By: Kamel H.B. No. 401
73R435 SOS-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the Texas prepaid postsecondary education expense
1-3 program.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 51, Education Code, is amended by adding
1-6 Subchapter Q to read as follows:
1-7 SUBCHAPTER Q. TEXAS PREPAID POSTSECONDARY EDUCATION
1-8 EXPENSE PROGRAM
1-9 Sec. 51.731. DEFINITIONS. In this subchapter:
1-10 (1) "Advance payment contract" means a contract
1-11 entered into by the board and a purchaser under this subchapter.
1-12 (2) "Board" means the Texas Higher Education
1-13 Coordinating Board.
1-14 (3) "Fund" means the prepaid postsecondary education
1-15 expense fund.
1-16 (4) "Institution of higher education" has the meaning
1-17 assigned by Section 61.003 of this code.
1-18 (5) "Program" means the Texas prepaid postsecondary
1-19 education expense program.
1-20 Sec. 51.732. FEES. This subchapter does not apply to
1-21 laboratory fees charged by an institution of higher education.
1-22 Sec. 51.733. ESTABLISHMENT. The Texas prepaid postsecondary
1-23 education expense program is established to provide a medium
1-24 through which the cost for an academic year of undergraduate
2-1 education of a student enrolled at an institution of higher
2-2 education may be paid in advance of enrollment at a rate lower than
2-3 the projected corresponding cost at the time of actual enrollment.
2-4 Sec. 51.734. FUND. (a) The prepaid postsecondary education
2-5 expense fund is created in the state treasury.
2-6 (b) The fund consists of money acquired from the federal
2-7 government or private sources, money remitted in accordance with
2-8 advance payment contracts, and interest income accruing from money
2-9 in the fund.
2-10 (c) Interest earned on all deposits to the fund shall be
2-11 credited to the fund.
2-12 (d) Money in the fund must be invested in a manner that
2-13 yields for each advance payment contract, at a minimum, sufficient
2-14 interest to generate the difference between the prepaid amount and
2-15 the amount of tuition and fees charged at the institution of higher
2-16 education for an academic year at the time the beneficiary of the
2-17 contract enrolls at the institution.
2-18 (e) Unless otherwise specified by the board, money in the
2-19 fund may be appropriated only in the following order of priority:
2-20 (1) to make payments to institutions of higher
2-21 education on behalf of beneficiaries;
2-22 (2) to make refunds upon termination of advance
2-23 payment contracts; and
2-24 (3) to pay the costs of program administration and
2-25 operations.
2-26 Sec. 51.735. ADMINISTRATION. (a) The board shall
2-27 administer the program.
3-1 (b) The board shall administer the fund in an actuarially
3-2 sound manner to defray the obligations of the program.
3-3 (c) The board annually shall evaluate the actuarial
3-4 soundness of the fund.
3-5 (d) If the board determines a need for additional assets in
3-6 order to preserve actuarial soundness, the board may adjust the
3-7 terms of subsequent advance payment contracts to ensure the
3-8 soundness of the program.
3-9 (e) The board shall adopt rules for the administration of
3-10 the program.
3-11 Sec. 51.736. ADMINISTRATIVE FEE. (a) The board may assess
3-12 and collect from each purchaser of an advance payment contract a
3-13 fee in an amount determined by the board necessary to administer
3-14 the program.
3-15 (b) The board shall deposit a fee collected under this
3-16 section in the state treasury to the credit of the fund.
3-17 Sec. 51.737. ISSUANCE AND SALE OF ADVANCE PAYMENT CONTRACTS.
3-18 (a) The board shall issue and sell advance payment contracts to
3-19 residents of this state in denominations of the total tuition and
3-20 fees for one academic year of undergraduate education at each
3-21 institution of higher education.
3-22 (b) The board may contract for advance payment contracts to
3-23 be available for purchase through payroll deductions.
3-24 Sec. 51.738. TERMS OF ADVANCE PAYMENT CONTRACTS. (a) An
3-25 advance payment contract must include:
3-26 (1) the amount and number of payments required from
3-27 the purchaser of the contract;
4-1 (2) the terms and conditions under which the purchaser
4-2 shall remit payments, including the date on which each payment is
4-3 due;
4-4 (3) provisions for late payment charges and for
4-5 default;
4-6 (4) provisions for penalty fees for withdrawals from
4-7 the fund;
4-8 (5) the name and date of birth of the beneficiary of
4-9 the contract;
4-10 (6) whether the contract may be terminated by the
4-11 purchaser, the beneficiary, or a specific designated person, and
4-12 the name of any person who may terminate the contract;
4-13 (7) the terms and conditions under which the contract
4-14 may be terminated, the name of the person entitled to any refund
4-15 due as a result of termination of the contract under those terms
4-16 and conditions, and the amount of any refund due to the named
4-17 person;
4-18 (8) any time limitations within which the beneficiary
4-19 must redeem the contract; and
4-20 (9) the institution of higher education for which the
4-21 contract was purchased.
4-22 (b) An advance payment contract will earn interest
4-23 compounded annually at a rate determined annually by the board.
4-24 (c) Advance payment contracts do not constitute indebtedness
4-25 of the state.
