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Quinn's college savings plan: why the veto?

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Throughout the country politicians of all ideological persuasions are now arguing that a combination of economic calamities has shattered the expectations of the middle class, including its assumption that it can afford to send its children to college. Politicians in Illinois recently had a chance to make the goal of higher education widely available, but they passed it up.

The climactic moment came in October, when the state legislature failed to override Governor Jim Edgar's veto of the Future Education Account Act. That bill, aimed at middle-class residents, would have guaranteed tuition for students at every state university in Illinois.

No one can be certain exactly why Edgar vetoed the bill. In the statement that accompanied his veto, his synopsis of the bill was inaccurate on several points--which suggests that he may not have read it.

The legislation was originally proposed by Democratic state treasurer Patrick Quinn, who may one day choose to run against Edgar. Some observers think that Edgar vetoed the bill to deny Quinn an opportunity to look good.

Edgar's aides vehemently deny that. "This wasn't partisan," says Dan Egler, an Edgar spokesman. "The governor had good fiscal reasons for vetoing the bill."

Maybe so, but Edgar hasn't yet suggested an alternative. And with tuition rising, there's no relief in sight.

"I plan to have this proposal brought back," says Quinn. "But we have lost a chance to get the program going right away."

The impetus for Quinn's program is clear: the wages and salaries of most people can't keep pace with the rising cost of college tuition. With room and board, the yearly bill for college students at private schools can go as high as $20,000. The tuition at state schools is lower, but also on the rise. At the University of Illinois at Urbana-Champaign, for instance, annual tuition is now almost $2,500; for the Chicago campus it's a little more than $2,000, one of the state's lowest rates.

"The typical family experiences two major investments in a lifetime--buying a house and putting their kids through college," says Quinn. "Going to college is the key to the new information age. And yet all the statistics show that in the last decade many high school graduates can't go to college for financial reasons."

The crisis is most severe in poor communities. After a decade of aid cuts by the Reagan and Bush administrations, the number of low-income students applying to colleges has declined. But federal cutbacks have also hurt those middle-class families who make too much money to qualify for low-income assistance yet not enough to pay tuition without going into debt. "For these people," says Quinn, "the escalating cost of college tuition is a problem that needs a solution."

The solution Quinn proposes isn't original; variations on it have been operating for years in Ohio, Michigan, and Florida. Quinn proposes to create a statewide multimillion-dollar trust fund out of regular monthly contributions from thousands of participants. This trust fund would pay the tuition bills of future college students.

"The point is to use government as a catalyst to help people help themselves," says Quinn. "We want to encourage people to set financial goals for themselves--in this case saving to pay for the college education of their sons and daughters."

Under Quinn's proposal it would take only $90 to open an account for a future college student, and then monthly installments of $90 until the child is of college age (the interest earned would be exempt from state and possibly federal taxes). "When you open the account, you are required to make a set monthly payment that does not change," says Quinn. "If it's $90 a month for a newborn baby, its $90 for the rest of that child's years." If parents fell behind for more than six months, the account would be closed and their money and interest would be refunded. All parents would be guaranteed to get out at least as much as they put in plus interest.

By the year 2009 parents of children born this year would have contributed almost $20,000 in premiums, which might have earned as much as $5,000 in interest--and which should be enough to cover tuition even if it keeps rising at its current rate.

"When your child turns 18, you can withdraw that money to pay the full cost of four years of tuition at any state college or university," says Quinn. "What makes this program different from others is that we guarantee to cover tuition payments at state schools.

"And you don't have to be the parent to start one for a child. In other states we see that a lot of grandparents start them for their grandchildren. You can also buy them in lump sums. There was a guy in Florida who paid in full for the accounts of eight different grandchildren. When you figure that full payment over the course of 18 years can run you about $20,000, that's a lot of money. Obviously this grandfather had more money than most. This was his living legacy. He may not be around for 18 years, but this way he could be sure that his grandchildren would have a solid educational future."

Students who attend private colleges would not be guaranteed full tuition payment. "They would get an annual sum equal to the average cost of all the state schools in Illinois," says Quinn. "Private tuition is generally higher than tuition at state schools, so parents would have to come up with the rest of the money on their own. But this would be a big help."

Quinn unveiled his program last spring. Within a few days it had rounded up sponsors in the house and senate and was endorsed by education associations and newspaper editorials throughout the state. In June it passed the senate and the house by overwhelming margins and needed only Governor Edgar's signature to become law.

There was some opposition, most significantly from the Chicago Tribune, which argued in an editorial that taxpayers would be stuck with a hefty bill if the trust fund went bankrupt. And what about those children who ultimately decide not to attend college? Their "parents would get a refund with an undetermined interest rate," the Tribune editorial noted. "It seems likely that some people would do worse than if they had invested in the private market." Besides, the editorial concluded, there are already several tuition-assistance programs.

Quinn counters that there's little chance the fund would go bankrupt, since it would be scrutinized by outside auditors every year. "You have to think of it as an insurance program. Yes, college is not for everyone. And accounts may be opened for children who decide they don't want to go to college. But most people would like to know that money will not be an issue when their child makes that decision."

The existing tuition programs, he and his backers point out, are aimed at the well-to-do. "There is a tuition bond program which requires an up-front outlay of at least $1,200," says Marj Halperin, Quinn's press secretary. "In 18 years that outlay will have grown into $5,000 which can be used for tuition. That's fine if you can muster up $1,200 on the spot. But not all people can do that."

Quinn and his supporters thought they had answered all criticism. Yet they couldn't satisfy Edgar, whose September 13 veto echoed several points originally raised by the Tribune. "Foremost among the legislation's flaws is that the program might well require a bailout from all Illinois taxpayers," his statement read. "I could approve this attractive legislation and leave its consequences to a future Governor and a future State Treasurer. However, that has been done too often in government at all levels."

Edgar also wrote that the legislation "establishes the Treasurer as the auditor for his own program, and self-auditing is a risky practice in state government, especially when there is a possibility of severe impact on General Revenue Funds." Moreover, he wrote, "according to floor debate in the Legislature, someone attending the University of Michigan would be entitled to higher payments than someone attending Northwestern University."

Both assertions are false, says Quinn, noting that the bill specifically states that the fund would be independently audited and that out-of-state students would not receive more money than their in-state counterparts. "I don't think the governor's veto message was very clear. It sounds like he didn't read the bill very well."

Edgar's aides contend that the governor did too read the bill. "The problem that the governor saw with this account is that you had no guarantee that the money you paid in would cover the cost of tuition," says spokesman Dan Egler. "If tuition costs rose faster than expected, the state would have to make good on all these guarantees and bail the fund out. There were a number of Democrats who raised questions about the bill--it wasn't just Republicans who were against it."

And what accounts for the mistakes in the governor's veto message? Egler said he didn't know. "To be honest, I can't remember all the details of the legislation."

In any case, Quinn's proposal fell one vote short of the 71 it needed in the house to override Edgar's veto. "We had our votes lined up, and then one Republican left the floor," says Quinn. "As I understand it, she was under heavy pressure from the governor's people. I don't think Edgar's opposition stems from anything personal with me--although we shall see. I plan to have the bill brought back in the spring."

Art accompanying story in printed newspaper (not available in this archive): photo/Steven D. Arazmus.

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