BILL ANALYSIS
C.S.H.B. 1214
By: Kamel, Raymond
04-27-95
Committee Report (Substituted)
BACKGROUND
Tuition rates at public and private universities increased steadily
over the 1980s. In order for families to pay for college they must
begin saving for college expenses when their children are young.
While Texas does provide tax-exempt savings bonds, parents remain
uncertain of the amount of money they will need to pay for higher
education when their children become college- age. Students can
take advantage of grants and loans, but they carry significant
costs to operate due to interest rate subsidies and high default
rates. In addition, students who borrow heavily to pay for college
face years of loan repayment.
PURPOSE
If enacted, C.S.H.B. 1214 creates the Prepaid Higher Education
Tuition Program to increase access to higher education for Texas
families by providing future college and university students the
opportunity to prepay tuition and student fees. For families who
cannot afford to participate in the Prepaid Higher Education
Tuition Program, a scholarship program is created to increase
access to a college education for low-income Texans.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill in SECTION 1 expressly
grants additional rulemaking authority to the Prepaid Higher
Education Tuition Board (Section 54.617 (b), 54.618 (b)(2), Section
54.633 (a), (h), Section 54.641 (5), Education Code) of the bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 54, Education Code, by adding Subchapter
F to read as follows:
Subchapter F. PREPAID HIGHER EDUCATION TUITION PROGRAM.
Sec. 54.601. DEFINITIONS. Defines "beneficiary", "board",
"fund", "institution of higher education", "prepaid tuition
contract", "private or independent institution of higher
education", "program", "public junior college", "public senior
college or university", and "purchaser".
Sec. 54.602. ESTABLISHMENT OF BOARD; FUNCTION. (a) The
Prepaid Higher Education Tuition Board is in the office of the
comptroller. (b) Provides that the board shall administer the
program.
Sec. 54.603. SUNSET PROVISION. (a) Provides that the Prepaid
Higher Education Tuition Board is subject to Chapter 325,
Government Code (Texas Sunset Act). Unless continued by that
chapter, the board is abolished and this subchapter expires on
September 1, 2007.
Sec. 54.604. TERMINATION OR MODIFICATION OF PROGRAM.
Provides that if the comptroller determines the program is
financially infeasible, the comptroller shall notify the governor
and the legislature and recommend that the program be modified or
terminated.
Sec. 54.605. EFFECT OF TERMINATION OF PROGRAM ON CONTRACT.
(a) Sets forth criteria for the beneficiary under which a prepaid
tuition contract remains in effect after the program is terminated.
(b) Provides that a prepaid tuition contract terminates when the
program is terminated if the contract does not remain in effect
under Subsection (a).
Sec. 54.606. MEMBERS OF BOARD; APPOINTMENT; TERMS OF OFFICE.
(a) Sets forth the membership of the board. (b) Sets forth
eligibility criteria for board members.
(c) Provides that board members serve staggered six-year terms and
that the terms of one-third of the appointed members expire on
February 1 of each odd-numbered year.
Sec. 54.607. DUTY IN RECOMMENDING, MAKING, OR CONFIRMING
APPOINTMENTS. (a) Sets forth requirements for appointments of board
members. (b) Provides that appointments be made without regard to
race, color, disability, sex, religion, age, or national origin of
the appointees.
Sec. 54.608. RESTRICTIONS ON BOARD APPOINTMENT, MEMBERSHIP,
AND EMPLOYMENT. Sets forth restrictions for appointment as a
member of the board.
Sec. 54.609. REMOVAL OF BOARD MEMBER. Sets forth criteria for
removal from the board.
Sec. 54.610. TRAINING OF BOARD MEMBERS. (a) Provides that a
member of the board complete at least one course of the training
program established by this section before assuming duties. (b)
Sets forth the information that would be provided during the
training program for board members.
Sec. 54.611. BOARD OFFICERS. (a) The comptroller serves as the
presiding officer of the board. (b) Provides for appointment and
duties of a secretary of the board.
