74R7494 SMH-D By Kamel, Raymond H.B. No. 1214 Substitute the following for H.B. No. 1214: By Rangel C.S.H.B. No. 1214 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the establishment of a prepaid higher education tuition 1-3 program. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter 54, Education Code, is amended by adding 1-6 Subchapter F to read as follows: 1-7 SUBCHAPTER F. PREPAID HIGHER EDUCATION TUITION PROGRAM 1-8 Sec. 54.601. DEFINITIONS. In this subchapter: 1-9 (1) "Beneficiary" means a person who is entitled to 1-10 receive benefits under a prepaid tuition contract. 1-11 (2) "Board" means the Prepaid Higher Education Tuition 1-12 Board. 1-13 (3) "Fund" means the Texas tomorrow fund. 1-14 (4) "Institution of higher education" has the meaning 1-15 assigned by Section 61.003. 1-16 (5) "Prepaid tuition contract" means a contract 1-17 entered into under this subchapter by the board and a purchaser to 1-18 provide for the payment of higher education tuition and required 1-19 fees of a beneficiary. 1-20 (6) "Private or independent institution of higher 1-21 education" has the meaning assigned by Section 61.003. 1-22 (7) "Program" means the prepaid higher education 1-23 tuition program. 1-24 (8) "Public junior college" has the meaning assigned 2-1 by Section 61.003. 2-2 (9) "Public senior college or university" has the 2-3 meaning assigned by Section 61.003. 2-4 (10) "Purchaser" means a person who is obligated to 2-5 make payments under a prepaid tuition contract. 2-6 Sec. 54.602. ESTABLISHMENT OF BOARD; FUNCTION. (a) The 2-7 Prepaid Higher Education Tuition Board is in the office of the 2-8 comptroller. 2-9 (b) The board shall administer the program. 2-10 Sec. 54.603. SUNSET PROVISION. The Prepaid Higher Education 2-11 Tuition Board is subject to Chapter 325, Government Code (Texas 2-12 Sunset Act). Unless continued in existence as provided by that 2-13 chapter, the board is abolished and the program terminates 2-14 September 1, 2007. 2-15 Sec. 54.604. TERMINATION OR MODIFICATION OF PROGRAM. If the 2-16 comptroller determines the program is financially infeasible, the 2-17 comptroller shall notify the governor and the legislature and 2-18 recommend that the program be modified or terminated. 2-19 Sec. 54.605. EFFECT OF TERMINATION OF PROGRAM ON CONTRACT. 2-20 (a) A prepaid tuition contract remains in effect after the program 2-21 is terminated if, when the program is terminated, the beneficiary: 2-22 (1) has been accepted by or is enrolled in an 2-23 institution of higher education or a private or independent 2-24 institution of higher education; or 2-25 (2) is projected to graduate from high school not 2-26 later than the third anniversary of the date the program is 2-27 terminated. 3-1 (b) A prepaid tuition contract terminates when the program 3-2 is terminated if the contract does not remain in effect under 3-3 Subsection (a). 3-4 Sec. 54.606. MEMBERS OF BOARD; APPOINTMENT; TERMS OF OFFICE. 3-5 (a) The board consists of: 3-6 (1) the comptroller; 3-7 (2) two members appointed by the governor with the 3-8 advice and consent of the senate; and 3-9 (3) four members appointed by the lieutenant governor, 3-10 at least two of whom must be appointed from a list of persons 3-11 recommended by the speaker of the house of representatives. 3-12 (b) The appointed members must possess knowledge, skill, and 3-13 experience in higher education, business, or finance. 3-14 (c) The appointed members serve for staggered six-year 3-15 terms. The terms of one-third of the appointed members expire on 3-16 February 1 of each odd-numbered year. 3-17 Sec. 54.607. DUTY IN RECOMMENDING, MAKING, OR CONFIRMING 3-18 APPOINTMENTS. (a) In recommending, making, or confirming 3-19 appointments to the board, the governor, lieutenant governor, 3-20 speaker of the house of representatives, and senate shall ensure 3-21 that each appointee has the background and experience suitable for 3-22 performing the statutory responsibilities of a member of the board. 3-23 (b) Appointments to the board shall be made without regard 3-24 to the race, color, disability, sex, religion, age, or national 3-25 origin of the appointees. 3-26 Sec. 54.608. RESTRICTIONS ON BOARD APPOINTMENT, MEMBERSHIP, 3-27 AND EMPLOYMENT. (a) A person is not eligible for appointment as a 4-1 member of the board if the person or the person's spouse: 4-2 (1) is employed by or participates in the management 4-3 of a business entity receiving funds from the board; 4-4 (2) owns or controls, directly or indirectly, more 4-5 than a 10-percent interest in a business entity receiving funds 4-6 from the board; or 4-7 (3) uses or receives a substantial amount of tangible 4-8 goods, services, or funds from the board, other than compensation 4-9 or reimbursement authorized by law for board membership, 4-10 attendance, or expenses. 