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Illinois State Rep. Jim Durkin on an audit showing the state’s college tuition savings program is $560 million short of its projected obligations.
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Illinois uncovering more problems than just under funding with their 529 plants.
A recent state audit has revealed seriously for investment choices.
Conflicts of interest with top officials and outrageously high administrative costs my first guest tonight is -- lawmaker who called for that -- Republican state represented Jim -- joins me now welcome -- represented to the show it's great to have you here thanks for being on.
Tell me I'm very glad to be -- what caused you to call for this audit.
Well you don't about seven years ago when I was not the legislature signed up for college -- -- -- my daughter and last spring.
A publication in Chicago cranes business to -- very -- -- Tuesday.
Talking about the bed some of the problems with -- sick mainly the underfunding and also some unwise investment decisions.
My wife and I had a discussion about it said we need to pour money evidence that no I'm in the legislature my job as a fix things let's take a look at it let's investigate -- called forays.
Are -- general management audit which -- a lot of things regarding conflicts of interest underfunding.
Ridiculously high administrative fees and management fees.
But I you know one of the things have turned to Springfield to -- -- -- -- here to fix problems so our I think that we need to work on.
Absolutely -- -- when they get to some of the details of this because they're hardly believable frankly.
I was shocked to hear what was going on in Illinois and I've ridden Illinois story or -- but even I it was surprise.
For example.
Andrew Davis the -- who was appointed to lead the commission that actually looks after all of this invested money.
He was appointed after its investment firm.
Collapsed.
Now how does that happen how does this I mean -- you people think and in Illinois that that makes cents.
No it does make sense but I think that somebody who's sitting the federal penitentiary and cholera a lot of right now could you know giving an answer to that but -- -- asked about her former governor Rod Blagojevich right.
He is very close of the Blagojevich administration he served for he -- problems at the one of the exchanges in Chicago.
He's been leading -- -- up until last summer and I recommend of the governor to remove mr.
Davis and also the whole board which the governor just.
And so you know we -- not only Andrew Davis -- George -- these were people who were all sort of friends.
Got into office at the the same time and -- Illinois parents like yourself got hurt.
That's correct the -- -- shown that there's a very close relationship with.
The top management of the previous administration -- vice Eric going back in the days.
Working in the investment world and that his expose some serious conflicts of interest and also violations of our procurement code.
And and right now the executive office of the inspector general also -- my attorney general are investigating.
Based on their report and I think I can tell you that if there are violations it will be held accountable we have a lot of people were very scared.
I talked to -- daily basis there's 55000 country -- -- Illinois 35000 families who were signed up for this program.
Many years ago based on marketing materials which stated that the that this -- on our program was effective by the full faith and credit that the -- -- -- like it's not true.
There was not subject to market -- -- misleading years ago.
We're hearing -- may give your regular exist now I would give people an idea of the degree that how badly this was managed it was and this this fund invested in short bank.
Which is no longer.
Operations.
And I don't think was given a survey -- given thirteen million dollar.
Allocation a few years ago this was a direct placement which is the first of its kind within -- sick for college Illinois.
That was in troubled bank was a community bank within one year we lost their thirteen million dollars or red flags before.
-- spent by the FDA see and other regulators at this bank is having problems but what was also very troubling with the shore bank.
Issue is that there was a consultant who was used.
They did not use -- in house consultant when was brought in to perform the due diligence on shore bank.
In one of the terms of their.
Compensation is that you only be paid consultant would be paid if that reallocation was approved by the board.
To consult blizzard -- objective analysis on -- institution and it does leave the question of whether or not there was an objective.
And else has done.
May determine who wish to make a determination of whether that this is a wise -- -- -- money but when you say that there's an incentive you only get paid.
If there's an allocation if their allocations approved by the board it -- it says well.
Why would they not approve -- -- is a good investment.
-- doesn't -- and other a lot of -- worth second because a lot of these funds.
They don't do direct investments like back -- this was in usual in enough itself.
That they did it's it's more likely to invest in the stock market in bonds just like with just like you would invest a 401K but they chose to do these direct investments one of which included.
As I understand that Fiske -- which is surprising now given what we know about back company.
Look I think -- the end of the day at go back and look at what they said their objectives were in according to the -- the you -- or.
They thought they were gonna get returns of nine point 25%.
Now how realistic -- -- that.
Unrealistic.
Under these markets and -- that was working at that time we're at about five point eight right now this return we're getting.
But it was inflated and that's another question which I hope that the -- junior executive Office of Inspector General gets -- Of why -- -- that was made but there was more to -- way up position at the executive director chuck.
Didn't meet those.
Investment and insurance and that is cause further stress -- -- fund.
Well you know I know there -- a lot of people out there who are worried about this we're hearing from them they are sending its emails what is your message to them tonight you've got a couple of bills pending in front of it Hoosier state legislature what do you trying to -- I have two bills that are right on the governor's tested go to transparency on the decisions that are going to be made by the Christ only student assistance Ford who oversees college Illinois.
Another one which is gonna force that state that all members of the investment board are going to have to file economic interest statements to ensure that there's no conflicts of interest.
But what I've been telling people who are part of this program is that there's a commitment from this governor governor Quinn myself.
To sit down with universities this summer we're gonna have to reopen college Illinois -- stops on country -- list fall.
We need to -- open -- program.
We also need to be creative -- how we're gonna make this a better program right now it's gonna you know we didn't get there overnight it's gonna take some time we have -- very large pension problem we're doing with.
-- -- -- -- out of money problems in Illinois that's for sure yes congressman are happy you know.
Can finish anyway I think actually that the chairman chairman of the of the Illinois student assistance commission -- told me publicly and privately that they can pay out of the next ten years.
If the legislature does nothing but we are gonna do something -- -- -- -- improve this program.
Revert very hard over the next year or so I want people who have country to know that I have not taken by I a football neither -- legislature in also the -- what people get their money back.
My belief is that they will get their money back but we're gonna have to work very hard -- have to work with universities.
Because the cost of public education to be in Illinois has skyrocketed it has all over the country but to -- -- to the University of Illinois for one year.
Room board tuition fees 33000 dollars it's more than anywhere else in the midwest so.
We have to make college accessible and affordable and that's going to be -- discussion over -- over the summer.
Wow long way to -- her come back any time.
