Saturday, December 17, 2011

College Illinois! Could Need a $1.6 Billion Bailout

Before anyone sends me a message to take me to task for the apparent typographical error in the title of this article, that exclamation point is meant to be there. That really is what the great state of Illinois's dumbass college tuition savings program is called. I say "dumbass" because of the report that appeared in the Chicago Sun Times the other day:
Illinois’ financially tanking prepaid college tuition program could require a $1.6 billion bailout from the state to remain solvent during the next 25 years, a new study shows.

If state lawmakers do nothing to prop up College Illinois!, the fund could be drained completely by 2022, financial consultant Gabriel Roeder Smith & Company reported in its analysis for the Illinois Student Assistance Commission.

The report, made public Monday, says if no new contracts are sold going forward, the shortfall will develop between 2022 and 2036 to pay for past contracts coming due. The contracts are supposed to allow parents to pay in advance and lock in lower tuition rates for their children to attend state schools, including the University of Illinois.
Just what cash-strapped Illinois needs, another underfunded program that requires bailing out. Given the bubble in student loans and college education costs that I have written about numerous times before, it really doesn't matter that the fund is going to be bankrupt by 2022, as it seems highly unlikely that the American university system as we know it today will still be functioning then.

Moving on with the story, we greet the appearance of one of my favorite creatures grazing out on the plains of cluelessness awaiting the big bad carnivore named reality to slay them unaware. Behold, in all of her glory, the upper middle class nitwit:
Kim Godden, a lawyer who lives in Ukrainian Village, said Tuesday she was “outraged” to learn that there might not be any money by the time her daughter, Hannah, needs it. Godden, 38, enrolled her daughter in the program a month after her birth in 2007.

She said she did her homework before buying the contract to be sure she wasn’t making a risky investment, but figured her monthly $400 payments were safe.

“I said, ‘I’m guaranteed,’” Godden recalled thinking. “‘I don’t have to worry about fluctuations in the stock market.’”
I hate to break this to you, Ms. Godden, but you aren't guaranteed jack shit. In fact, by voluntarily agreeing to turn over control of your own money for 18 years to a state government in which four of the previous seven governors have ended up in prison you have proven once again that a fool and her money are easily parted, even if she should happen to have a law degree. The only sensible thing for you to do is stop paying into the program now and cut your losses. But you won't do that because you continue to naively believe in a system that, if you were to open your eyes just once, you could quite plainly see is crumbling down around you.

The real problem, Ms. Godden is that despite your fancy law degree you are the type of person who is easily taken in by flim-flam artists such as these:
Gov. Pat Quinn told reporters Tuesday that he supported the commission’s decision to suspend the sale of new College Illinois! contracts but gave no other clues about what steps need to be taken to right the fund’s finances.

“We’re going to have to roll up our sleeves. I really feel strongly about the importance of access to college and reducing the bite it takes on many students’ wallets when they have to go to college. That’s an issue we’re going work on in the coming years,” the governor said when asked about the report’s findings and whether College Illinois! can remain a viable program.

“We’ll come up with a plan, a rescue plan, to make it better,” Quinn said.

State Rep. Jim Durkin (R-Western Springs), who has a College Illinois! contract for his daughter, said the report underscores the need for the Legislature to take decisive action when lawmakers return to Springfield early next year.

“Part of our job is to fix problems,” he said. “There is a problem. I think we can turn this around.”

Durkin said he is working on legislation to submit next year to make the program more transparent.

“We have to convince current contract holders this is still a safe investment and also need to make this an attractive plan for down the road,” Durkin said.

Godden said she is confident any problems will be resolved: “I have faith the state will back their commitment to me, and I hope I’m not disappointed.”
Tell you what, Ms. Godden, I'll bet you any amount you wish to wager that not only will you be disappointed and lose the money you continue to throw into the state's gigantic fiscal black hole, but that the university system will be so crippled by the time your daughter is college age that she will NEVER attend a single class. Why am I so confident that I'll win my bet? Well, maybe this has something to do with it: a letter to contract holders, commission Interim Executive Director John Sinsheimer and board chairwoman Kym Hubbard noted that the $1.29 billion portfolio is 69.8 percent funded, a “slight improvement from the 68.6 percent reported as of June 30, 2010. This is much stronger than any of the State’s pension plans and many corporate pension plans.”
There you go, Ms. Godden. Director Sinsheimer and Chairwoman Hubbard just inadvertently told you how bad things really are even as they were trying to boost your confidence. Now who you gonna believe? The craven politicos, or your lying eyes?

Bonus: A song dedicated to the lovely lawyer, Kim Godden...look what she gets for pretending the danger's not real


  1. "if no new contracts are sold going forward, the shortfall will develop between 2022 and 2036 to pay for past contracts coming due."

    Isn't that pretty much the description of a Ponzi scheme? Oh, yeah, that's right... our whole economy is a Ponzi scheme.

  2. The last quote is very enlightening, and unintentionally let slip I'm sure.
    I just can't understand how supposedly intelligent people (i.e. lawyers, I know, I know..) cannot see what is happening even when it is spelled out for them.
    Even sheep run from the wolf when it starts chasing them.