1-1        By:  Kamel, et al. (Senate Sponsor - Barrientos)     H.B. No.
    1-2  1214
    1-3        (In the Senate - Received from the House May 12, 1995;
    1-4  May 15, 1995, read first time and referred to Committee on Finance;
    1-5  May 25, 1995, reported favorably by the following vote:  Yeas 9,
    1-6  Nays 0; May 25, 1995, sent to printer.)
    1-7                         A BILL TO BE ENTITLED
    1-8                                AN ACT
    1-9  relating to the establishment of a prepaid higher education tuition
   1-10  program.
   1-11        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   1-12        SECTION 1.  Chapter 54, Education Code, is amended by adding
   1-13  Subchapter F to read as follows:
   1-14        SUBCHAPTER F.  PREPAID HIGHER EDUCATION TUITION PROGRAM
   1-15        Sec. 54.6001.  PUBLIC PURPOSE.  An educated population being
   1-16  necessary to the social development and economic health of this
   1-17  state, the legislature finds and declares it to be an urgent public
   1-18  necessity to assist young Texans in obtaining a higher education.
   1-19  Because the state's population is rapidly growing and is diverse,
   1-20  the state is required to use all of the higher education facilities
   1-21  and resources within the state, both public and private, to provide
   1-22  a wide variety of educational environments and instructional
   1-23  options and to preserve the partnership between the state and
   1-24  private or independent institutions of higher education.
   1-25  Therefore, the prepaid higher education tuition program is
   1-26  established to help Texas students attend the institution that best
   1-27  meets their individual needs.
   1-28        Sec. 54.601.  DEFINITIONS.  In this subchapter:
   1-29              (1)  "Beneficiary" means a person who is entitled to
   1-30  receive benefits under a prepaid tuition contract.
   1-31              (2)  "Board" means the Prepaid Higher Education Tuition
   1-32  Board.
   1-33              (3)  "Estimated average private tuition and required
   1-34  fees" means an estimated average of tuition and required fees to be
   1-35  charged by private or independent institutions of higher education
   1-36  as determined annually by the board.
   1-37              (4)  "Fund" means the Texas tomorrow fund.
   1-38              (5)  "Institution of higher education" has the meaning
   1-39  assigned by Section 61.003.
   1-40              (6)  "Prepaid tuition contract" means a contract
   1-41  entered into under this subchapter by the board and a purchaser to
   1-42  provide for the payment of higher education tuition and required
   1-43  fees of a beneficiary.
   1-44              (7)  "Private or independent institution of higher
   1-45  education" has the meaning assigned by Section 61.003.
   1-46              (8)  "Program" means the prepaid higher education
   1-47  tuition program.
   1-48              (9)  "Public junior college" has the meaning assigned
   1-49  by Section 61.003.
   1-50              (10)  "Public senior college or university" has the
   1-51  meaning assigned by Section 61.003.
   1-52              (11)  "Purchaser" means a person who is obligated to
   1-53  make payments under a prepaid tuition contract.
   1-54        Sec. 54.602.  ESTABLISHMENT OF BOARD; FUNCTION.  (a)  The
   1-55  Prepaid Higher Education Tuition Board is in the office of the
   1-56  comptroller.
   1-57        (b)  The board shall administer the program.
   1-58        Sec. 54.603.  SUNSET PROVISION.  The Prepaid Higher Education
   1-59  Tuition Board is subject to Chapter 325, Government Code (Texas
   1-60  Sunset Act).  Unless continued in existence as provided by that
   1-61  chapter, the board is abolished and the program terminates
   1-62  September 1, 2007.
   1-63        Sec. 54.604.  TERMINATION OR MODIFICATION OF PROGRAM.  If the
   1-64  comptroller determines the program is financially infeasible, the
   1-65  comptroller shall notify the governor and the legislature and
   1-66  recommend that the program be modified or terminated.
   1-67        Sec. 54.605.  EFFECT OF TERMINATION OF PROGRAM ON CONTRACT.
   1-68  (a)  A prepaid tuition contract remains in effect after the program
    2-1  is terminated if, when the program is terminated, the beneficiary:
    2-2              (1)  has been accepted by or is enrolled in an
    2-3  institution of higher education or a private or independent
    2-4  institution of higher education; or
    2-5              (2)  is projected to graduate from high school not
    2-6  later than the third anniversary of the date the program is
    2-7  terminated.