Sec. 54.612. COMPENSATION AND EXPENSES OF APPOINTED BOARD
MEMBERS. Provides that appointed board members serve without pay
but shall be reimbursed for actual expenses incurred in attending
meetings and performing work of the board when that work is
approved by the presiding officer of the board.
Sec. 54.613. MEETINGS. (a) Provides that the board hold
regular quarterly meetings in Austin and other meetings as
determined by the board. (b) Provides that the board develop and
implement policies to provide the public with reasonable
opportunity to appear before the board on any issue under the
board's jurisdiction. (c) Provides that minutes of all meetings be
made available in the board's office for public inspection.
Sec. 54.614. APPLICABILITY OF OPEN MEETINGS LAW AND
ADMINISTRATIVE PROCEDURE LAW. The board is subject to the open
meetings law, Chapter 551, Government Code, and the administrative
procedure law, Chapter 2001, Government Code.
Sec. 54.615. EXECUTIVE DIRECTOR; STAFF. (a) The comptroller
serves as executive director of the board. (b) The employees of
the comptroller selected by the comptroller for that purpose serve
as the staff of the board. (c) Requires the comptroller to select
and supervise the staff of the board and perform other duties
delegated to the comptroller by the board. (d) Requires the
comptroller to provide information to the members of the board and
board staff regarding their qualifications for office under this
subchapter and their responsibilities under applicable laws
relating to standards of conduct for state officers or employees.
(e) Requires the board to develop and implement policies that
clearly separate policy-making responsibilities of the board and
the management responsibilities of the comptroller and the staff of
the board.
Sec. 54.616. PROGRAM AND FACILITY ACCESSIBILITY. (a)
Requires that the board comply with federal and state laws related
to program and facility accessibility. (b) Requires that the board
prepare and maintain a written plan describing how a person who
does not speak English can be provided reasonable access to the
board's programs and services.
Sec. 54.617. PUBLIC INTEREST INFORMATION AND COMPLAINTS. (a)
Requires that the board prepare and make available information of
public interest describing the functions of the board and the
board's procedures by which complaints are filed and resolved by
the board. (b) Requires that the board establish by rule methods
by which consumers and service recipients may direct complaints to
the board. (c) Requires the board to keep information about each
complaint filed with the board. (d) Requires the board to keep a
file for each written complaint filed with the board that the board
has the authority to resolve.
Sec. 54.618. POWERS OF BOARD. (a) Provides that the board has
powers necessary or proper to carry out this subchapter. (b) Sets
forth the powers of the board necessary or proper to carry out this
subchapter.
Sec. 54.619. PREPAID HIGHER EDUCATION TUITION PROGRAM. (a)
Provides that a purchaser may enter into a prepaid tuition contract
with the board under which the purchaser agrees to prepay the
tuition and required fees for a beneficiary to attend an
institution of higher education. (b) Requires the board to deposit
money paid under a prepaid tuition contract in the fund, invest the
money and credit earnings to the fund, and apply money in the fund
to tuition and fees of the institution in which the beneficiary
enrolls as provided by the contract. (c) Provides that if there is
not enough money in the fund to pay tuition and fees as provided by
the contract, the legislature shall appropriate to the fund the
amount necessary for the board to pay the tuition and fees of the
institution. (d) Provides the guidelines for payment should a
prepaid tuition contract holder attend a private institution of
higher education.
Sec. 54.620. PREPAID TUITION CONTRACT. (a) Provides that the
board may contract with a purchaser to prepay tuition and fees for
the beneficiary to attend an institution of higher education to
which the beneficiary is admitted as a student. (b) Provides that
the terms of a prepaid tuition contract shall be based on an
actuarial analysis of tuition growth rates, expected investment
returns, and estimated administrative costs. (c) Provides that the
board adopt a form for a prepaid tuition contract. (d) Sets forth
criteria for a prepaid tuition contract. (e) Provides that a
prepaid tuition contract does not cover the cost of laboratory fees
charged for specific courses.
Sec. 54.621. BENEFICIARY. Sets forth eligibility criteria for
a beneficiary of a prepaid tuition contract.
