BILL ANALYSIS
H.B. 1214
By: Kamel (Barrientos)
Finance
05-25-95
Senate Committee Report (Unamended)
BACKGROUND
Tuition rates at public and private universities increased steadily
during the 1980s. Texas does provide tax-exempt savings bonds and
parents remain uncertain of the amount of money they will need to
pay for their children's higher education.
PURPOSE
As proposed, H.B. 1214 creates the Prepaid Higher Education Tuition
Program and a scholarship program to increase access to higher
education for Texas families.
RULEMAKING AUTHORITY
It is the committee's opinion that rulemaking authority is granted
to the Prepaid Higher Education Tuition Board under SECTION 1
(Sections 54.617(b), 54.618(b), 54.633(a) and (h), and 54.641,
Education Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 54, Education Code, by adding Subchapter
F, as follows:
SUBCHAPTER F. PREPAID HIGHER EDUCATION TUITION PROGRAM
Sec. 54.6001. PUBLIC PURPOSE. Sets forth the purpose of the
prepaid higher education tuition program (program).
Sec. 54.601. DEFINITIONS. Defines "beneficiary," "board,"
"estimated average private tuition and required fees," "fund,"
"institution of higher education," "prepaid tuition contract,"
"private or independent institution of higher education,"
"program," "public junior college," "public senior college,"
and "purchaser."
Sec. 54.602. ESTABLISHMENT OF BOARD; FUNCTION. (a)
Provides that Prepaid Higher Education Tuition Board (board)
is in the office of the comptroller.
(b) Requires the board to administer the program.
Sec. 54.603. SUNSET PROVISION. Provides that the board is
subject to Chapter 325, Government Code. Provides that the
board is abolished and the program terminates September 1,
2007, unless continued in existence as provided by that
chapter.
Sec. 54.604. TERMINATION OR MODIFICATION OF PROGRAM.
Requires the comptroller to 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) Provides that the prepaid tuition contract remains in
effect after the program is terminated if, when the program is
terminated, the beneficiary has been accepted by or is
enrolled in an institution of higher education (institution)
or a private or independent institution, or is projected to
graduate from high school not later than the third anniversary
of the date 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 composition of the board.
(b) Requires appointed members to possess knowledge, skill,
and experience in higher education, business, or finance.
(c) Provides that the appointed members serve for staggered
six-year terms. Provides 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) Requires the governor, lieutenant
governor, speaker of the house of representatives, and senate
to ensure that each appointee has the background and
experience suitable for performing the statutory
responsibilities of a member of the board.
(b) Requires appointments to the board to be made without
regard to the race, color, disability, sex, religion, age,
or national origin of the appointees.
Sec. 54.608. RESTRICTIONS ON BOARD APPOINTMENT, MEMBERSHIP,
AND EMPLOYMENT. (a) Sets forth restrictions for an
appointment to the board.
(b)-(e) Sets forth restrictions for membership to the
board.
(f) Defines a Texas trade association.
Sec. 54.609. REMOVAL OF BOARD MEMBER. (a) Sets forth
grounds for removal of a member from the board.
(b) Provides that the validity of an action of the board is
not affected by the fact that the action was taken when a
ground for removal of a board member existed.
Sec. 54.610. TRAINING OF BOARD MEMBERS. (a) Requires the
board member to complete at least one course of the training
program established under this section before a board member
may assume the member's duties and before an appointed member
may be confirmed by the senate.
(b) Requires the training program established under this
section to provide certain information to the member.
Sec. 54.611. BOARD OFFICERS. (a) Provides that the
comptroller serves as the presiding officer of the board.
(b) Requires the board to appoint a secretary of the board
whose duties may be prescribed by law and by the board.
Sec. 54.612. COMPENSATION AND EXPENSES OF APPOINTED BOARD
MEMBERS. Requires appointed board members to serve without
pay but to be reimbursed for their actual expenses incurred in
attending meetings of the board or in performing other work of
the board when that work is approved by the presiding officer
of the board.
Sec. 54.613. MEETINGS. (a) Sets forth times and locations
of meetings.
(b) Requires the board to develop and implement policies
that provide the public with reasonable opportunity to
appear before the board and to speak on any issue under the
jurisdiction of the board.
(c) Requires all minutes of all meetings to be available in
the board's office for public inspection.
Sec. 54.614. APPLICABILITY OF OPEN MEETINGS LAW AND
ADMINISTRATIVE PROCEDURE LAW. Subjects the board to the open
meetings law.
