When was the last time you heard a GOP party official or an elected Republican in the General Assembly say anything like this?:
The Great State of Illinois is going to have to come up with $300 million it doesn’t have in order to bail out a state program that made unrealistic promises based on fantasies. But the budget that its governor has come up with to provide those funds is based on even more unrealistic fantasies. Both moves would raise the prospect of prosecution for fraud, had they been advanced by a private corporation responsible to shareholders. But we’re talking about the state of Illinois, where imprisoned former governors are not at all uncommon, but fantasy predictions are never the reason.
Joe Cahill of Crain’s Chicago Business explains the bailout:
It took a while, but Illinois legislators, who ought to know something about financial holes, seem prepared to apply that well-known principle the state’s underfunded prepaid college tuition program. College Illinois has $300 million less than it needs to pay future tuition at Illinois universities for students whose parents bought prepaid contracts in the mistaken belief they were guaranteed by the state.
In fact, the state has no legally enforceable obligation to cover the gap between College Illinois’ promises and its cash. Yet marketing materials from the Illinois Student Assistance Commission, which administers College Illinois, created the false impression that Illinois stands behind the contracts.
As my colleague Steve Daniels reported recently, bills pending before the Illinois House and Senate would oblige the state to honor College Illinois contracts. Both bills provide that “the full faith and credit of the State of Illinois is pledged for the punctual payment of such obligations.”
Another $300 million IOU is exactly what cash-strapped Illinois doesn’t need. Yet the moral case for covering the College Illinois contracts is indisputable.
A private entity selling an insurance policy, an annuity, or any other financial instrument that could not deliver its promised benefits would be in deep trouble if negligence in making its financial calculations could be proved. If it created the impression that it was promising something that it actually was not guaranteeing, there might also be prosecution.
Read more: American Thinker
Image credit: Illinois Policy.