4-11 (b) An officer, employee, or paid consultant of a Texas 4-12 trade association in the field of higher education may not be a 4-13 member or employee of the board who is exempt from the state's 4-14 position classification plan or is compensated at or above the 4-15 amount prescribed by the General Appropriations Act for step 1, 4-16 salary group 17, of the position classification salary schedule. 4-17 (c) A person who is the spouse of an officer, manager, or 4-18 paid consultant of a Texas trade association in the field of higher 4-19 education may not be a board member and may not be a board employee 4-20 who is exempt from the state's position classification plan or is 4-21 compensated at or above the amount prescribed by the General 4-22 Appropriations Act for step 1, salary group 17, of the position 4-23 classification salary schedule. 4-24 (d) A person may not serve as a member of the board or act 4-25 as the general counsel to the board if the person is required to 4-26 register as a lobbyist under Chapter 305, Government Code, because 4-27 of the person's activities for compensation on behalf of a 5-1 profession related to the operation of the board. 5-2 (e) A person may not serve as an appointed member of the 5-3 board if the person is related in the second degree by affinity or 5-4 consanguinity, as determined under Subchapter B, Chapter 573, 5-5 Government Code, to a person who is an officer, employee, or paid 5-6 consultant of a Texas trade association in the banking, securities, 5-7 or investment industry. 5-8 (f) For the purposes of this section, a Texas trade 5-9 association is a nonprofit, cooperative, and voluntarily joined 5-10 association of business or professional competitors in this state 5-11 designed to assist its members and its industry or profession in 5-12 dealing with mutual business or professional problems and in 5-13 promoting their common interest. 5-14 Sec. 54.609. REMOVAL OF BOARD MEMBER. (a) It is a ground 5-15 for removal from the board if a member: 5-16 (1) violates a prohibition established by Section 5-17 54.608; 5-18 (2) cannot because of illness or disability discharge 5-19 the member's duties for a substantial part of the term for which 5-20 the member is appointed; or 5-21 (3) is absent from more than half of the regularly 5-22 scheduled board meetings that the member is eligible to attend 5-23 during a calendar year unless the absence is excused by majority 5-24 vote of the board. 5-25 (b) The validity of an action of the board is not affected 5-26 by the fact that the action was taken when a ground for removal of 5-27 a board member existed. 6-1 Sec. 54.610. TRAINING OF BOARD MEMBERS. (a) Before a 6-2 member of the board may assume the member's duties and before an 6-3 appointed member may be confirmed by the senate, the member must 6-4 complete at least one course of the training program established 6-5 under this section. 6-6 (b) A training program established under this section shall 6-7 provide information to the member regarding: 6-8 (1) the enabling legislation that created the board; 6-9 (2) the programs operated by the board; 6-10 (3) the role and functions of the board; 6-11 (4) the rules of the board, with an emphasis on the 6-12 rules that relate to disciplinary and investigatory authority; 6-13 (5) the current budget for the board; 6-14 (6) the results of the most recent formal audit of the 6-15 board; 6-16 (7) the requirements of the: 6-17 (A) open meetings law, Chapter 551, Government 6-18 Code; 6-19 (B) open records law, Chapter 552, Government 6-20 Code; and 6-21 (C) administrative procedure law, Chapter 2001, 6-22 Government Code; 6-23 (8) the requirements of the conflict of interest laws 6-24 and other laws relating to public officials; and 6-25 (9) any applicable ethics policies adopted by the 6-26 board or the Texas Ethics Commission. 6-27 Sec. 54.611. BOARD OFFICERS. (a) The comptroller serves as 7-1 the presiding officer of the board. 7-2 (b) The board shall appoint a secretary of the board whose 7-3 duties may be prescribed by law and by the board. 7-4 Sec. 54.612. COMPENSATION AND EXPENSES OF APPOINTED BOARD 7-5 MEMBERS. Appointed members of the board shall serve without pay 7-6 but shall be reimbursed for their actual expenses incurred in 7-7 attending meetings of the board or in performing other work of the 7-8 board when that work is approved by the presiding officer of the 7-9 board. 