Director: College Illinois! to stay afloat, even if that means taxpayer bailout

February 7, 2012

By Andrew Thomason | Illinois Statehouse NewsSPRINGFIELD —

Illinois’ prepaid college tuition fund on which some 54,000 families are relying is vowing to find some way to make up a·$559.9-million deficit.Even if that means asking for a taxpayer-funded bailout, said·John Sinsheimer, executive director for theIllinois Student Assistance Commission, or ISAC, which administers·College Illinois!.·

“There are a variety of solutions out there. They range from seeking a full-faith guarantee from the·General Assembly, to closing the program out to all new contracts and having the General Assembly make up the shortfall, to what we call benefit cost sharing where the universities would help,” Sinsheimer said during a hearing Tuesday of the·Legislative Audit Commission, a joint committee of the Illinois House and Illinois Senate.
College Illinois! stopped accepting new contracts on Sept. 30 after media reports of risky investments, funding shortfalls and accelerated withdraws from the program.
State Rep.·Rich Brauer, R-Petersburg, said he has received calls from constituents who’ve bought contracts, asking for advice on what to do.

“Parents call me and of course they … have these payments due, and they’re wondering if they should make those payments or default,” Brauer said.

Sinsheimer said he did not know if the fund’s $1.1 billion in assets could cover a complete refund of everyone’s initial investment plus the additional 2 percent return usually paid out when people withdraw their investment.
He said the program will not attempt to prevent people from leaving the en masse by charging a penalty for withdrawals.
“There is no truth in that,” Sinsheimer said.

Sinsheimer said he wants contract account holders, employees of ISAC and legislators to discuss together how to revamp the plan and make it financially sounds. The General Assembly and Gov.·Pat Quinn would need to take action on any recommendation.
Meanwhile, people like·Sarah Antonacci and her husband·Gianni·Antonacci are left to worry.
The Antonaccis purchased plans for their three children, and are still making monthly payments for their two youngest.
Sarah Antonacci repeated one adjective over and over to describe how she and her husband are feeling about the program’s future·—·“scary.”

The Antonaccis said they have tens of thousands of dollars wrapped up in the plan. At times their monthly check to College Illinois! was larger than their mortgage payment. With so much money in the system and at least eight years of payments left, Sarah Antonacci said she and her husband feel trapped.
“If we had just gotten into it, we would pull the money out without thinking about it, but we didn’t just put our money in,” Sarah said.

Created 12 years ago, College Illinois! allows people to pay for tuition and mandatory fees at universities and community colleges years in advance at a lower cost. The money people contribute is invested and the return on the investments is supposed cover tuition and fee inflation during the ·coming years and decades.
Plans can be paid for in full or through monthly installment payments.
Taxpayers’ dollars do not legally back College Illinois!.

Instead, the·Legislature can be asked — not compelled — to cover any kind of deficit or default.
Individual lawmakers have said they oppose giving taxpayer dollars to the program.
Sinsheimer said the fund could pay for current contracts through 2020 before running out of cash. Current contracts cover students through 2029.

Sinsheimer’s said the 2020 figures assume current investments will earn a rate of return of 8.75 percent, college tuitions continue to edge upward at the current rate and contract holders don’t make a run on the bank.
Illinois Auditor General·William Holland said his office is investigating the investments made and the management of College Illinois!. He said the investigation should be completed later in the year and will be made public.
“Some of the things we are looking at … (are) the growth in the program cost over the recent years, the efficacy of the program administration and then to look at the asset allocation of the program,” Holland said.