BILL ANALYSIS
C.S.H.B. 1592
By: Dukes
May 5, 1995
Committee Report (Substituted)
BACKGROUND
The increase in tuition rates of institutions of higher education
will continue to make it financially difficult for people to
attend. The University Bonds for the Education of Texans program
(UBET) would allow the public with a method of saving in advance
for higher education tuition expenses and to encourage enrollment
at public and private postsecondary educational institutions.
PURPOSE
If enacted, C.S.H.B. 1592 would establish the University Bonds for
the Education of Texans program (UBET) and authorizes issuance of
special savings certificates.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does expressly grant
additional rulemaking authority to the state treasurer in SECTION
1 (Sec. 56.183(b), Sec. 56.187(a), (b) and (c), and Sec. 56.192
(a), Education code) of the bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 56, Education Code, by adding Subchapter
K to read as follows:
SUBCHAPTER K. UNIVERSITY BONDS FOR THE EDUCATION OF TEXANS
(UBET) PROGRAM
Sec. 56.181. DEFINITIONS. "Bonds", "fund" and "program" are
defined.
Sec. 56.182. ESTABLISHMENT OF PROGRAM, PURPOSE. Provides the
public with a method of saving in advance for higher education
tuition expenses.
Sec. 56.183. ADMINISTRATIVE AUTHORITY. The state treasurer
shall administer this program, adopt rules necessary and may accept
gifts or grants for purposes of this subchapter.
Sec. 56.184. ISSUANCE AND SALE. The state treasurer shall
issue and sell the bonds and shall execute necessary agreements for
the bonds to be available for purchase through payroll.
Sec. 56.185. TERMS. (a) Each bond must be issued in the name
of a person who is younger than 18 years of age on the date of
purchase and must bear that person's name. (b) Interest is
compounded annually at a rate determined by the state treasurer.
(c) Bonds may be sold at prices the state treasurer determines and
may adopt more than one plan for the payment. (d) Interest will be
exempt from federal income tax. (e) Bonds do not constitute
indebtedness of the state.
Sec. 56.186. UBET FUND. (a) Created in the state treasury.
(b) The fund consists of proceeds of the sale, gifts and grants,
and interest earned. (c) State treasurer shall pay expenses of
administering from the fund. (d) State treasurer shall establish
a separate account for each person and deposit the payment of the
purchase price and the interest in their account.
Sec. 56.187. REDEMPTION. (a) The person who has a bond and
enrolls in an institution of higher education may redeem the bond.
(b) The bond is redeemed in the manner provided by rule of the
state treasurer. (c) When the person is 18 years of age, they may
also redeem the bond on presentation of the bond to the state
treasurer.
Sec. 56.188. MANDAMUS. The performance of official duties may
be enforced in a court by mandamus or other appropriate
proceedings.
Sec. 56.189. REPLACEMENT OF BOND. The state treasurer may
provide for the replacement of any bond that is mutilated, lost, or
destroyed.
Sec. 56.190. MANAGEMENT. (a) Money in the fund shall be
invested by the state treasurer and is immune from liability for
any losses.
Sec. 56.191. EXEMPTION FROM TAXATION. Bonds issued may not be
taxed by the state or any of its political subdivisions.
Sec. 56.192. SCHOLARSHIP PROGRAM. (a) The state treasurer
shall establish a scholarship program and the board shall adopt
rules to determine criteria for the economically disadvantaged.
(b) State treasurer shall encourage the purchase of bonds for the
benefit of the economically disadvantaged. (c) State treasurer
shall hold a bond purchased and redeem it when a student awarded a
scholarship under this section enrolls.
Sec. 56.193. GUARANTEE OF ADMISSION. This subchapter is not a
promise that a person will be admitted to any institution; admitted
to a particular institution; allowed continued enrollment after
admission; or graduated from an institution of higher education.
Sec. 54.194. REPORTS. (a) The state treasurer shall provide a
report of the balance in the account; the payments for the bond;
and interest credited to the account. (b) The state treasurer
shall deliver annually a report to the governor, lieutenant
governor and the speaker of the house regarding the status of the
fund.
SECTION 2. Effective date: January 1, 1996.
SECTION 3. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
SECTION 1
In Sec. 56.182, the original bill includes public and private
postsecondary educational institutions. The committee substitute
states institutions of higher education.
In Sec. 56.184 (a), the original bill stated that the bonds issued
or sold would not be less that $50 or more than $100. The
committee substitute lowers the amount to $25 and removes the cap
of $100.
In Sec. 56.184 (b), the original bill stated that a person could
not purchase more than one bond a month and the committee
substitute deletes this provision.
In Sec. 56.185 (c), the committee substitute allows the treasurer
to adopt more than one plan for the payment of the purchase price
of bonds issued. The original bill does not address this issue.
In Sec. 56.185 (d), the original bill stated that income from the
bonds is tax exempt while the committee substitute clarifies that
the interest is tax exempt.
In Sec. 56.186 (d), the committee substitute requires the state
treasurer to establish a separate account for each person with a
bond and that the payments of the purchase price and interest on
the bond be credited to the account. The original bill does not
address this issue.
In Sec. 56.187 (a), the original bill stated that upon redemption,
110 percent of the bond would be credited, while the committee
substitute clarifies that the face amount plus accrued interest
will be credited. Also in Subsection (a), the original bill
required the state treasurer to reimburse the institution if
sufficient money existed. The committee substitute clarifies that
the amount of the bond and accrued interest shall be reimbursed in
accordance with rules adopted by the state treasurer. Finally,
Subsection (b) in the original bill states that the state treasurer
may execute agreements with private postsecondary educational
institutions for redemption in a manner similar to Subsection (a)
of the original bill. The committee substitute clarifies that the
state may redeem the bond in a manner provided by rule of the state
treasurer, which is similar to Subsection (a) of the committee
substitute.
In Sec. 56.190 (b), the committee substitute states that the state
treasurer is immune from liability for any losses from investments
under Subsection (a). The original bill does not address this
issue.
The committee substitute adds the following sections not included
in the original bill:
Sec. 56.192, which authorizes the state treasurer to create a
scholarship program for economically disadvantaged youths;
Sec. 56.193, which states that this subchapter is not a promise or
guarantee that a person will be admitted, continue to be enrolled,
or graduate from an institution; and
Sec. 56.194, which requires the state treasurer to provide reports
to purchasers of bonds, the governor, lieutenant governor, and
speaker of the house regarding the status of the funds.
The committee substitute added additional rulemaking authority in
Sec. 56.187(a) and (b) and Sec. 56.192 (a) not contained in the
original bill.
SUMMARY OF COMMITTEE ACTION
H.B. 1592 was considered by the committee in a public hearing on
April 11, 1995.
The committee considered a complete substitute for the bill.
The bill was left pending.
H.B. 1592 was considered by the committee in a formal meeting on
May 3, 1995.
The committee considered a complete substitute for the bill. The
substitute was adopted without objection by a non-record vote.
The bill was reported favorably as substituted, with the
recommendation that it do pass and be printed, by a record vote of
5 ayes, 0 nays, 4 pnv, 0 absent.