this State more. It’d be a lot easier to give the State more to upgrade infrastructure if there was any faith the State could spend it right.
Comment by Shemp Friday, Mar 22, 19 @ 3:56 pm