Sec. 54.615. EXECUTIVE DIRECTOR; STAFF. (a) Provides that
the comptroller serves as the executive director of the board.
(b) Provides that employees selected by the comptroller
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 to board members
and to board staff information regarding their
qualifications for office or employment 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 the 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 the board to comply with federal and state law
related to program and facility accessibility.
(b) Requires the board to prepare and maintain a written
plan that describes 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 the board to prepare information of public
interest describing the functions of the board and the board's
procedures by which complaints are filed with and resolved by
the board. Requires the board to make the information
available to the public and appropriate state agencies.
(b) Requires the board, by rule, to establish methods by
which consumers and service recipients are notified of the
name, mailing address, and telephone number of the board for
the purpose of directing complaints to the board.
(c) Requires the board to keep certain 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 authority
to resolve. Requires the board to provide to the person
filing the complaint and the persons or entities complained
about the board's policies and procedures pertaining to
complaint investigation and resolution. Requires the board,
at least quarterly and until final disposition of the
complaint, to notify the person filing the complaint and the
persons or entities complained about of the status of the
complaint unless the notice would jeopardize an undercover
investigation.
Sec. 54.618. POWERS OF BOARD. (a) Provides that the board
has the powers necessary or proper to carry out this
subchapter.
(b) Sets forth the powers of the board.
Sec. 54.619. PREPAID HIGHER EDUCATION TUITION PROGRAM. (a)
Authorizes a purchaser to 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 or private or
independent institution of higher education.
(b) Requires the board to deposit the money paid under a
prepaid tuition contract in the fund, invest the money and
credit the income earned to the fund, and apply money in the
fund to the tuition and required fees of the institution or
private or independent institution in which the beneficiary
enrolls as provided by the prepaid tuition contract.
(c) Requires the board to pay a private or independent
institution the tuition and fees the board would have paid
had the beneficiary enrolled in an institution covered by
the plan selected in the prepaid tuition contract. Provides
that the beneficiary is responsible for paying the private
or independent institution the amount by which the tuition
and required fees of the institution exceed the tuition and
required fees paid by the board.
(d) Requires the board to pay the institution and the
beneficiary certain amounts if the beneficiary of a plan
described by Section 54.6251 (Private College Plan) enrolls
in a public institution.
(e) Requires the board to pay the institution and the
beneficiary certain amounts if the beneficiary of a plan
described by Section 54.6251 enrolls in a private or
independent institution.
(f) Provides that the beneficiary is responsible for paying
a private institution the amount by which the tuition and
required fees of the institution exceeds the estimated
average private tuition and required fees if the beneficiary
of a plan described by Section 54.6251 enrolls in a private
or independent institution.
(g) Authorizes the legislature to appropriate to the fund
the amount necessary for the board to pay the applicable
amount of tuition and required fees of the institution if
there is not enough money in the fund to pay the tuition and
required fees of the institution in which the beneficiary
enrolls or the appropriate portion of the tuition and
required fees of the private or independent institution in
which the beneficiary enrolls as provided by the prepaid
tuition contract.
Sec. 54.620. PREPAID TUITION CONTRACT. (a) Authorizes the
board to contract with a purchaser for the purchaser to prepay
the tuition and required fees for a beneficiary to attend an
institution or private or independent institution to which the
beneficiary is admitted as a student.
(b) Requires the terms of a prepaid tuition contract to be
based on a certain actuarial analysis.
(c) Requires the board to adopt a form for a prepaid
tuition contract to be used by the board and purchasers.
(d) Requires a prepaid tuition contract to specify and
contain certain information.
(e) Provides that a prepaid tuition contract does not cover
the cost of laboratory fees charged for specific courses.
Sec. 54.621. BENEFICIARY. (a) Sets forth certain
requirements of a beneficiary at the time the purchaser enters
into the contract.
(b) Authorizes the board to require a reasonable period of
residence in this state for a beneficiary or the parent of
a beneficiary.
(c) Provides that a beneficiary is considered a resident
for purposes of tuition regardless of the beneficiary's
residence on the date of enrollment.
Sec. 54.622. TYPES OF LOANS. Requires the board to make
prepaid tuition contracts available for certain types of
plans.
Sec. 54.623. JUNIOR COLLEGE PLAN. Requires a prepaid
tuition contract to provide prepaid tuition and required fees
for the beneficiary to attend a public junior college for a
specified number of undergraduate credit hours not to exceed
the typical number of hours required for a certificate or an
associate degree awarded by a public junior college.