    2-8        (b)  A prepaid tuition contract terminates when the program
    2-9  is terminated if the contract does not remain in effect under
   2-10  Subsection (a).
   2-11        Sec. 54.606.  MEMBERS OF BOARD; APPOINTMENT; TERMS OF OFFICE.
   2-12  (a)  The board consists of:
   2-13              (1)  the comptroller;
   2-14              (2)  two members appointed by the governor with the
   2-15  advice and consent of the senate; and
   2-16              (3)  four members appointed by the lieutenant governor,
   2-17  at least two of whom must be appointed from a list of persons
   2-18  recommended by the speaker of the house of representatives.
   2-19        (b)  The appointed members must possess knowledge, skill, and
   2-20  experience in higher education, business, or finance.
   2-21        (c)  The appointed members serve for staggered six-year
   2-22  terms.  The terms of one-third of the appointed members expire on
   2-23  February 1 of each odd-numbered year.
   2-24        Sec. 54.607.  DUTY IN RECOMMENDING, MAKING, OR CONFIRMING
   2-25  APPOINTMENTS.  (a)  In recommending, making, or confirming
   2-26  appointments to the board, the governor, lieutenant governor,
   2-27  speaker of the house of representatives, and senate shall ensure
   2-28  that each appointee has the background and experience suitable for
   2-29  performing the statutory responsibilities of a member of the board.
   2-30        (b)  Appointments to the board shall be made without regard
   2-31  to the race, color, disability, sex, religion, age, or national
   2-32  origin of the appointees.
   2-33        Sec. 54.608.  RESTRICTIONS ON BOARD APPOINTMENT, MEMBERSHIP,
   2-34  AND EMPLOYMENT.  (a)  A person is not eligible for appointment as a
   2-35  member of the board if the person or the person's spouse:
   2-36              (1)  is employed by or participates in the management
   2-37  of a business entity receiving funds from the board;
   2-38              (2)  owns or controls, directly or indirectly, more
   2-39  than a 10-percent interest in a business entity receiving funds
   2-40  from the board; or
   2-41              (3)  uses or receives a substantial amount of tangible
   2-42  goods, services, or funds from the board, other than compensation
   2-43  or reimbursement authorized by law for board membership,
   2-44  attendance, or expenses.
   2-45        (b)  An officer, employee, or paid consultant of a Texas
   2-46  trade association in the field of higher education may not be a
   2-47  member or employee of the board who is exempt from the state's
   2-48  position classification plan or is compensated at or above the
   2-49  amount prescribed by the General Appropriations Act for step 1,
   2-50  salary group 17, of the position classification salary schedule.
   2-51        (c)  A person who is the spouse of an officer, manager, or
   2-52  paid consultant of a Texas trade association in the field of higher
   2-53  education may not be a board member and may not be a board employee
   2-54  who is exempt from the state's position classification plan or is
   2-55  compensated at or above the amount prescribed by the General
   2-56  Appropriations Act for step 1, salary group 17, of the position
   2-57  classification salary schedule.
   2-58        (d)  A person may not serve as a member of the board or act
   2-59  as the general counsel to the board if the person is required to
   2-60  register as a lobbyist under Chapter 305, Government Code, because
   2-61  of the person's activities for compensation on behalf of a
   2-62  profession related to the operation of the board.
   2-63        (e)  A person may not serve as an appointed member of the
   2-64  board if the person is related in the second degree by affinity or
   2-65  consanguinity, as determined under Subchapter B, Chapter 573,
   2-66  Government Code, to a person who is an officer, employee, or paid
   2-67  consultant of a Texas trade association in the banking, securities,
   2-68  or investment industry.
   2-69        (f)  For the purposes of this section, a Texas trade
   2-70  association is a nonprofit, cooperative, and voluntarily joined
    3-1  association of business or professional competitors in this state
    3-2  designed to assist its members and its industry or profession in
    3-3  dealing with mutual business or professional problems and in
    3-4  promoting their common interest.
    3-5        Sec. 54.609.  REMOVAL OF BOARD MEMBER.  (a)  It is a ground
    3-6  for removal from the board if a member:
    3-7              (1)  violates a prohibition established by Section
    3-8  54.608;
    3-9              (2)  cannot because of illness or disability discharge
   3-10  the member's duties for a substantial part of the term for which
   3-11  the member is appointed; or
   3-12              (3)  is absent from more than half of the regularly
   3-13  scheduled board meetings that the member is eligible to attend
   3-14  during a calendar year unless the absence is excused by majority
   3-15  vote of the board.
