Lang, Durkin Push Illinois Investment Board to Conduct Independent Investigation of College Illinois! Investment Losses

(Springfield, IL) — April 18, 2011. A recent state audit revealed one of the state’s “low-risk” prepaid tuition programs is underfunded by 31 percent and wasted millions on “risky” investments last year. But state legislators say there is more to uncover.

House lawmakers this week unanimously adopted a resolution calling for an investigation into the investment practices of the state’s College Illinois. Families make payments to “lock in” present rates to pay for future tuition at Illinois colleges or universities, according to its website.

Approximately 55,000 students participate statewide.

State Rep. Jim Durkin, R-Western Springs, is chief sponsor of House Resolution 174. He invested in a 15-year contract with the program for his 9-year-old daughter.

“I thought it was a good, safe investment,” Durkin said, “… to ensure that my daughter would have an affordable education available for her by the time she graduates from high school.”

The office of Illinois Auditor General William Holland released a report last week raising red flags about the Illinois Student Assistance Commission’s investment losses and questionable business practices concerning College Illinois.

The audit found that ISAC in 2008 invested $12.7 million in Chicago-based Shorebank, despite concerns about the bank’s financial health. When federal regulators closed the bank in 2010, the original investment was worthless.

Also, College Illinois had a deficit of $338 million on June 30, and a deficit of $342 million in 2009.

An investigation would help ensure the program lives up to its marketing as “low-risk,” Durkin said.

“We need to restore confidence in the parents who have made these investments for their children and grandchildren,” Durkin said.

The audit revealed officials invested in “virtually all stocks and bonds” in 2009, but by January 2011, had shifted $419 million of its investment portfolio into “riskier alternatives,” like hedge funds, real estate and private equity, according to the resolution.

The resolution calls for the Auditor General’s office to conduct a management audit into the program’s administrative operations and its recent cost growth. Auditors would determine the program’s overall risk, whether funds are safe and available in the future. It would also compare the program’s investment portfolio to similar programs in Washington state, Michigan, Virginia and Florida.

State Rep. Lou Lang, D-Skokie, a co-chief sponsor of the resolution, said the new audit would help to ensure college investments are available in the future. Lang also invested in the program for his daughter, who is now in college.

“We are going to take care of these college savings,” Lang said, “and make sure that the money is there to send our kids to college, especially when it is so expensive now.”

State Rep. Chad Hays, R-Catlin, asked parents to be patient until further investigation into the program.

“As we go forward in conjunction with our universities,” Hays said, “my hope is that people will have renewed confidence in the entire fund, as we see this thing through.”

Andrew Davis, ISAC’s executive director, said during this week’s House Executive Committee meeting that the commission agrees to cooperate with the review.

“We do believe it is the right thing to do at this point to give assurance to all the families in the state and to the legislators who are responsible, ultimately, for our oversight that the program is in good shape, which it is,” Davis said. “And so we welcome this opportunity to have a public examination of our track record.”

The Auditor General’s office is expected to submit its findings to the Illinois Legislature and the governor by Jan. 15.

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