Illinois General Assembly - Full Text of SR0177
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Full Text of SR0177  97th General Assembly




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2    WHEREAS, The College Illinois! prepaid tuition program has
3served Illinois families successfully for more than a decade,
4encouraging parents and grandparents to pay college tuition in
5advance through the purchase of State-sponsored prepaid
6tuition contracts; and
7    WHEREAS, The financial performance of the College
8Illinois! prepaid tuition program is critical to ensure the
9plan participants' ability to access funds when students are
10prepared to attend an institution of higher education; and
11    WHEREAS, The College Illinois! prepaid tuition program is
12not backed by the full faith and credit of the State of
13Illinois, but rather constitutes a moral obligation of the
14State, making the College Illinois! prepaid tuition program
15long-term investment portfolio vulnerable to risk-intensive
16investment practices; and
17    WHEREAS, In 2009, College Illinois! prepaid tuition
18program assets were virtually stocks and bonds in their
19entirety, but, by the conclusion of January 2011, the College
20Illinois! fund held $419 million or 38% in alternative
21investments such as hedge funds, real estate, and private
22equity investments; and



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1    WHEREAS, Hedge funds and private equity investments often
2fail to provide an intensive level of transparency appropriate
3for public institutional investments of this kind; and
4    WHEREAS, The Illinois Student Assistance Commission's
5stated strategy is to pursue alternative investments until the
6College Illinois! prepaid tuition program portfolio reaches
747% in alternative investments such as hedge fund, real estate,
8and private equity investments; and
9    WHEREAS, In 2008, the Illinois Student Assistance
10Commission invested $12.7 million in ShoreBank, a privately
11held company and, in 2010, the entire $12.7 million was lost
12when federal regulators closed the bank; and
13    WHEREAS, As of June 30, 2007, the College Illinois! prepaid
14tuition program fund was 7% underfunded, and, as of June 2010,
15the date of the most recent figures available, the College
16Illinois! prepaid tuition program fund was 31% underfunded;
17therefore, be it
19ASSEMBLY OF THE STATE OF ILLINOIS, that the Auditor General
20shall conduct a management audit of the College Illinois!
21prepaid tuition program's administrative operations; and be it



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2    RESOLVED, That the audit include, but not be limited to,
3the following determinations:
4        (1) The growth in recent years of program costs; and
5        (2) The efficacy of the program's administration, and,
6    in particular, the Illinois Student Assistance
7    Commission's oversight and administrative capacity to
8    evaluate and direct College Illinois! prepaid tuition
9    program investments; and be it further
10    RESOLVED, That as a part of this audit, the Auditor General
11shall conduct an independent asset allocation study of College
12Illinois! prepaid tuition program investments to determine the
13overall level of risk associated with the program's current
14alternative investment mix; it is intended that this study
15shall be conducted in comparison with a standardized investment
16portfolio containing no alternative investments, as well as in
17comparison with actual investment portfolios of similar public
18prepaid tuition programs currently operating in the states of
19Michigan, Virginia, Washington, and Florida; and be it further
20    RESOLVED, That the Illinois Student Assistance Commission
21and any other entity having information relevant to this audit
22cooperate fully and promptly with the Auditor General's Office
23in the conduct of this audit; and be it further



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1    RESOLVED, That the Auditor General commence this audit as
2soon as possible and report his findings and recommendations
3upon completion in accordance with the provisions of Section
43-14 of the Illinois State Auditing Act; and be it further
5    RESOLVED, That suitable copies of this resolution be
6delivered to the Auditor General and the Director of the
7Illinois Student Assistance Commission.