7-10 Sec. 54.613. MEETINGS. (a) The board shall hold regular 7-11 quarterly meetings in the city of Austin and other meetings at 7-12 places and times scheduled by the board in formal sessions and 7-13 called by the presiding officer. 7-14 (b) The board shall develop and implement policies that 7-15 provide the public with a reasonable opportunity to appear before 7-16 the board and to speak on any issue under the jurisdiction of the 7-17 board. 7-18 (c) Minutes of all meetings shall be available in the 7-19 board's office for public inspection. 7-20 Sec. 54.614. APPLICABILITY OF OPEN MEETINGS LAW AND 7-21 ADMINISTRATIVE PROCEDURE LAW. The board is subject to the open 7-22 meetings law, Chapter 551, Government Code, and the administrative 7-23 procedure law, Chapter 2001, Government Code. 7-24 Sec. 54.615. EXECUTIVE DIRECTOR; STAFF. (a) The 7-25 comptroller serves as the executive director of the board. 7-26 (b) The employees of the comptroller selected by the 7-27 comptroller for that purpose serve as the staff of the board. 8-1 (c) The comptroller shall select and supervise the staff of 8-2 the board and perform other duties delegated to the comptroller by 8-3 the board. 8-4 (d) The comptroller shall provide to members of the board 8-5 and to board staff, as often as necessary, information regarding 8-6 their qualifications for office or employment under this subchapter 8-7 and their responsibilities under applicable laws relating to 8-8 standards of conduct for state officers or employees. 8-9 (e) The board shall develop and implement policies that 8-10 clearly separate the policy-making responsibilities of the board 8-11 and the management responsibilities of the comptroller and the 8-12 staff of the board. 8-13 Sec. 54.616. PROGRAM AND FACILITY ACCESSIBILITY. (a) The 8-14 board shall comply with federal and state laws related to program 8-15 and facility accessibility. 8-16 (b) The board shall prepare and maintain a written plan that 8-17 describes how a person who does not speak English can be provided 8-18 reasonable access to the board's programs and services. 8-19 Sec. 54.617. PUBLIC INTEREST INFORMATION AND COMPLAINTS. 8-20 (a) The board shall prepare information of public interest 8-21 describing the functions of the board and the board's procedures by 8-22 which complaints are filed with and resolved by the board. The 8-23 board shall make the information available to the public and 8-24 appropriate state agencies. 8-25 (b) The board by rule shall establish methods by which 8-26 consumers and service recipients are notified of the name, mailing 8-27 address, and telephone number of the board for the purpose of 9-1 directing complaints to the board. 9-2 (c) The board shall keep information about each complaint 9-3 filed with the board. The information shall include: 9-4 (1) the date the complaint is received; 9-5 (2) the name of the complainant; 9-6 (3) the subject matter of the complaint; 9-7 (4) a record of all persons contacted in relation to 9-8 the complaint; 9-9 (5) a summary of the results of the review or 9-10 investigation of the complaint; and 9-11 (6) for complaints for which the board took no action, 9-12 an explanation of the reason the complaint was closed without 9-13 action. 9-14 (d) The board shall keep a file for each written complaint 9-15 filed with the board that the board has authority to resolve. The 9-16 board shall provide to the person filing the complaint and the 9-17 persons or entities complained about the board's policies and 9-18 procedures pertaining to complaint investigation and resolution. 9-19 The board, at least quarterly and until final disposition of the 9-20 complaint, shall notify the person filing the complaint and the 9-21 persons or entities complained about of the status of the complaint 9-22 unless the notice would jeopardize an undercover investigation. 9-23 Sec. 54.618. POWERS OF BOARD. (a) The board has the powers 9-24 necessary or proper to carry out this subchapter. 9-25 (b) The board may: 9-26 (1) adopt an official seal; 9-27 (2) adopt rules to implement this subchapter; 10-1 (3) sue and be sued; 10-2 (4) enter into contracts and other necessary 10-3 instruments; 10-4 (5) enter into agreements or other transactions with 10-5 the United States, state agencies, including institutions of higher 10-6 education, and local governments; 10-7 (6) appear in its own behalf before governmental 10-8 agencies; 10-9 (7) contract for necessary goods and services and 10-10 engage the services of private consultants, actuaries, trustees, 10-11 records administrators, managers, legal counsel, and auditors for 10-12 administrative or technical assistance; 10-13 (8) solicit and accept gifts, grants, loans, and other 10-14 aid from any source or participate in any other way in any 10-15 government program to carry out this subchapter; 10-16 (9) impose administrative fees; 10-17 (10) contract with a person to market the program; 10-18 (11) purchase liability insurance covering the board 10-19 and employees and agents of the board; and 10-20 (12) establish other policies, procedures, and 10-21 eligibility criteria to implement this subchapter. 