Shallow thinking from the start

Shallow thinking from the start

A deficit in planning can produce a surplus of problems.

The state's College Illinois prepaid tuition program offered a deal that was too good to be true. That's why the program's long-term finances remain in deficit and the program's administrators have suspended, at least for the time being, acceptance of new enrollees.

Illinois Auditor General William Holland this week laid out chapter and verse of the program's finances, offering two sets of numbers for those with different tastes in different accounting methods.

By one standard, the tuition program's financial statement deficit, as of June 30, 2011, declined from $338 million to $262 million. Another standard, one based on the actuarial value of assets, showed the deficit increased from $531 million to $536 million.

The good news, according to Holland's audit, is that "the program's cash flow is expected to remain positive through the fiscal year that ends in 2021" even without resuming sales of contracts.

The state's prepaid tuition program reflects poor financial decisions like others our public officials have made.

It was rushed into being with great promises that were backed by little thought. State officials guaranteed parents that if they paid certain sums now, their future tuition payments would be guaranteed. The idea was that gains made from the invested funds would cover future costs.

That's a great theory. But state officials overlooked the possibility that the gains would not be as great as they estimated, a prospect that became grim reality when the housing bubble burst in 2008 and the banking crisis followed. Further, the state did not anticipate the extent to which college tuition would increase.

The combination of reduced investment returns and larger-than-anticipated tuition increases has wreaked havoc on the program's long-term viability, forcing state officials to rethink their approach to salvage the prepaid tuition plan.

It's hard to see how they will achieve that goal in the current economic climate. What Illinois, as well as the entire nation, needs is for the economy to start growing at a strong clip, putting people back to work and driving great economic activity.

The basic flaw with the program, however, remains. The state overpromised while laying the groundwork to underdeliver. It's got to do better if this program — or Illinois — is to recover from its current financial woes.

Sections (2):Editorials, Opinion
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