Lawmakers appropriated $250 million to shore up the bankrupt program in the $4.1 billion package signed into law today by Gov. J.B. Pritzker.
Most of the funding in the bill was aimed at paying off a chunk of the billions in expanded unemployment benefits provided during the pandemic. The bill, passed on party-line votes in an election year, was championed by Democrats as a hefty down payment on getting Illinois’ fiscal house in order. Republicans chided Democrats for preserving much of the billions in federal pandemic aid for new spending rather than paying off what’s already owed.
College Illinois has been closed to new participants for five years. But tens of thousands of contracts still must be honored as they come due, and the investment fund that was designed to cover all of those costs was hundreds of millions short.
The program is separate from the better-known Bright Start, which enables parents to invest for future college costs without paying taxes on the gains. But Bright Start, like most such 529 programs, doesn’t guarantee those savings will cover future tuition. College Illinois does—as long as the contract beneficiary attends school in the state. That gave the program, established during an era of soaring stock markets, the features of a pension plan.
An extensive Crain’s investigation in 2011 raised alarm bells about the funding shortfall and high-risk investments the Illinois Student Assistance Commission, which oversees the program, was using at the time to try to catch up. The state wasn’t required by law to honor the contracts if the investment fund ran dry—a fact many parents were unaware of, given misleading marketing used back then by College Illinois.
Pritzker made clear when he took office in 2019 that the state would provide the needed funds. But it wasn’t clear how, given the terrible state of Illinois’ finances then. The pandemic and ensuing massive federal aid changed the fiscal picture.
“Paying down debt, making additional pension payments and fully funding College Illinois is the fiscally responsible move that could lead to another credit upgrade,” Sen. Elgie R. Sims Jr., D-Chicago, who chairs the Senate Appropriations Committee, said in Pritzker’s release announcing the bill’s signing.
via Crain’s Chicago Business
March 25, 2022 at 01:54PM