10-22 Sec. 54.619. PREPAID HIGHER EDUCATION TUITION PROGRAM. (a) 10-23 Under the program, a purchaser may enter into a prepaid tuition 10-24 contract with the board under which the purchaser agrees to prepay 10-25 the tuition and required fees for a beneficiary to attend an 10-26 institution of higher education. 10-27 (b) The board shall deposit the money paid under a prepaid 11-1 tuition contract in the fund, invest the money and credit the 11-2 income earned to the fund, and apply money in the fund to the 11-3 tuition and required fees of the institution of higher education in 11-4 which the beneficiary enrolls as provided by the prepaid tuition 11-5 contract. 11-6 (c) If there is not enough money in the fund to pay the 11-7 tuition and required fees of the institution of higher education in 11-8 which a beneficiary enrolls as provided by the prepaid tuition 11-9 contract, the legislature shall appropriate to the fund the amount 11-10 necessary for the board to pay the tuition and required fees of the 11-11 institution. 11-12 (d) If the beneficiary enrolls in a private or independent 11-13 institution of higher education, the board shall pay the 11-14 institution the tuition and required fees the board would have paid 11-15 had the student enrolled in an institution of higher education 11-16 covered by the plan selected in the prepaid tuition contract. The 11-17 beneficiary is responsible for paying the private or independent 11-18 institution of higher education the amount by which the tuition and 11-19 required fees of the institution exceed the tuition and required 11-20 fees paid by the board. 11-21 Sec. 54.620. PREPAID TUITION CONTRACT. (a) The board may 11-22 contract with a purchaser for the purchaser to prepay the tuition 11-23 and required fees for a beneficiary to attend an institution of 11-24 higher education to which the beneficiary is admitted as a student. 11-25 (b) The terms of a prepaid tuition contract shall be based 11-26 on an actuarial analysis of: 11-27 (1) tuition growth rates; 12-1 (2) expected investment returns; and 12-2 (3) estimated administrative costs. 12-3 (c) The board shall adopt a form for a prepaid tuition 12-4 contract to be used by the board and purchasers. 12-5 (d) A prepaid tuition contract must: 12-6 (1) specify the amount and number of payments required 12-7 from the purchaser on behalf of the beneficiary; 12-8 (2) specify the terms under which the purchaser shall 12-9 make payments, including the date on which each payment is due; 12-10 (3) specify the consequences of default; 12-11 (4) specify the name and date of birth of the 12-12 beneficiary of the contract and the terms under which another 12-13 person may be substituted as the beneficiary; 12-14 (5) specify the number of credit hours contracted by 12-15 the purchaser; 12-16 (6) specify the type of plan toward which the 12-17 contracted credit hours shall be applied; 12-18 (7) contain an assumption of a contractual obligation 12-19 by the board to the beneficiary to provide for a specified number 12-20 of credit hours of undergraduate instruction at an institution of 12-21 higher education, not to exceed the typical number of credit hours 12-22 required for the degree that corresponds to the plan purchased on 12-23 behalf of the beneficiary; 12-24 (8) specify the date the beneficiary is projected to 12-25 graduate from high school; and 12-26 (9) contain any other provisions the board considers 12-27 necessary or appropriate. 13-1 (e) A prepaid tuition contract does not cover the cost of 13-2 laboratory fees charged for specific courses. 13-3 Sec. 54.621. BENEFICIARY. (a) The beneficiary of a prepaid 13-4 tuition contract must be younger than 18 years of age at the time 13-5 the purchaser enters into the contract and must be: 13-6 (1) a resident of this state at the time the purchaser 13-7 enters into the contract; or 13-8 (2) a nonresident who is the child of a parent who is 13-9 a resident of this state at the time that parent enters into the 13-10 contract. 13-11 (b) The board may require a reasonable period of residence 13-12 in this state for a beneficiary or the parent of a beneficiary. 