   3-16        (b)  The validity of an action of the board is not affected
   3-17  by the fact that the action was taken when a ground for removal of
   3-18  a board member existed.
   3-19        Sec. 54.610.  TRAINING OF BOARD MEMBERS.  (a)  Before a
   3-20  member of the board may assume the member's duties and before an
   3-21  appointed member may be confirmed by the senate, the member must
   3-22  complete at least one course of the training program established
   3-23  under this section.
   3-24        (b)  A training program established under this section shall
   3-25  provide information to the member regarding:
   3-26              (1)  the enabling legislation that created the board;
   3-27              (2)  the programs operated by the board;
   3-28              (3)  the role and functions of the board;
   3-29              (4)  the rules of the board, with an emphasis on the
   3-30  rules that relate to disciplinary and investigatory authority;
   3-31              (5)  the current budget for the board;
   3-32              (6)  the results of the most recent formal audit of the
   3-33  board;
   3-34              (7)  the requirements of the:
   3-35                    (A)  open meetings law, Chapter 551, Government
   3-36  Code;
   3-37                    (B)  open records law, Chapter 552, Government
   3-38  Code; and
   3-39                    (C)  administrative procedure law, Chapter 2001,
   3-40  Government Code;
   3-41              (8)  the requirements of the conflict of interest laws
   3-42  and other laws relating to public officials; and
   3-43              (9)  any applicable ethics policies adopted by the
   3-44  board or the Texas Ethics Commission.
   3-45        Sec. 54.611.  BOARD OFFICERS.  (a)  The comptroller serves as
   3-46  the presiding officer of the board.
   3-47        (b)  The board shall appoint a secretary of the board whose
   3-48  duties may be prescribed by law and by the board.
   3-49        Sec. 54.612.  COMPENSATION AND EXPENSES OF APPOINTED BOARD
   3-50  MEMBERS.  Appointed members of the board shall serve without pay
   3-51  but shall be reimbursed for their actual expenses incurred in
   3-52  attending meetings of the board or in performing other work of the
   3-53  board when that work is approved by the presiding officer of the
   3-54  board.
   3-55        Sec. 54.613.  MEETINGS.  (a)  The board shall hold regular
   3-56  quarterly meetings in the city of Austin and other meetings at
   3-57  places and times scheduled by the board in formal sessions and
   3-58  called by the presiding officer.
   3-59        (b)  The board shall develop and implement policies that
   3-60  provide the public with a reasonable opportunity to appear before
   3-61  the board and to speak on any issue under the jurisdiction of the
   3-62  board.
   3-63        (c)  Minutes of all meetings shall be available in the
   3-64  board's office for public inspection.
   3-65        Sec. 54.614.  APPLICABILITY OF OPEN MEETINGS LAW AND
   3-66  ADMINISTRATIVE PROCEDURE LAW.  The board is subject to the open
   3-67  meetings law, Chapter 551, Government Code, and the administrative
   3-68  procedure law, Chapter 2001, Government Code.
   3-69        Sec. 54.615.  EXECUTIVE DIRECTOR; STAFF.  (a)  The
   3-70  comptroller serves as the executive director of the board.
    4-1        (b)  The employees of the comptroller selected by the
    4-2  comptroller for that purpose serve as the staff of the board.
    4-3        (c)  The comptroller shall select and supervise the staff of
    4-4  the board and perform other duties delegated to the comptroller by
    4-5  the board.
    4-6        (d)  The comptroller shall provide to members of the board
    4-7  and to board staff, as often as necessary, information regarding
    4-8  their qualifications for office or employment under this subchapter
    4-9  and their responsibilities under applicable laws relating to
   4-10  standards of conduct for state officers or employees.
   4-11        (e)  The board shall develop and implement policies that
   4-12  clearly separate the policy-making responsibilities of the board
   4-13  and the management responsibilities of the comptroller and the
   4-14  staff of the board.
   4-15        Sec. 54.616.  PROGRAM AND FACILITY ACCESSIBILITY.  (a)  The
   4-16  board shall comply with federal and state laws related to program
   4-17  and facility accessibility.
   4-18        (b)  The board shall prepare and maintain a written plan that
   4-19  describes how a person who does not speak English can be provided
   4-20  reasonable access to the board's programs and services.