Sec. 54.622. TYPES OF PLANS. Provides for three prepaid
tuition contract plans: junior college plan, senior college plan,
and junior-senior college plan.
Sec. 54.623. JUNIOR COLLEGE PLAN. Sets forth criteria for a
junior college plan.
Sec. 54.624. SENIOR COLLEGE PLAN. Sets forth criteria for a
senior college plan.
Sec. 54.625. JUNIOR-SENIOR COLLEGE PLAN. Sets forth criteria
for a junior-senior college plan.
Sec. 54.626. CONTRACT PAYMENT. (a) Sets forth guidelines by
which the board may provide for the receipt of payments under a
prepaid tuition contract in lump sums or installment payments. (b)
Provides that a purchaser may make payments under a prepaid tuition
contract by electronic funds transfer. (c) Provides that an
employee of the state or political subdivision of the state may
make payments under a prepaid tuition contract by payroll
deductions made by the appropriate officer of the state or
political subdivision. (d) Provides that the board may impose a
fee for a late payment under a prepaid tuition contract.
Sec. 54.627. CHANGE OF BENEFICIARY. (a) Sets forth criteria
for a purchaser of a prepaid contract to designate a beneficiary
other than the original beneficiary. (b) Provides that the board
may adjust the terms of the contract in accordance with the change
in the beneficiary of the contract.
Sec. 54.628. CONVERSION TO ANOTHER PLAN. (a) Provides that a
purchaser may convert a prepaid tuition contract from one plan to
another plan. (b) Provides that the board may adjust the terms of
the contract in accordance with a converted plan.
Sec. 54.629. VERIFICATION UNDER OATH. Provides that the board
may require a purchaser to verify under oath requests to change a
beneficiary, convert a contract to another plan, and terminate a
contract.
Sec. 54.630. PROMISE OR GUARANTEE OF ADMISSION. Provides that
this subchapter is not a promise or guarantee that a beneficiary
will be admitted or allowed continued enrollment to an institution
of higher education or will graduate from an institution of higher
education.
Sec. 54.631. CONTRACT TERMINATION. Sets forth criteria for
the termination of a prepaid tuition contract.
Sec. 54.632. REFUND. Sets forth criteria for a refund of a
prepaid tuition contract.
Sec. 54.633. PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS FOR
NEEDY STUDENTS. (a) Provides that the board may award a prepaid
tuition contract to a student who meets economic and academic
requirements adopted by the board to the extent that money is
available. (b) Sets forth criteria for the termination of a
scholarship. (c) Requires that each region of the state is
equitably represented in the awarding of scholarships under this
section. (d) Provides that the scholarships awarded under this
section are funded by the private sector, the United States and
this state if the legislature chooses to do so. (e) Provides that
the board may establish a direct-support organization under the
Texas Non-Profit Corporation Act (Article 1396-1.01 et seq.,
Vernon's Texas Civil Statutes) to receive, hold, invest, and
administer money, gifts, grants, loans or other property for or on
behalf of the program; and purchase scholarships under this
section. (f) Sets forth members of the board of directors of the
direct-support organization. (g) Provides that the board must
certify that the direct-support organization operates in a manner
consistent with the goals of this state and in the best interests
of this state. (h) Provides that the board may contract with an
independent certified public accountant to annually audit the
direct-support organization under rules adopted by the board.
Requires that the board submit the audit to the comptroller,
governor, lieutenant governor, speaker of the house of
representatives, LBB, Legislative Audit Committee, state auditor
and Texas Higher Education Coordinating Board. Provides that the
comptroller may require the direct-support organization or
independent auditor to provide additional information relating to
the operation of the organization. (i) Requires that the identity
of the donors under this section who desire to remain anonymous and
that the records of the direct-support organization, other than
records disclosed under Subsection (h), are confidential.
Sec. 54.634. ESTABLISHMENT OF FUND. (a) Sets forth criteria
for the Texas tomorrow fund outside the state treasury. (b)
Provides that the board shall administer the assets of the fund.