13-13 (c) A beneficiary is considered a resident for purposes of 13-14 tuition regardless of the beneficiary's residence on the date of 13-15 enrollment. 13-16 Sec. 54.622. TYPES OF PLANS. The board shall make prepaid 13-17 tuition contracts available for the: 13-18 (1) junior college plan; 13-19 (2) senior college plan; and 13-20 (3) junior-senior college plan. 13-21 Sec. 54.623. JUNIOR COLLEGE PLAN. Through the junior 13-22 college plan, a prepaid tuition contract shall provide prepaid 13-23 tuition and required fees for the beneficiary to attend a public 13-24 junior college for a specified number of undergraduate credit hours 13-25 not to exceed the typical number of hours required for a 13-26 certificate or an associate degree awarded by a public junior 13-27 college. 14-1 Sec. 54.624. SENIOR COLLEGE PLAN. Through the senior 14-2 college plan, a prepaid tuition contract shall provide prepaid 14-3 tuition and required fees for the beneficiary to attend a public 14-4 senior college or university for a specified number of 14-5 undergraduate credit hours not to exceed the typical number of 14-6 hours required for a baccalaureate degree awarded by a public 14-7 senior college or university. 14-8 Sec. 54.625. JUNIOR-SENIOR COLLEGE PLAN. Through the 14-9 junior-senior college plan, a prepaid tuition contract shall 14-10 provide prepaid tuition and required fees for the beneficiary to 14-11 attend: 14-12 (1) a public junior college for a specified number of 14-13 undergraduate credit hours not to exceed the typical number of 14-14 hours required for a person to receive a certificate or associate 14-15 degree awarded by a public junior college; and 14-16 (2) a public senior college or university for a 14-17 specified number of credit hours not to exceed the typical number 14-18 of additional hours required for the person to receive a 14-19 baccalaureate degree awarded by a public senior college or 14-20 university. 14-21 Sec. 54.626. CONTRACT PAYMENT. (a) The board may provide 14-22 for the receipt of payments under prepaid tuition contracts in lump 14-23 sums or installment payments. 14-24 (b) A purchaser may make payments under a prepaid tuition 14-25 contract by electronic funds transfer. 14-26 (c) An employee of the state or a political subdivision of 14-27 the state may make payments under a prepaid tuition contract by 15-1 payroll deductions made by the appropriate officer of the state or 15-2 political subdivision. 15-3 (d) The board may impose a fee for a late payment under a 15-4 prepaid tuition contract. 15-5 Sec. 54.627. CHANGE OF BENEFICIARY. (a) The purchaser of a 15-6 prepaid tuition contract may designate a new beneficiary instead of 15-7 the original beneficiary if the new beneficiary meets the 15-8 requirements of a beneficiary on the date the designation is 15-9 changed. If the purchaser is an individual, the new beneficiary 15-10 must be a sibling, step-sibling, or half-sibling of the original 15-11 beneficiary. 15-12 (b) The board may adjust the terms of the contract so that 15-13 the purchaser is required to pay the amount the purchaser would 15-14 have been required to pay had the purchaser originally designated 15-15 the new beneficiary as the beneficiary, taking into account any 15-16 payments made before the date the designation is changed. 15-17 Sec. 54.628. CONVERSION TO ANOTHER PLAN. (a) A purchaser 15-18 may convert a prepaid tuition contract from one plan to another 15-19 plan. 15-20 (b) The board may adjust the terms of the contract so that 15-21 the purchaser is required to pay the amount required under the plan 15-22 to which the contract is converted, taking into account any 15-23 payments made before the date the contract is converted. 15-24 Sec. 54.629. VERIFICATION UNDER OATH. The board may require 15-25 a purchaser to verify under oath a request to: 15-26 (1) change a beneficiary; 15-27 (2) convert a contract to another plan; or 16-1 (3) terminate a contract. 16-2 Sec. 54.630. PROMISE OR GUARANTEE OF ADMISSION. This 16-3 subchapter is not a promise or guarantee that a beneficiary will 16-4 be: 16-5 (1) admitted to any institution of higher education; 16-6 (2) admitted to a particular institution of higher 16-7 education; 16-8 (3) allowed to continue enrollment at an institution 16-9 of higher education after admission; or 16-10 (4) graduated from an institution of higher education. 16-11 Sec. 54.631. CONTRACT TERMINATION. (a) A prepaid tuition 16-12 contract shall specify: 16-13 (1) the name of any person who may terminate the 16-14 contract; and 16-15 (2) the terms under which the contract may be 16-16 terminated. 