(Chicago Sun Times) — The recent revelations about the State of Illinois’ prepaid tuition program, CollegeIllinois, are troubling — but not totally unexpected. Every “defined benefit” investment program has shown losses over the past few years. But most plans have a longer time horizon than this program, which is supposed to pay out tuition benefits within 18 years or less. Suddenly, thousands of parents who thought they were securing their children’s tuition have joined the millions of state employees who are worried about their promised pensions, and the bondholders who are wondering where the state will come up with the money to pay the interest on the bonds they own, much less repay the principal. Crains’ excellent investigative report highlighted not only the investment deficiency in the funds but the changes in their investment style and accounting methodology. While CollegeIllinois executives defend their investment moves as necessary to “catch up” with the runaway costs of tuition, there is no doubt that the accounting changes give the appearance of “window dressing” to make the plan appear less underfunded.
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