(c) Sets forth guidelines by which the board may administer the
fund.
Sec. 54.635. STATE TREASURER. (a) Except as provided by
subsection (d) and (e), provides that the State Treasurer is the
custodian of the assets of the fund. (b) Requires that the state
treasurer pay money from the fund on a warrant drawn by the
Comptroller. (c) Requires that the state treasurer furnish an
annual sworn statement of the amount of the fund's assets in the
treasury's custody. (d) Provides that the board may select one or
more commercial banks, depository trust companies, or other
entities to serve as custodian of all or part of the fund's assets.
(e) The comptroller will be the custodian of the assets of the fund
if the office of the state treasurer is abolished.
Sec. 54.636. INVESTMENT OF FUND ASSETS. (a) Requires that the
board invest the assets of the fund. (b) Provides that the board
may contract with private professional investment managers to
assist the board in investing the assets of the fund. (c) Requires
that the board develop written investment objectives for the fund.
(d) Requires the comptroller to establish a comprehensive
investment plan for the assets of the program. (e) Sets forth
guidelines for investment of assets of the funds. (f) Sets forth
criteria under which the board shall invest the assets of the fund.
Sec. 54.637. USE OF FUND ASSETS. Sets forth criteria for use
of funds.
Sec. 54.638. REQUEST OF RULINGS FROM INTERNAL REVENUE SERVICE
AND SECURITIES AND EXCHANGE COMMISSION. (a) Requires the board to
request rulings from the IRS regarding the tax consequences to
purchasers and beneficiaries participating in the programs; and
requires the board to request rulings from the Securities and
Exchange Commission regarding the application of federal securities
laws to the fund. (b) Requires that the board inform a purchaser of
the status of the requests under Subsection (a) before the
purchaser enters into a contract.
Sec. 54.639. EXEMPTION FROM CREDITORS' CLAIMS. Money in the
fund is exempt from claims of creditors of a purchaser or
beneficiary.
Sec. 54.640. ACTUARIAL SOUNDNESS OF FUND. (a) The board shall
administer the fund in a manner to pay all costs of program
administration and meet the obligations of the program. (b) The
board shall annually evaluate the actuarial soundness of the fund.
(c) Provides that the board may adjust the terms of subsequent
contracts to ensure the actuarial soundness of the fund.
Sec. 54.641. STATEMENT REGARDING STATUS OF PREPAID TUITION
CONTRACT. (a) Not later than December 1 of each year, the board
shall furnish without charge to each purchaser a statement of the
status of a contract. (b) The board shall furnish a statement to
a purchaser or beneficiary on written request.
Sec. 54.642. REPORTS. (a) Requires the board to submit a
report to the governor, lieutenant governor, speaker of the house
of representatives, Legislative Budget Board, Legislative Audit
Committee, state auditor, and Texas Higher Education Coordinating
Board not later than December 1 of each year; sets forth guidelines
for report. (b) The board shall make the report available to
purchasers of contracts. (c) The board shall provide the Texas
Higher Education Coordinating Board contract sales information.
Sec. 54.643. CONFIDENTIALITY. (a) Records in the custody of
the board relating to specific purchasers and beneficiaries are
confidential. (b) The board may release information to an
institution of higher education in which the beneficiary may enroll
or is enrolled. The institution of higher education shall keep the
information confidential.
SECTION 2. (a) Sets forth guidelines for the appointment of members
of the Prepaid Higher Education Tuition Board by the governor and
lieutenant governor. (b) The legislature may appropriate funds for
the board's administrative costs for the state fiscal biennium
ending August 31, 1997. (c) The board shall be prepared to enter
into a prepaid tuition contract no later than the 90th day after
the date all the members are appointed or January 1, 1996,
whichever occurs later.
SECTION 3. Effective date: September 1, 1995.
SECTION 4. Emergency clause.
COMPARISON OF SUBSTITUTE TO ORIGINAL
The caption has been revised in the committee substitute as
compared to the original bill.