Sec. 54.624. SENIOR COLLEGE PLAN. Requires a prepaid
tuition contract to provide prepaid tuition and required fees
for the beneficiary to attend a public senior college or
university for a specified number of undergraduate credit
hours not to exceed the typical number of hours required for
a baccalaureate degree awarded by a public senior college or
university.
Sec. 54.625. JUNIOR-SENIOR COLLEGE PLAN. Requires a prepaid
tuition contract to provide prepaid tuition and required fees
for the beneficiary to attend a certain college or university
for a specified number of credit hours not to exceed the
typical number of additional hours required for the person to
receive a certain degree awarded by a certain college or
university.
Sec. 54.6251. PRIVATE COLLEGE PLAN. Requires a prepaid
tuition contract to provide prepaid estimated average private
tuition and required fees for the beneficiary to attend a
private or independent institution for a specified number of
undergraduate credit hours not to exceed the typical number of
hours required for a baccalaureate degree awarded by a private
or independent institution.
Sec. 54.626. CONTRACT PAYMENT. (a) Authorizes the board to
provide for the receipt of payments under prepaid tuition
contracts in lump sums or installment payments.
(b) Authorizes a purchaser to make payments under a prepaid
tuition contract by electronic funds transfer.
(c) Authorizes an employee of the state or a political
subdivision of the state to make payments under a prepaid
tuition contract by payroll deductions made by the
appropriate officer of the state or political subdivision.
(d) Authorizes the board to impose a fee for a late payment
under a prepaid tuition contract.
Sec. 54.627. CONTRACT OF BENEFICIARY. (a) Authorizes the
purchaser of a contract to designate a new beneficiary instead
of the original beneficiary if the new beneficiary meets the
requirements of a beneficiary on the date the designation is
changed. Requires the new beneficiary to be a sibling, step-sibling, or half-sibling of the original beneficiary if the
purchaser is an individual.
(b) Authorizes the board to adjust the terms of the
contract so that the purchaser is required to pay the amount
the purchaser would have been required to pay had the
purchaser originally designated the new beneficiary as the
beneficiary, taking into account any payments made before
the date the designation is changed.
(c) Prohibits the purchaser of a contract from selling the
contract.
Sec. 54.628. CONVERSION TO ANOTHER PLAN. (a) Authorizes a
purchaser to convert a contract from one plan to another plan.
(b) Authorizes the board to adjust the terms of the
contract so that the purchaser is required to pay the amount
required under the plan to which the contract is converted,
taking into account any payments made before the date the
contract is converted.
Sec. 54.629. VERIFICATION UNDER OATH. Authorizes the board
to require a purchaser to verify a certain request under oath.
Sec. 54.630. PROMISE OR GUARANTEE OF ADMISSION. Provides
that this subchapter is not a promise or guarantee certain
benefits to a beneficiary.
Sec. 54.631. CONTRACT TERMINATION. (a) Requires a prepaid
tuition contract to specify certain information.
(b) Sets forth termination date of a prepaid tuition
contact.
Sec. 54.632. REFUND. (a) Requires a prepaid tuition
contract to specify certain refund information.
(b) Entitles the person named in the contract to a refund
following termination of a prepaid tuition contract.
(c) Requires the board to determine the method by which the
amount of the refund is calculated.
Sec. 54.633. PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS
FOR NEEDY STUDENTS. (a) Authorizes the board to award a
prepaid higher education tuition scholarship (scholarship) to
a student who meets economic and academic requirements adopted
by the board by rule.
(b) Sets forth criteria for terminating a scholarship
awarded under this section.
(c) Requires the board to ensure that each region of the
state is equitably represented in the awarding of
scholarships under this section.
(d) Provides that scholarships under this section are
funded by the private sector.
(e) Authorizes the board to establish a direct-support
organization under the Texas Non-Profit Corporation Act 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 the composition of the board of directors of
the direct-support organization.
(g) Requires the board to 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) Authorizes the board to contract with an independent
certified public accountant to annually audit the direct-support organization under rules adopted by the board.
Requires the board to submit the audit to certain persons
and entities. Authorizes the comptroller or state auditor
to require the direct-support organization or independent
certified public accountant to provide additional
information relating to the operation of the organization.