16-17 (b) A prepaid tuition contract terminates if: 16-18 (1) the purchaser: 16-19 (A) gives notice of termination; or 16-20 (B) defaults on the contract; or 16-21 (2) the beneficiary: 16-22 (A) dies; 16-23 (B) becomes permanently and totally disabled; 16-24 (C) is denied admission by each institution of 16-25 higher education to which the beneficiary applies; or 16-26 (D) enrolls in an institution of higher 16-27 education but does not graduate from the institution on or before 17-1 the 10th anniversary of the projected date of graduation from that 17-2 institution, not counting time spent by the beneficiary as an 17-3 active duty member of the United States armed services. 17-4 Sec. 54.632. REFUND. (a) A prepaid tuition contract shall 17-5 specify: 17-6 (1) the name of the person entitled to any refund if 17-7 the contract is terminated; and 17-8 (2) the terms under which a person is entitled to a 17-9 refund. 17-10 (b) The person named in the contract is entitled to a refund 17-11 following termination of a prepaid tuition contract. 17-12 (c) The amount of the refund is the sum of the payments made 17-13 under the prepaid tuition contract, together with five percent 17-14 interest on each payment accruing from the date the payment is 17-15 received to the date the refund is paid, multiplied by a fraction, 17-16 the numerator of which is the number of credit hours remaining 17-17 under the contract and the denominator of which is the number of 17-18 credit hours originally covered by the contract. 17-19 Sec. 54.633. PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS 17-20 FOR NEEDY STUDENTS. (a) To the extent money is available, the 17-21 board may award a prepaid higher education tuition scholarship to a 17-22 student who meets economic and academic requirements adopted by the 17-23 board by rule. 17-24 (b) A scholarship awarded under this section terminates if 17-25 the student to whom the scholarship is awarded is: 17-26 (1) convicted of, or adjudicated as having engaged in 17-27 delinquent conduct constituting, an offense under Chapter 481, 18-1 Health and Safety Code; or 18-2 (2) convicted of, or adjudicated as having engaged in 18-3 delinquent conduct constituting, a felony or Class A misdemeanor. 18-4 (c) The board shall ensure that each region of the state is 18-5 equitably represented in the awarding of scholarships under this 18-6 section. 18-7 (d) Scholarships under this section are funded by the 18-8 private sector, the United States, and this state. The legislature 18-9 may appropriate an amount for the scholarships not to exceed the 18-10 amount provided by the private sector and the United States. 18-11 (e) The board may establish a direct-support organization 18-12 under the Texas Non-Profit Corporation Act (Article 1396-1.01 et 18-13 seq., Vernon's Texas Civil Statutes) to: 18-14 (1) receive, hold, invest, and administer money, 18-15 gifts, grants, loans, or other property for or on behalf of the 18-16 program; and 18-17 (2) purchase scholarships under this section. 18-18 (f) The board of directors of the direct-support 18-19 organization consists of: 18-20 (1) the comptroller; 18-21 (2) a member appointed by the governor with the advice 18-22 and consent of the senate; and 18-23 (3) three members appointed jointly by the comptroller 18-24 and the member appointed by the governor. 18-25 (g) The board must certify that the direct-support 18-26 organization operates in a manner consistent with the goals of this 18-27 state and in the best interests of this state. 19-1 (h) The board may contract with an independent certified 19-2 public accountant to annually audit the direct-support organization 19-3 under rules adopted by the board. The board shall submit the audit 19-4 to the comptroller, governor, lieutenant governor, speaker of the 19-5 house of representatives, Legislative Budget Board, Legislative 19-6 Audit Committee, state auditor, and Texas Higher Education 19-7 Coordinating Board. The comptroller or state auditor may require 19-8 the direct-support organization or independent certified public 19-9 accountant to provide additional information relating to the 19-10 operation of the organization. 19-11 (i) The identity of a donor under this section who desires 19-12 to remain anonymous and the records of the direct-support 19-13 organization, other than the records disclosed under Subsection 19-14 (h), are confidential. 19-15 Sec. 54.634. ESTABLISHMENT OF FUND. (a) The Texas tomorrow 19-16 fund is outside the state treasury. The fund consists of: 19-17 (1) state appropriations for purposes of the fund; 19-18 (2) money acquired from other governmental or private 19-19 sources; 19-20 (3) money paid under prepaid tuition contracts; and 19-21 (4) the income from money deposited in the fund. 19-22 (b) The board shall administer the assets of the fund. The 19-23 board is the trustee of the fund's assets. 