The committee substitute amends Chapter 54 by adding Subchapter F
as compared to the original bill which amends Chapter 51 by adding
Subchapter R.
In SECTION 1 (SECTION 54.601), the committee substitute includes
definitions which are not in the original bill. These definitions
include "beneficiary", "private or independent institution of
higher education", "public junior college", "public senior college
or university", and "purchaser".
In SECTION 54.601, the committee substitute redefines some of the
original bill's definitions with new language: "Prepaid tuition
contract" is defined instead of "advance payment contract";
"program" means the Prepaid Higher Education Tuition Program
instead of the Prepaid Postsecondary Education Expense Program;
"board" means the Prepaid Higher Education Tuition Board (appointed
by the governor and lieutenant governor) instead of the Texas
Higher Education Coordinating Board as stated in the original bill.
In SECTION 54.602, the committee substitute establishes the Prepaid
Higher Education Tuition Board in the office of the comptroller and
that this board shall administer the program. In the original bill
(SECTION 51.735) the Texas Higher Education Coordinating Board
would have administered the program.
In SECTIONS 54.602 through 54.605, the committee substitutes
provides provisions for the program (Prepaid Higher Education
Tuition Program). In SECTION 51.733 and 51.735, the original bill
provides provisions for the program (Postsecondary Education
Expense Program).
In SECTIONS 54.606 through 54.618, the committee substitute adds
new sections to set forth the provisions for the board. These
sections were not contained in the original bill.
In SECTION 54.619(c), the committee substitute clarifies that the
Prepaid Higher Education Tuition Program is a guaranteed program.
In the original bill the program is a non-guaranteed one.
In SECTION 54.621, the committee substitute includes additional
criteria a beneficiary must meet as compared to the original bill.
In SECTIONS 54.622 through 54.625, the committee substitute creates
three types of plans and explains them. They include a Junior
College Plan, Senior College Plan and a two-plus-two Junior-Senior
College Plan. The original bill only had a one-year plan that
provided contracts in one-year denominations.
In SECTION 54.632, the committee substitute provides a guaranteed
refund for a terminated contract, whereas the original bill did not
guarantee a refund due to the refund being dependent on sufficient
funds.
In SECTION 54.633, the committee substitute includes a scholarship
program for needy students through a public/private partnership.
The original bill did not establish any kind of scholarship
program.
In SECTION 54.634, the committee substitute establishes the Texas
Tomorrow Fund in the State Comptroller's office as compared to
SECTION 51.734 of the original bill which establishes the Treasury
Fund for the program in the State Treasury.
The committee substitute includes other SECTIONS which were not
included in the original bill. Such as:
SECTION 54.626. CONTRACT PAYMENTS;
SECTION 54.627. CHANGE OF BENEFICIARIES;
SECTION 54.628. CONVERSIONS TO ANOTHER PLAN;
SECTION 54.635. DUTIES OF THE STATE TREASURER;
SECTION 54.636. INVESTMENTS OF FUND ASSETS;
SECTION 54.641. STATEMENTS REGARDING THE STATUS OF A CONTRACT;
SECTION 54.643. THE CONFIDENTIALITY OF RECORDS ON
BENEFICIARIES OF THE PROGRAM.
SUMMARY OF COMMITTEE ACTION
H.B. 1214 was considered by the committee in a public hearing on
April 4, 1995.
The committee considered a complete substitute for the bill.
The acting chair, Representative Ogden, recognized Representative
Richard Raymond to explain the bill.
The following person testified neutrally on the bill:
Mr. Jeff Cole.
The bill was left pending.
H.B. 1214 was considered by the committee in a formal meeting on
April 20, 1995.
The committee considered a complete substitute for the bill. One
amendment was offered to the substitute. The amendment was adopted
without objection by a non-record vote. The substitute, as amended
was adopted without objection by a non-record vote.
The chair directed the staff to incorporate the amendment into the
substitute.
The bill was reported favorably as substituted, with the
recommendation that it do pass and be printed, by a record vote of
7 ayes, 0 nays, 0 pnv, 2 absent.