   4-21        Sec. 54.617.  PUBLIC INTEREST INFORMATION AND COMPLAINTS.
   4-22  (a)  The board shall prepare information of public interest
   4-23  describing the functions of the board and the board's procedures by
   4-24  which complaints are filed with and resolved by the board.  The
   4-25  board shall make the information available to the public and
   4-26  appropriate state agencies.
   4-27        (b)  The board by rule shall establish methods by which
   4-28  consumers and service recipients are notified of the name, mailing
   4-29  address, and telephone number of the board for the purpose of
   4-30  directing complaints to the board.
   4-31        (c)  The board shall keep information about each complaint
   4-32  filed with the board.  The information shall include:
   4-33              (1)  the date the complaint is received;
   4-34              (2)  the name of the complainant;
   4-35              (3)  the subject matter of the complaint;
   4-36              (4)  a record of all persons contacted in relation to
   4-37  the complaint;
   4-38              (5)  a summary of the results of the review or
   4-39  investigation of the complaint; and
   4-40              (6)  for complaints for which the board took no action,
   4-41  an explanation of the reason the complaint was closed without
   4-42  action.
   4-43        (d)  The board shall keep a file for each written complaint
   4-44  filed with the board that the board has authority to resolve.  The
   4-45  board shall provide to the person filing the complaint and the
   4-46  persons or entities complained about the board's policies and
   4-47  procedures pertaining to complaint investigation and resolution.
   4-48  The board, at least quarterly and until final disposition of the
   4-49  complaint, shall notify the person filing the complaint and the
   4-50  persons or entities complained about of the status of the complaint
   4-51  unless the notice would jeopardize an undercover investigation.
   4-52        Sec. 54.618.  POWERS OF BOARD.  (a)  The board has the powers
   4-53  necessary or proper to carry out this subchapter.
   4-54        (b)  The board may:
   4-55              (1)  adopt an official seal;
   4-56              (2)  adopt rules to implement this subchapter;
   4-57              (3)  sue and be sued;
   4-58              (4)  enter into contracts and other necessary
   4-59  instruments;
   4-60              (5)  enter into agreements or other transactions with
   4-61  the United States, state agencies, including institutions of higher
   4-62  education, private or independent institutions of higher education,
   4-63  and local governments;
   4-64              (6)  appear in its own behalf before governmental
   4-65  agencies;
   4-66              (7)  contract for necessary goods and services and
   4-67  engage the services of private consultants, actuaries, trustees,
   4-68  records administrators, managers, legal counsel, and auditors for
   4-69  administrative or technical assistance;
   4-70              (8)  solicit and accept gifts, grants, loans, and other
    5-1  aid from any source or participate in any other way in any
    5-2  government program to carry out this subchapter;
    5-3              (9)  impose administrative fees;
    5-4              (10)  contract with a person to market the program;
    5-5              (11)  purchase liability insurance covering the board
    5-6  and employees and agents of the board; and
    5-7              (12)  establish other policies, procedures, and
    5-8  eligibility criteria to implement this subchapter.
    5-9        Sec. 54.619.  PREPAID HIGHER EDUCATION TUITION PROGRAM.  (a)
   5-10  Under the program, a purchaser may enter into a prepaid tuition
   5-11  contract with the board under which the purchaser agrees to prepay
   5-12  the tuition and required fees for a beneficiary to attend an
   5-13  institution of higher education or private or independent
   5-14  institution of higher education.
   5-15        (b)  The board shall deposit the money paid under a prepaid
   5-16  tuition contract in the fund, invest the money and credit the
   5-17  income earned to the fund, and apply money in the fund to the
   5-18  tuition and required fees of the institution of higher education or
   5-19  private or independent institution of higher education in which the
   5-20  beneficiary enrolls as provided by the prepaid tuition contract.
   5-21        (c)  If the beneficiary of a plan described by Section
   5-22  54.623, 54.624, or 54.625 enrolls in a private or independent
   5-23  institution of higher education, the board shall pay the
   5-24  institution the tuition and required fees the board would have paid
   5-25  had the beneficiary enrolled in an institution of higher education
   5-26  covered by the plan selected in the prepaid tuition contract.  The
   5-27  beneficiary is responsible for paying the private or independent
   5-28  institution of higher education the amount by which the tuition and
   5-29  required fees of the institution exceed the tuition and required
   5-30  fees paid by the board.