19-24 (c) The board may: 19-25 (1) segregate contributions and payments to the fund 19-26 into various accounts; and 19-27 (2) acquire, hold, manage, purchase, sell, assign, 20-1 trade, transfer, and dispose of any security, evidence of 20-2 indebtedness, or other investment in which the fund's assets may be 20-3 invested. 20-4 Sec. 54.635. STATE TREASURER. (a) Except as provided by 20-5 Subsections (d) and (e), the state treasurer is the custodian of 20-6 the assets of the fund. 20-7 (b) The state treasurer shall pay money from the fund on a 20-8 warrant drawn by the comptroller supported only on a voucher signed 20-9 by the comptroller or the comptroller's authorized representative. 20-10 (c) The state treasurer annually shall furnish to the board 20-11 a sworn statement of the amount of the fund's assets in the 20-12 treasurer's custody. 20-13 (d) The board may select one or more commercial banks, 20-14 depository trust companies, or other entities to serve as custodian 20-15 of all or part of the fund's assets. 20-16 (e) If the office of the state treasurer is abolished, the 20-17 comptroller is the custodian of the assets of the fund. 20-18 Sec. 54.636. INVESTMENT OF FUND ASSETS. (a) The board 20-19 shall invest the assets of the fund. 20-20 (b) The board may contract with private professional 20-21 investment managers to assist the board in investing the assets of 20-22 the fund. 20-23 (c) The board shall develop written investment objectives 20-24 concerning the investment of the assets of the fund. The 20-25 objectives may address desired rates of return, risks involved, 20-26 investment time frames, and any other relevant considerations. 20-27 (d) The comptroller shall develop a comprehensive plan for 21-1 the investment of the assets of the fund consistent with the 21-2 objectives developed by the board under Subsection (c). The plan 21-3 shall specify the policies under which the board shall invest the 21-4 assets of the fund. The board must approve the plan. 21-5 (e) The assets of the fund may be invested only in: 21-6 (1) investments authorized by Section 404.024, 21-7 Government Code; 21-8 (2) corporate debt obligations that have received one 21-9 of the two highest credit ratings by at least two nationally 21-10 recognized rating services; 21-11 (3) preferred stocks; 21-12 (4) common stocks traded on the New York Stock 21-13 Exchange; 21-14 (5) institutional investment products, including fixed 21-15 annuities, variable annuities, and guaranteed insurance contracts 21-16 that are obligations of United States insurance companies; and 21-17 (6) mutual funds regulated by the Securities and 21-18 Exchange Commission. 21-19 (f) In investing the assets of the fund, the board shall 21-20 exercise the judgment and care, under the circumstances prevailing 21-21 at the time of the investment, that persons of ordinary prudence, 21-22 discretion, and intelligence exercise in the management of their 21-23 own affairs, not in speculation but when making a permanent 21-24 disposition of their money, considering the probable income from 21-25 the disposition and the probable safety of their capital. 21-26 Sec. 54.637. USE OF FUND ASSETS. The assets of the fund may 21-27 be used only to: 22-1 (1) pay the costs of program administration and 22-2 operations; 22-3 (2) make payments to institutions of higher education 22-4 on behalf of beneficiaries; and 22-5 (3) make refunds under prepaid tuition contracts. 22-6 Sec. 54.638. REQUEST OF RULINGS FROM INTERNAL REVENUE 22-7 SERVICE AND SECURITIES AND EXCHANGE COMMISSION. (a) The board 22-8 shall request rulings from: 22-9 (1) the Internal Revenue Service regarding the tax 22-10 consequences to purchasers and beneficiaries of participating in 22-11 the program; and 22-12 (2) the Securities and Exchange Commission regarding 22-13 the application of federal securities laws to the fund. 22-14 (b) The board shall inform a purchaser of the status of the 22-15 requests under Subsection (a) before the purchaser enters into a 22-16 prepaid tuition contract. 22-17 Sec. 54.639. EXEMPTION FROM CREDITORS' CLAIMS. Money in the 22-18 fund is exempt from claims of creditors of a purchaser or 22-19 beneficiary. 22-20 Sec. 54.640. ACTUARIAL SOUNDNESS OF FUND. (a) The board 22-21 shall administer the fund in a manner that is sufficiently 22-22 actuarially sound to pay the costs of program administration and 22-23 operations and meet the obligations of the program. 