HR0174enr 97TH GENERAL ASSEMBLY

HR0174 Enrolled LRB097 11122 NHT 52455 r

HOUSE RESOLUTION 174

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! prepaid tuition program is critical to ensure the plan participants' ability to access funds when students are prepared to attend an institution of higher education; and

WHEREAS, The College Illinois! prepaid tuition program is not backed by the full faith and credit of the State of Illinois, but rather constitutes a moral obligation of the State, making the College Illinois! prepaid tuition program long-term investment portfolio vulnerable to risk-intensive investment practices; and

WHEREAS, In 2009, College Illinois! prepaid tuition program assets were virtually stocks and bonds in their entirety, but, by the conclusion of January 2011, the College Illinois! fund held $419 million or 38% in alternative investments such as hedge funds, real estate, and private equity investments; and

WHEREAS, Hedge funds and private equity investments often fail to provide an intensive level of transparency appropriate for public institutional investments of this kind; and

WHEREAS, The Illinois Student Assistance Commission's stated strategy is to pursue alternative investments until the College Illinois! prepaid tuition program portfolio reaches 47% in alternative investments such as 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 entire $12.7 million was lost when federal regulators closed the bank; and

WHEREAS, As of June 30, 2007, the College Illinois! prepaid tuition program fund was 7% underfunded, and, as of June 2010, the date of the most recent figures available, the College Illinois! prepaid tuition program fund was 31% underfunded; therefore, be it

RESOLVED, BY THE HOUSE OF REPRESENTATIVES OF THE NINETY-SEVENTH GENERAL ASSEMBLY OF THE STATE OF ILLINOIS, that the Auditor General shall conduct a management audit of the College Illinois! prepaid tuition program's administrative operations; and be it further

RESOLVED, That the audit include, but not be limited to, the following determinations:

(1) The growth in recent years of program costs; and

(2) The efficacy of the program's administration, and, in particular, the Illinois Student Assistance Commission's oversight and administrative capacity to evaluate and direct College Illinois! prepaid tuition program investments; and be it further

RESOLVED, That as a part of this audit, the Auditor General shall conduct an independent asset allocation study of College Illinois! prepaid tuition program investments to determine the overall level of risk associated with the program's current alternative investment mix; it is intended that this study shall be conducted in comparison with a standardized investment portfolio containing no alternative investments, as well as in comparison with actual investment portfolios of similar public prepaid tuition programs currently operating in the states of Michigan, Virginia, Washington, and Florida; and be it further

RESOLVED, That the Illinois Student Assistance Commission and any other entity having information relevant to this audit cooperate fully and promptly with the Auditor General's Office in the conduct of this audit; and be it further

RESOLVED, That the Auditor General commence this audit as soon as possible and report his findings and recommendations upon completion in accordance with the provisions of Section 3-14 of the Illinois State Auditing Act; and be it further

RESOLVED, That suitable copies of this resolution be delivered to the Auditor General and the Director of the Illinois Student Assistance Commission.