4-26 Sec. 51.739. REDEMPTION OF ADVANCE PAYMENT CONTRACTS. (a)
4-27 A beneficiary who is named in an advance payment contract and who
5-1 enrolls in an institution of higher education may redeem the
5-2 contract on presentation of the contract to the registrar of the
5-3 institution.
5-4 (b) The registrar shall credit the value of the advance
5-5 payment contract for the full amount of tuition and fees charged at
5-6 that institution for an academic year of undergraduate education if
5-7 the institution is:
5-8 (1) the institution named in the contract; or
5-9 (2) another institution of higher education whose
5-10 tuition and fees for an academic year of undergraduate education
5-11 are equal to or less than the tuition and fees of the institution
5-12 named in the contract.
5-13 (c) The registrar shall credit the value of the advance
5-14 payment contract for an amount equal to the full amount of tuition
5-15 and fees for an academic year of undergraduate education currently
5-16 charged by the institution named in the contract if the student
5-17 enrolls at an institution of higher education that:
5-18 (1) is not the institution named in the contract; and
5-19 (2) charges tuition and fees for an academic year of
5-20 undergraduate education in an amount that is greater than the
5-21 amount charged by the institution at which the student enrolls.
5-22 (d) The registrar shall mark the advance payment contract as
5-23 redeemed and deliver the contract to the board.
5-24 (e) The board shall reimburse the registrar for the value of
5-25 the advance payment contract credited by the institution if
5-26 sufficient money in the fund exists.
5-27 (f) An advance payment contract may not be redeemed on a
6-1 date:
6-2 (1) before the fourth anniversary of the date the
6-3 contract was purchased; or
6-4 (2) after the 30th anniversary of the date the
6-5 contract was purchased.
6-6 Sec. 51.740. TERMINATION OF ADVANCE PAYMENT CONTRACTS. (a)
6-7 An advance payment contract that is not redeemed on or before the
6-8 30th anniversary of the date the contract was purchased is
6-9 terminated.
6-10 (b) An advance payment contract that is terminated under
6-11 this section may not be refunded.
6-12 (c) The board shall retain any money paid by the purchaser
6-13 for an advance payment contract that has been terminated under this
6-14 section.
6-15 Sec. 51.741. REFUND OF ADVANCE PAYMENT CONTRACTS. (a) The
6-16 beneficiary named in or the purchaser of an advance payment
6-17 contract that has not been redeemed or terminated is entitled to a
6-18 refund of the amount that the purchaser paid for the contract plus
6-19 interest at the rate determined under Section 51.738(b) of this
6-20 code on that amount from the date of purchase to the date of
6-21 refund, if sufficient money in the fund exists.
6-22 (b) An advance payment contract for which a refund has been
6-23 made under this section is terminated.
6-24 Sec. 51.742. BENEFICIARY OF ADVANCE PAYMENT CONTRACT. The
6-25 beneficiary named in an advance payment contract must be a resident
6-26 of this state at the time the contract is purchased.
6-27 Sec. 51.743. REPORTS. (a) The board annually shall prepare
7-1 a report setting forth in appropriate detail an accounting of the
7-2 fund and a description of the financial condition of the program at
7-3 the close of each fiscal biennium.
7-4 (b) The report shall be submitted to the lieutenant governor
7-5 and the speaker of the house of representatives not later than
7-6 February 15 each odd-numbered year.
7-7 (c) The board shall make the report available to purchasers
7-8 of advance payment contracts.
7-9 Sec. 51.744. RULING REQUESTS. (a) The board shall solicit
7-10 answers to applicable ruling requests from the Internal Revenue
7-11 Service and from the comptroller regarding the tax status of fees
7-12 paid for an advance payment contract to the purchaser or
7-13 beneficiary of the contract and from the Securities and Exchange
7-14 Commission regarding the application of federal securities laws to
7-15 the contract.
7-16 (b) The board shall make the status of those requests known
7-17 before entering into an advance payment contract.
7-18 Sec. 51.745. EXEMPTION OF CONTRACT PROCEEDS. Proceeds of an
7-19 advance payment contract that has not been terminated or refunded
7-20 are exempt from attachment, execution, and seizure for the
7-21 satisfaction of debts.
7-22 Sec. 51.746. REPLACEMENT OF ADVANCE PAYMENT CONTRACTS. The
7-23 board may provide for the replacement of an advance payment
7-24 contract that is mutilated, lost, or destroyed.
7-25 Sec. 51.747. GIFTS AND GRANTS. The board may accept a gift
7-26 or grant from a public or private source to administer the program.
7-27 SECTION 2. Not later than January 1, 1994, the Texas Higher
8-1 Education Coordinating Board shall adopt initial rules to
8-2 administer the Texas prepaid postsecondary education expense
8-3 program created under Subchapter Q, Chapter 51, Education Code, as
8-4 added by this Act.
8-5 SECTION 3. This Act takes effect September 1, 1993.
8-6 SECTION 4. The importance of this legislation and the
8-7 crowded condition of the calendars in both houses create an
8-8 emergency and an imperative public necessity that the
8-9 constitutional rule requiring bills to be read on three several
8-10 days in each house be suspended, and this rule is hereby suspended.