   5-31        (d)  If the beneficiary of a plan described by Section
   5-32  54.6251 enrolls in an institution of higher education, the board
   5-33  shall pay:
   5-34              (1)  to the institution the tuition and required fees
   5-35  of the institution; and
   5-36              (2)  to the beneficiary the amount by which the
   5-37  estimated average private tuition and required fees exceeds the
   5-38  tuition and required fees of the institution.
   5-39        (e)  If the beneficiary of a plan described by Section
   5-40  54.6251 enrolls in a private or independent institution of higher
   5-41  education, the board shall pay:
   5-42              (1)  to the institution the lesser of:
   5-43                    (A)  the tuition and required fees of the
   5-44  institution; or
   5-45                    (B)  the estimated average private tuition and
   5-46  required fees; and
   5-47              (2)  to the beneficiary the amount by which the
   5-48  estimated average private tuition and required fees exceeds the
   5-49  tuition and required fees of the institution.
   5-50        (f)  If the beneficiary of a plan described by Section
   5-51  54.6251 enrolls in a private or independent institution of higher
   5-52  education, the beneficiary is responsible for paying the
   5-53  institution the amount by which the tuition and required fees of
   5-54  the institution exceeds the estimated average private tuition and
   5-55  required fees.
   5-56        (g)  If there is not enough money in the fund to pay the
   5-57  tuition and required fees of the institution of higher education in
   5-58  which a beneficiary enrolls or the appropriate portion of the
   5-59  tuition and required fees of the private or independent institution
   5-60  of higher education in which the beneficiary enrolls as provided by
   5-61  the prepaid tuition contract, the legislature may appropriate to
   5-62  the fund the amount necessary for the board to pay the applicable
   5-63  amount of tuition and required fees of the institution.
   5-64        Sec. 54.620.  PREPAID TUITION CONTRACT.  (a)  The board may
   5-65  contract with a purchaser for the purchaser to prepay the tuition
   5-66  and required fees for a beneficiary to attend an institution of
   5-67  higher education or private or independent institution of higher
   5-68  education to which the beneficiary is admitted as a student.
   5-69        (b)  The terms of a prepaid tuition contract shall be based
   5-70  on an actuarial analysis of:
    6-1              (1)  the rates of increase of:
    6-2                    (A)  tuition and required fees at institutions of
    6-3  higher education; or
    6-4                    (B)  estimated average private tuition and
    6-5  required fees;
    6-6              (2)  expected investment returns;
    6-7              (3)  estimated administrative costs; and
    6-8              (4)  the period between the date the contract is
    6-9  entered into and the date the beneficiary is projected to graduate
   6-10  from high school.
   6-11        (c)  The board shall adopt a form for a prepaid tuition
   6-12  contract to be used by the board and purchasers.
   6-13        (d)  A prepaid tuition contract must:
   6-14              (1)  specify the amount and number of payments required
   6-15  from the purchaser on behalf of the beneficiary;
   6-16              (2)  specify the terms under which the purchaser shall
   6-17  make payments, including the date on which each payment is due;
   6-18              (3)  specify the consequences of default;
   6-19              (4)  specify the name and date of birth of the
   6-20  beneficiary of the contract and the terms under which another
   6-21  person may be substituted as the beneficiary;
   6-22              (5)  specify the number of credit hours contracted by
   6-23  the purchaser;
   6-24              (6)  specify the type of plan toward which the
   6-25  contracted credit hours shall be applied;
   6-26              (7)  contain an assumption of a contractual obligation
   6-27  by the board to the beneficiary to provide for a specified number
   6-28  of credit hours of undergraduate instruction at an institution of
   6-29  higher education or private or independent institution of higher
   6-30  education, not to exceed the typical number of credit hours
   6-31  required for the degree that corresponds to the plan purchased on
   6-32  behalf of the beneficiary;
   6-33              (8)  specify the date the beneficiary is projected to
   6-34  graduate from high school; and
   6-35              (9)  contain any other provisions the board considers
   6-36  necessary or appropriate.
   6-37        (e)  A prepaid tuition contract does not cover the cost of
   6-38  laboratory fees charged for specific courses.
