State likely to bail out College Illinois, Halbrook says
Fixing the College Illinois prepaid tuition program, which closed to new investors last summer after falling $320 million short of its obligations, will not be easy and a taxpayer bailout is likely, Rep. Brad Halbrook said during a recent interview.
"There really is no simple fix to the program," Halbrook (R-Shelbyville) told Prairie State Wire. "The stability of the program has been in question for far too long. The only way it can continue is for people to invest in it."
That would be difficult, considering the program's many financial problems, but there could be some lessons learned from similar problems in Alabama, Halbrook said.
"We should look at how Alabama addressed their troubled college tuition program in 2013," he said.
''They offered to pay out tuition rates at 2010 levels. Illinois could do the same thing. They could guarantee tuition rates at, say, 2014 levels. Families get something out of the deal and the state gets out of a program that is not sustainable and costing taxpayers money."
Meanwhile, Halbrook said he expected a bailout for College Illinois.
"State money will likely have to be used because current families enrolled will likely sue if the program defaults," he said. "The longer we wait to figure this situation out, the worse it is going to become. We need to figure out a solution to avoid the state having to pay costs we really can't afford right now."
Halbrook describes himself as a "fiscal and social conservative" who in 2012 turned down enrollment in the state's General Assembly Retirement System pension. He has represented the 102nd House District since running unopposed in the November 2016 General Election. The 102nd District encompasses all of Douglas, Moultrie and Shelby counties and parts of Champaign, Edgar, Macon and Vermilion counties.
Halbrook previously, from 2012 until 2015, represented the state's the 110th House District. The 110th District encompasses all Clark, Coles, Crawford and Cumberland counties and parts of Edgar and Lawrence counties.
His comments follow 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 were "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."
College Illinois is one of several prepaid tuition programs for higher education in the state. College Illinois is not affiliated with Illinois’ 529 college savings programs Bright Start and Bright Directions.
"College Illinois has been in trouble for a long, long time," Halbrook said. "The program has been badly managed and it is not all sustainable."
Part of the problem with College Illinois has been the dramatic rise in Illinois tuition rates in recent years, Halbrook said.
"Students in Illinois are finding they can pay out of state tuition rates to some colleges and universities in other states for less than what in state tuition is costing them here in Illinois," he said. "What is needed is a comprehensive fix to our university system in Illinois. College Illinois has been badly managed and is bleeding money but College Illinois is one part of a greater problem in Illinois."
Another problem College Illinois has faced is a lack of investors. 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 numbers were a far cry from the 1998-99 sales years when 11,706 new contracts were sold, according to the actuary report.
The state has options, Halbrook said.
"One option would be to work out a deal with families enrolled in College Illinois to roll over monies they have invested in College Illinois into other 529 plans that are more solvent," he said. "The state could offer some incentives to families to take this route. One of the biggest problems with College Illinois is that tuition rates in Illinois are rising at an incredible rate. The program can't keep up with these increases. Let's allow people to roll their money over into a plan and get as much of risky financial obligations as we can."