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Prepaid tuition investment panel not fully staffed

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SPRINGFIELD — The panel tasked with deciding how to invest the $1.1 billion fund that some 33,000 families rely on for affordable college educations in the future has three vacancies and two other positions where people are serving despite expired terms.

By Andrew Thomason

SPRINGFIELD — The panel tasked with deciding how to invest the $1.1 billion fund that some 33,000 families rely on for affordable college educations in the future has three vacancies and two other positions where people are serving despite expired terms.

The Investment Advisory Panel was created as part of College Illinois!, the state's prepaid tuition program, 12 years ago.

"Their function and responsibility is to advise and oversee the overall investment policy as well as to advise on asset allocation," said Andrew Davis, executive director for the Illinois Student Assistance Commission, or ISAC, which administers College Illinois!.

Even though College Illinois! is under examination by the Illinois auditor general, Illinois attorney general and the Illinois secretary of state for its investment practices and massive deficit, the seats on the panel have remained empty for months. As of May, College Illinois! was $243 million in the hole

The investment panel has seven members serving three-year terms — three members named by ISAC; one member named by the Illinois Treasurer's Office; one member named by the Illinois Comptroller's Office; one member named by the governor's Office of Management and Budget; and one member named by the Illinois Board of Higher Education, or IBHE.

The positions filled by the Comptroller's Office, governor's Office of Management and Budget and IBHE are vacant. Terms for the treasure's appointee and one of ISAC's three appointees have expired

ISAC would not say why it hasn't done anything about Michael Mann's expired term other than to say "under the statute advisory panel members with an expired term serve until successors are nominated and approved by the full commission."

As for the governor's Office of Management and Budget, spokeswoman Kelly Kraft said the state's budget takes priority over anything else. Once the budget is taken care of, filling the seat will be addressed, Kraft said. Gov. Pat Quinn said he would sign the budget Thursday.

The Comptroller's Office did not respond to inquiries about its vacant seat, and the Treasurer's Office could not be reached for comment.

Insiders and observers of the program agree that the doubling of tuition costs at Illinois universities during the past decade has led to the current deficit of College Illinois!

But many outsiders also point to the decision to move funds from traditional stocks and bonds investments to alternative investments, such as real estate and hedge funds, before the global economic meltdown in 2007, as a source of trouble for the program.

These investments generally offer more return on investments than stocks and bonds, but come with higher risks. The Investment Advisory Panel made the decision to move to the higher-risk investments, said Davis.

The program went from being 93 percent funded, or having enough cash and investments on hand to pay for 93 percent of all contracts, both current and future, in 2007 to a funding level of only 82 percent as of May.

Davis said while ISAC has moved away from strictly traditional investments, it actually lowered risk by spreading money out over several different kinds of investments.

At least one of the vacant seats on the board could be filled soon. Karen Kissel, associate vice president for financial services at Governors State University, was tapped recently by IBHE to fill its seat. George Reid, executive director for the IBHE, said the recent fervor over College Illinois! did not factor into IBHE's selection of Kissel.

"We did not make the appointment of her for any specific reason, except that she has great expertise to serve on a panel like this," Reid said. "As long as she uses her expertise, I think she'll be a great addition to this body."

Reid said the position has been vacant only for a matter of months. It's up to ISAC to approve Kissel at its July 8 meeting.

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