22-24 (b) The board shall annually evaluate the actuarial 22-25 soundness of the fund. 22-26 (c) The board may adjust the terms of subsequent prepaid 22-27 tuition contracts as necessary to ensure the actuarial soundness of 23-1 the fund. 23-2 Sec. 54.641. STATEMENT REGARDING STATUS OF PREPAID TUITION 23-3 CONTRACT. (a) Not later than December 1 of each year, the board 23-4 shall furnish without charge to each purchaser a statement of: 23-5 (1) the amount paid by the purchaser under the prepaid 23-6 tuition contract; 23-7 (2) the number of credit hours originally covered by 23-8 the contract; 23-9 (3) the number of credit hours remaining under the 23-10 contract; 23-11 (4) the amount of the refund to which the person 23-12 designated by the contract would be entitled if the contract were 23-13 terminated on the date of the statement; and 23-14 (5) any other information the board determines by rule 23-15 is necessary or appropriate. 23-16 (b) The board shall furnish a statement complying with 23-17 Subsection (a) to a purchaser or beneficiary on written request. 23-18 The board may charge a reasonable fee for each statement furnished 23-19 under this subsection. 23-20 Sec. 54.642. REPORTS. (a) Not later than December 1 of 23-21 each year, the board shall submit to the governor, lieutenant 23-22 governor, speaker of the house of representatives, Legislative 23-23 Budget Board, Legislative Audit Committee, state auditor, and Texas 23-24 Higher Education Coordinating Board a report including: 23-25 (1) the board's fiscal transactions during the 23-26 preceding fiscal year; 23-27 (2) the market and book value of the fund as of the 24-1 end of the preceding fiscal year; 24-2 (3) the asset allocations of the fund expressed in 24-3 percentages of stocks, fixed income, cash, or other financial 24-4 investments; 24-5 (4) the rate of return on the investment of the fund's 24-6 assets during the preceding fiscal year; and 24-7 (5) an actuarial valuation of the assets and 24-8 liabilities of the program, including the extent to which the 24-9 program's liabilities are unfunded. 24-10 (b) The board shall make the report described by Subsection 24-11 (a) available to purchasers of prepaid tuition contracts. 24-12 (c) Not later than December 1 of each year, the board shall 24-13 provide to the Texas Higher Education Coordinating Board complete 24-14 prepaid tuition contract sales information, including projected 24-15 enrollments of beneficiaries at institutions of higher education. 24-16 Sec. 54.643. CONFIDENTIALITY. (a) Records in the custody 24-17 of the board relating to the participation of specific purchasers 24-18 and beneficiaries in the program are confidential. 24-19 (b) Notwithstanding Subsection (a), the board may release 24-20 information described by that subsection to an institution of 24-21 higher education in which a beneficiary may enroll or is enrolled. 24-22 The institution of higher education shall keep the information 24-23 confidential. 24-24 SECTION 2. (a) As soon as possible on or after the 24-25 effective date of this Act, the governor and lieutenant governor 24-26 shall appoint the members of the Prepaid Higher Education Tuition 24-27 Board appointed by those officers. In making the appointments, the 25-1 governor shall designate one member for a term expiring February 1, 25-2 1997, and one member for a term expiring February 1, 1999. In 25-3 making the appointments, the lieutenant governor shall designate 25-4 one member for a term expiring February 1, 1997, one member 25-5 appointed from a list of persons recommended by the speaker of the 25-6 house of representatives for a term expiring February 1, 1999, and 25-7 two members for terms expiring February 1, 2001, one of whom must 25-8 be appointed from a list of persons recommended by the speaker of 25-9 the house of representatives. 25-10 (b) The legislature may appropriate to the board an amount 25-11 sufficient to cover the board's administrative costs for the state 25-12 fiscal biennium ending August 31, 1997. 25-13 (c) The board shall be prepared to enter into a prepaid 25-14 tuition contract not later than the 90th day after the date all the 25-15 members are appointed or January 1, 1996, whichever occurs later. 25-16 SECTION 3. This Act takes effect September 1, 1995. 25-17 SECTION 4. The importance of this legislation and the 25-18 crowded condition of the calendars in both houses create an 25-19 emergency and an imperative public necessity that the 25-20 constitutional rule requiring bills to be read on three several 25-21 days in each house be suspended, and this rule is hereby suspended.