Legislators ask UI to help cover shortfall in College Illinois program

 

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SPRINGFIELD — Some state senators want the University of Illinois and other public universities to help cover a projected shortfall in the state's prepaid-college-tuition program as part of a state bailout, to avert bigger financial problems down the road.

At an appropriations hearing on the UI's fiscal 2020 budget request, Sen. Scott Bennett, D-Champaign, asked UI President Tim Killeen for the university's help in addressing a $308 million unfunded liability for the College Illinois program.

For a number of reasons — including low investment returns and a drop-off in sales during the Great Recession — the program won't be able to meet all of its obligations starting in 2026.

Bennett said the other big factor was tuition inflation, citing "massive" UI tuition increases from 2000 to 2014, before a five-year tuition freeze took effect. The UI's base tuition rate rose from roughly $3,700 to $12,000 in that period.

That made it hard for College Illinois to earn an investment return large enough to cover future tuition costs, he said.

"You guys have a role in resolving this, too," he told Killeen. "No investment strategy can account for that."

Created in 1997, the program allowed parents to prepay tuition at a state university as a way to hedge against rising college costs. It has twice had to stop accepting new participants as it reorganized, and it hasn't sold any new contracts since 2017.

To reassure nervous families, Bennett recently introduced legislation that would guarantee all College Illinois contracts, saying he wants to avoid the class-action lawsuits brought against similar programs in other states.

Currently, the state is "morally obligated" to cover the costs of those contracts. The bill would change it to an automatic appropriation each year to cover any liabilities if lawmakers don't appropriate the money.

To win legislators' support — and limit the financial obligation — Bennett and others persuaded Illinois Student Assistance Commission Executive Director Eric Zarnikow to agree to discontinue College Illinois sales if the legislation passes.

The program has about 35,000 outstanding contracts with current or future students, though quite a few attend college out of state, a spokeswoman said.

Bennett said he wants all state universities to chip in, but the majority of College Illinois participants attend one of the UI campuses or Illinois State University.

Killeen acknowledged Bennett's point, noting that he wasn't president in the early 2000s, but also said the tuition increases came in response to steeply declining state support during that period.

Another factor was the state's guaranteed-tuition law, which keeps tuition flat for four years for each incoming class, he said. The UI increased freshman rates each year in response.

"I've been told our university had no input in investments" or contract pricing for College Illinois, Killeen added.

He said the UI can't absorb a $300 million shortfall but is willing to work with legislators on that and other underlying structural problems.

"The whole state needs to take a look at higher education," including demographics and costs, he said.

In response, Bennett said that UI tuition increased almost threefold during the "golden age of higher education" from 1990 to 2002, when state appropriations were flush.

He thinks it's in the universities' interest to help the state deal with the problem now. If they put it off, the unfunded liability will only grow and could wind up back in their laps, he said.

"I don't want to see that happen," Bennett said, but also noted that the state doesn't have $300 million in its current budget.

He suggested the UI and other schools consider tuition waivers or discounts that could help lower the cost, as they're doing with the new Illinois Commitment offering free tuition to low-income students. He commended administrators for that program and the five-year tuition freeze.

Bennett and Sen. Dan McConchie, R-Hawthorne, who supports the bill, said they don't want to shortchange families who invested in College Illinois.

Student 'outmigration'

McConchie asked Killeen how the $98 million budget increase requested by the UI will address the growing number of Illinois high school seniors leaving to attend college out of state — now up to 48.4 percent, from 29.3 percent in 2002.

He cited UI data showing that the largest group of potential students Illinois is losing are middle-class students with ACT scores of 28 to 32.

Executive Vice President Barbara Wilson said $10 million of the UI's request would go to financial aid, on top of the $231 million the UI now provides.

The state's new Aim High scholarship program — $25 million matched by the universities — is also targeted at that group, Killeen said.

Most in-state students who are accepted by the UI but leave Illinois for college cite finances as a factor in their decision, and a third who left during the two-year state budget impasse cited state finances as a reason, Wilson said.

"It's a huge concern for us," she said.

Last year, most of the admitted students the Urbana campus lost to other states went to Purdue, Michigan and the University of California-Berkeley, she said.

"That's just not right. We've got to turn that around," she said.

Faculty costs

UI administrators also defended the $69 million allocated in their budget request for faculty salaries and recruitment, saying "we've lost ground" on that front even as the UI's enrollment rose by nearly 10 percent over the last five years. The UI recently announced an ambitious five-year faculty hiring program.

"We need to get those numbers back up," Wilson said, to keep class sizes and student-faculty ratios in check and ensure students graduate on time.

McConchie and state Sen. Chapin Rose, R-Mahomet, pointed out that the state picks up $1.2 billion annually for pensions and health insurance costs for UI employees. Added to nearly $600 million in general operating funds, the UI's overall state funding totals more than $1.8 billion, they said.

Reporter/Columnist

Julie Wurth is a reporter covering the University of Illinois at The News-Gazette. Her email is jwurth@news-gazette.com, and you can follow her on Twitter (@jawurth).