HR0174 97TH GENERAL ASSEMBLY

HR0174 LRB097 11122 NHT 52455 r

HOUSE RESOLUTION

WHEREAS, The College Illinois! prepaid tuition program has served Illinois families successfully for more than a decade, encouraging parents and grandparents to pay college tuition in advance through the purchase of State-sponsored prepaid tuition contracts; and

WHEREAS, The financial performance of the College Illinois! program is critical to making certain that the plan's 55,000 participants are able to access funds when the students are ready to attend an institution of higher education; and

WHEREAS, The College Illinois! program is not backed by the full faith and credit of the State of Illinois, making its long-term investment portfolio vulnerable to risky investment practices; and

WHEREAS, In 2009, College Illinois! assets were virtually all stocks and bonds; as of the end of January 2011, however, the fund held $419 million, or 38%, in riskier alternative investments, such as hedge funds, real estate, and private equity investments; and

WHEREAS, Hedge funds and private equity investments often do not provide the level of transparency appropriate for public institutional investments of this kind; and

WHEREAS, The Illinois Student Assistance Commission's strategy is to continue purchasing alternative investments until the College Illinois! portfolio reaches 47% hedge fund, real estate, and private equity investments; and

WHEREAS, In 2008, the Illinois Student Assistance Commission invested $12.7 million in ShoreBank, a privately held company and, in 2010, the $12.7 million was lost when federal regulators closed the bank; and

WHEREAS, The level of exposure to alternative investments is at best questionable, given the relatively small size of the College Illinois! portfolio, and could expose the program's investors to unnecessary financial risk; and

WHEREAS, As of June 30, 2007, the College Illinois! fund was 7% underfunded, and as of June 2010, the most recent figures available, its shortfall grew to 31%; therefore, be it

RESOLVED, BY THE HOUSE OF REPRESENTATIVES OF THE NINETY-SEVENTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, that in response to the Illinois Student Assistance Commission's questionable investment practices and the College Illinois! program's growing shortfall in its fund, we direct the Illinois State Board of Investment to conduct an independent asset allocation study of College Illinois! investments to determine the overall level of risk associated with the program's investment mix and provide the results of that study to the General Assembly and the Governor no later than January 15, 2012; and be it further

RESOLVED, That we direct the Auditor General to conduct a special audit of College Illinois! operations to document growth in program administrative costs and determine the efficacy of program administration on behalf of participants and provide the results of this special audit to the General Assembly and the Governor no later than January 15, 2012; and be it further

RESOLVED, That suitable copies of this resolution be delivered to the Illinois State Board of Investment and the Auditor General.