Batinick calls on College Illinois to fulfill contractual obligations
Resolving issues with the College Illinois prepaid tuition program, which closed to new investors last summer after falling $320 million short of its obligations, will not be simple, Illinois' 97th District state House representative said during a recent interview.
"It's going to take a comprehensive plan to solve the problem," Mark Batinick (R-Plainfield) told the Will County Gazette. "All promises made need to be kept."
Batinick also recommended a good dose of conservative responsibility to address the problem. "One of the biggest ways to address the issue is to address all the cost-drivers in higher education," he said. "Getting Illinois' tuition rates down will help with the plan's solvency."
Batinick has represented the Illinois 97th House District, which includes parts of Kendall and Will counties, since 2014.
Batinick's comments came after a report last month that, for the second time in six years, College Illinois has been closed by the state to new investors. Crain's reported on Dec. 5 that state lawmakers are "huddling" with representatives from College Illinois administrator Illinois Student Assistance Commission (ISAC) "on how to fill a gap between the dollars in the investment fund backing the program and the family-purchased contracts to attend the University of Illinois at Urbana-Champaign and other state schools in the future."
"ISAC hopes to determine a course of action during next year's legislative session," the Crain's report said.
College Illinois is one of several prepaid tuition programs for higher education in the state. It is not affiliated with Illinois’ 529 college savings programs Bright Start and Bright Directions.
College Illinois sold only 433 new contracts during its 2016-17 sales year, according to the program's most recent actuary report. Those sales were the lowest since none were sold during the 2011-12 sales year, the last time the college savings program was closed to new investors after falling $560 million short. The 2016-17 purchases were a far cry from the 1998-99 sales year, when 11,706 new contracts were sold, according to the actuary report.
As of the end of June, the value of College Illinois' future tuition obligations that were under contracts, including future administrative expenses, was $1.27 billion while fund assets, including the market value of the program's assets and present value installment contract receivables, was $950 million, according to the actuary report. That reflected a deficit of $320 million, a significant increase from the deficit of $264 million at the end of June 2016, according to the actuary report.
"Based on the actuarial assumptions used during the June 30, 2016, actuarial soundness valuation, the deficit was expected to increase to $278.5 million," the report said, blaming the deficit increase on "the net impact of the changes in assumptions (change in the investment return assumption, partially offset by the change in the non-marketing related administrative expense assumption).
"This increase was partially offset by gains due to investment returns that were greater than expected (an actual rate of return greater than the assumption of 6.75 percent); tuition and fee increases that were less than expected (increases that were lower than the assumption of 5 percent); and other demographic experience, which includes deviations in actual contract beneficiary experience from our assumptions related to rates of enrollment and utilization of benefits and contract terminations and refunds."
The difficulties at College Illinois are similar to what the state is dealing with in its pension crisis, Batinick said. "But like pensions, this is another example of the risk of making big long-term promises," he said.