   6-39        Sec. 54.621.  BENEFICIARY.  (a)  The beneficiary of a prepaid
   6-40  tuition contract must be younger than 18 years of age at the time
   6-41  the purchaser enters into the contract and must be:
   6-42              (1)  a resident of this state at the time the purchaser
   6-43  enters into the contract; or
   6-44              (2)  a nonresident who is the child of a parent who is
   6-45  a resident of this state at the time that parent enters into the
   6-46  contract.
   6-47        (b)  The board may require a reasonable period of residence
   6-48  in this state for a beneficiary or the parent of a beneficiary.
   6-49        (c)  A beneficiary is considered a resident for purposes of
   6-50  tuition regardless of the beneficiary's residence on the date of
   6-51  enrollment.
   6-52        Sec. 54.622.  TYPES OF PLANS.  The board shall make prepaid
   6-53  tuition contracts available for the:
   6-54              (1)  junior college plan;
   6-55              (2)  senior college plan;
   6-56              (3)  junior-senior college plan; and
   6-57              (4)  private college plan.
   6-58        Sec. 54.623.  JUNIOR COLLEGE PLAN.  Through the junior
   6-59  college plan, a prepaid tuition contract shall provide prepaid
   6-60  tuition and required fees for the beneficiary to attend a public
   6-61  junior college for a specified number of undergraduate credit hours
   6-62  not to exceed the typical number of hours required for a
   6-63  certificate or an associate degree awarded by a public junior
   6-64  college.
   6-65        Sec. 54.624.  SENIOR COLLEGE PLAN.  Through the senior
   6-66  college plan, a prepaid tuition contract shall provide prepaid
   6-67  tuition and required fees for the beneficiary to attend a public
   6-68  senior college or university for a specified number of
   6-69  undergraduate credit hours not to exceed the typical number of
   6-70  hours required for a baccalaureate degree awarded by a public
    7-1  senior college or university.
    7-2        Sec. 54.625.  JUNIOR-SENIOR COLLEGE PLAN.  Through the
    7-3  junior-senior college plan, a prepaid tuition contract shall
    7-4  provide prepaid tuition and required fees for the beneficiary to
    7-5  attend:
    7-6              (1)  a public junior college for a specified number of
    7-7  undergraduate credit hours not to exceed the typical number of
    7-8  hours required for a person to receive a certificate or associate
    7-9  degree awarded by a public junior college; and
   7-10              (2)  a public senior college or university for a
   7-11  specified number of credit hours not to exceed the typical number
   7-12  of additional hours required for the person to receive a
   7-13  baccalaureate degree awarded by a public senior college or
   7-14  university.
   7-15        Sec. 54.6251.  PRIVATE COLLEGE PLAN.  Through the private
   7-16  college plan, a prepaid tuition contract shall provide prepaid
   7-17  estimated average private tuition and required fees for the
   7-18  beneficiary to attend a private or independent institution of
   7-19  higher education for a specified number of undergraduate credit
   7-20  hours not to exceed the typical number of hours required for a
   7-21  baccalaureate degree awarded by a private or independent
   7-22  institution of higher education.
   7-23        Sec. 54.626.  CONTRACT PAYMENT.  (a)  The board may provide
   7-24  for the receipt of payments under prepaid tuition contracts in lump
   7-25  sums or installment payments.
   7-26        (b)  A purchaser may make payments under a prepaid tuition
   7-27  contract by electronic funds transfer.
   7-28        (c)  An employee of the state or a political subdivision of
   7-29  the state may make payments under a prepaid tuition contract by
   7-30  payroll deductions made by the appropriate officer of the state or
   7-31  political subdivision.
   7-32        (d)  The board may impose a fee for a late payment under a
   7-33  prepaid tuition contract.
   7-34        Sec. 54.627.  CHANGE OF BENEFICIARY.  (a)  The purchaser of a
   7-35  prepaid tuition contract may designate a new beneficiary instead of
   7-36  the original beneficiary if the new beneficiary meets the
   7-37  requirements of a beneficiary on the date the designation is
   7-38  changed.  If the purchaser is an individual, the new beneficiary
   7-39  must be a sibling, step-sibling, or half-sibling of the original
   7-40  beneficiary.
   7-41        (b)  The board may adjust the terms of the contract so that
   7-42  the purchaser is required to pay the amount the purchaser would
   7-43  have been required to pay had the purchaser originally designated
   7-44  the new beneficiary as the beneficiary, taking into account any
   7-45  payments made before the date the designation is changed.
   7-46        (c)  The purchaser of a prepaid tuition contract may not sell
   7-47  the contract.
