By Kamel, Raymond, Chisum, Stiles, Hartnett           H.B. No. 1214
       74R186 CAS-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 R to read as follows:
    1-7         SUBCHAPTER R.  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.
   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) on that
   6-20  amount from the date of purchase to the date of refund, if
   6-21  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, 1996, 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 R, Chapter 51, Education Code, as
    8-4  added by this Act.
    8-5        SECTION 3.  This Act takes effect September 1, 1995.
    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.