State Rep. Jim Durkin (R-Hinsdale) hopes that his new legislative efforts will turn around the flailing College Illinois! Prepaid Tuition Plan, but it could be just one part of a more comprehensive fix.
Durkin introduced an open meeting bill to the Illinois House Jan. 10 hoping to curtail some of the haphazard, risky investments being made behind closed doors, which he said led to the plan’s current struggles.
If passed, the bill, which is currently in the Rules Committee, would amend the current Open Meetings Act to make the plan’s meetings concerning investments open to the public.
“There were questionable investment decisions made under the previous College Illinois! administration which possibly would not have been made if the families who own these contracts were in the room or aware of these investment choices,” Durkin said in December, as his office prepared to introduce the legislation.
Durkin approaches the investment strategy not only as a legislator, but as a stakeholder–he owns a prepaid tuition plan for his daughter.
The college savings plan, overseen by the Illinois Student Assistance Council, was created in 1997 to help Illinois parents save for their children’s college costs. The tax-exempt plan locks in tuition costs from the year when the parent purchases the plan.
Parents sign a contract, agreeing to pay for some or all college tuition costs over the course of the child’s life, so when it comes time for their child to attend college, the plan pays the school directly.
But the biggest problem facing the plan is nearly a half-billion dollar deficit and the potential that within 10 years, the plan might not be able to afford to pay for the contracts coming due, according to a March 2011 report.
In fact, the funding gap has presented such a problem that the plan stopped accepting new contracts in September.
The plan reached such dire straits due to a complex constellation of causes, said Rep. Robert Pritchard (R- Hinkley), who previously introduced a resolution in 2010 that called for an in-depth investigation into the plan’s funding problem.
Though Durkin has cited a risky investment strategy as the plan’s biggest problem, he also acknowledged challenges stemming from the administration of the plan.
“I would like to see timelier reporting standards on the investments and liabilities in the fund,” said Durkin in a statement.
“At this time advertising, administrative costs, salaries and operational costs are all draining the investment fund and this must stop immediately.”
Pritchard said he believes the problem lies deeper, with the constantly steep tuition increases at Illinois state schools.
“This bill may help,” said Pritchard. “But I’m not sure that this is going to override the cost of college tuition and fees which have escalated far beyond what the fund can keep up with.”
Pritchard pointed to the fact that the University of Illinois’s Board of Trustees just voted to raise its tuition by around 5 percent for next year, which he said is above and beyond the simple allowance for inflation built into the Prepaid Tuition Plan.
“It’s why you have to get into securities or more risky investments, just to increase your portfolio enough to cover the cost of tuition increases,” said Pritchard, who added that to enact comprehensive reform of the plan, legislators must work with Illinois colleges to prevent excessive tuition hikes.