(i) Provides that the identity of a donor who desires to
remain anonymous and the records of the direct-support
organization, other than the records disclosed under
Subsection (h), are confidential.
Sec. 54.634. ESTABLISHMENT OF FUND. (a) Provides that the
Texas tomorrow fund is outside the state treasury. Sets forth
the composition of the fund.
(b) Requires the board to administer the assets of the
fund. Provides that the board is the trustee of the fund's
assets.
(c) Sets forth certain duties of the board regarding the
fund.
Sec. 54.635. STATE TREASURER. (a) Provides that the state
treasurer is the custodian of the assets of the fund, except
as provided by Subsections (d) and (e).
(b) Requires the state treasurer to pay money from the fund
on a warrant drawn by the comptroller supported only on a
voucher signed by the comptroller or the comptroller's
authorized representative.
(c) Requires the state treasurer to furnish annually to the
board a sworn statement of the amount of the fund's assets
in the treasurer's custody.
(d) Authorizes the board to 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) Provides that the comptroller is 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 the
board to invest the assets of the fund.
(b) Authorizes the board to contract with a private
professional investment managers to assist the board in
investing the assets of the fund.
(c) Requires the board to develop written investment
objectives concerning the investment of the assets of the
fund. Authorizes the objectives to address desired rates of
return, risks involved, investment time frames, and any
other relevant considerations.
(d) Requires the comptroller to develop a comprehensive
plan for the investment of the assets of the fund consistent
with the objectives developed by the board under Subsection
(c). Requires the plan to specify the policies under which
the board shall invest the assets of the fund. Requires the
board to approve the plan.
(e) Requires the board to invest the assets of the fund in
accordance with the Public Funds Investment Act.
Sec. 54.637. USE OF FUND ASSETS. Sets forth the use of
funds assets.
Sec. 54.638. REQUEST OF RULINGS FROM INTERNAL REVENUE
SERVICE AND SECURITIES AND EXCHANGE COMMISSION. (a) Requires
the board to request rulings from certain entities.
(b) Requires the board to inform a purchaser of the status
of the requests under Subsection (a) before the purchaser
enters into a prepaid tuition contract.
Sec. 54.6385. EXEMPTION FROM SECURITIES LAWS. Provides that
the registration requirements of the Securities Act do not
apply to the sale of a contract by the board or by a
registered securities dealer.
Sec. 54.639. EXEMPTION FROM CREDITORS' CLAIMS. Provides
that money in the fund is exempt from claims of creditors of
a purchaser or beneficiary.
Sec. 54.640. ACTUARIAL SOUNDNESS OF FUND. (a) Requires the
board to administer the fund in a manner that is sufficiently
actuarially sound to pay the costs of program administration
and operations and meet the obligations of the program.
(b) Requires the board to evaluate annually the actuarial
soundness of the fund.
(c) Authorizes the board to adjust the terms of subsequent
prepaid tuition contracts as necessary to ensure the
actuarial soundness of the fund.
Sec. 54.641. STATEMENT REGARDING STATUS OF PREPAID TUITION
CONTRACT. (a) Requires the board to furnish without charge
to each purchaser a certain statement by December 1 of each
year.
(b) Requires the board to furnish a statement complying
with Subsection (a) to a purchaser or beneficiary on written
request. Authorizes the board to charge a reasonable fee
for each statement furnished under this subsection.
Sec. 54.642. REPORTS. (a) Requires the board to submit to
certain persons and entities a report containing certain
information.
(b) Requires the board to make the report described by
Subsection (a) available to purchasers of prepaid tuition
contracts.
(c) Requires the board to provide the Texas Higher
Education Coordinating Board complete contract sales
information, including projected enrollments of
beneficiaries at institutions.
Sec. 54.643. CONFIDENTIALITY. (a) Protects records in the
custody of the board by keeping them confidential
(b) Authorizes the board to release information described
by the subsection to an institution in which a beneficiary
may enroll or is enrolled. Requires the institution to keep
the information confidential.
SECTION 2. (a) Requires the governor and lieutenant governor to
appoint the members of the Prepaid Higher Education Tuition Board
required to be appointed by those officers as soon as possible on
or after the effective date of this Act. Sets forth the expiration
dates of appointments.
(b) Authorizes the legislature to appropriate to the board an
amount sufficient to cover the board's administrative costs
for the state fiscal biennium ending August 31, 1997.
(c) Requires the board to be prepared to enter into a prepaid
tuition contract by 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.