   7-48        Sec. 54.628.  CONVERSION TO ANOTHER PLAN.  (a)  A purchaser
   7-49  may convert a prepaid tuition contract from one plan to another
   7-50  plan.
   7-51        (b)  The board may adjust the terms of the contract so that
   7-52  the purchaser is required to pay the amount required under the plan
   7-53  to which the contract is converted, taking into account any
   7-54  payments made before the date the contract is converted.
   7-55        Sec. 54.629.  VERIFICATION UNDER OATH.  The board may require
   7-56  a purchaser to verify under oath a request to:
   7-57              (1)  change a beneficiary;
   7-58              (2)  convert a contract to another plan; or
   7-59              (3)  terminate a contract.
   7-60        Sec. 54.630.  PROMISE OR GUARANTEE OF ADMISSION.  This
   7-61  subchapter is not a promise or guarantee that a beneficiary will
   7-62  be:
   7-63              (1)  admitted to any institution of higher education or
   7-64  private or independent institution of higher education;
   7-65              (2)  admitted to a particular institution of higher
   7-66  education or private or independent institution of higher
   7-67  education;
   7-68              (3)  allowed to continue enrollment at an institution
   7-69  of higher education or private or independent institution of higher
   7-70  education after admission; or
    8-1              (4)  graduated from an institution of higher education
    8-2  or private or independent institution of higher education.
    8-3        Sec. 54.631.  CONTRACT TERMINATION.  (a)  A prepaid tuition
    8-4  contract shall specify:
    8-5              (1)  the name of any person who may terminate the
    8-6  contract; and
    8-7              (2)  the terms under which the contract may be
    8-8  terminated.
    8-9        (b)  A prepaid tuition contract terminates on the 10th
   8-10  anniversary of the date the beneficiary is projected to graduate
   8-11  from high school, not counting time spent by the beneficiary as an
   8-12  active duty member of the United States armed services.
   8-13        Sec. 54.632.  REFUND.  (a)  A prepaid tuition contract shall
   8-14  specify:
   8-15              (1)  the name of the person entitled to any refund if
   8-16  the contract is terminated;
   8-17              (2)  the terms under which a person is entitled to a
   8-18  refund; and
   8-19              (3)  the method by which the amount of the refund is
   8-20  calculated.
   8-21        (b)  The person named in the contract is entitled to a refund
   8-22  following termination of a prepaid tuition contract.
   8-23        (c)  The board shall determine the method by which the amount
   8-24  of the refund is calculated.
   8-25        Sec. 54.633.  PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS
   8-26  FOR NEEDY STUDENTS.  (a)  To the extent money is available, the
   8-27  board may award a prepaid higher education tuition scholarship to a
   8-28  student who meets economic and academic requirements adopted by the
   8-29  board by rule.
   8-30        (b)  A scholarship awarded under this section terminates if
   8-31  the student to whom the scholarship is awarded is:
   8-32              (1)  convicted of, or adjudicated as having engaged in
   8-33  delinquent conduct constituting, an offense under Chapter 481,
   8-34  Health and Safety Code; or
   8-35              (2)  convicted of, or adjudicated as having engaged in
   8-36  delinquent conduct constituting, a felony or Class A misdemeanor.
   8-37        (c)  The board shall ensure that each region of the state is
   8-38  equitably represented in the awarding of scholarships under this
   8-39  section.
   8-40        (d)  Scholarships under this section are funded by the
   8-41  private sector.
   8-42        (e)  The board may establish a direct-support organization
   8-43  under the Texas Non-Profit Corporation Act (Article 1396-1.01 et
   8-44  seq., Vernon's Texas Civil Statutes) to:
   8-45              (1)  receive, hold, invest, and administer money,
   8-46  gifts, grants, loans, or other property for or on behalf of the
   8-47  program; and
   8-48              (2)  purchase scholarships under this section.
   8-49        (f)  The board of directors of the direct-support
   8-50  organization consists of:
   8-51              (1)  the comptroller;
   8-52              (2)  a member appointed by the governor with the advice
   8-53  and consent of the senate; and
   8-54              (3)  three members appointed jointly by the comptroller
   8-55  and the member appointed by the governor.
   8-56        (g)  The board must certify that the direct-support
   8-57  organization operates in a manner consistent with the goals of this
   8-58  state and in the best interests of this state.
   8-59        (h)  The board may contract with an independent certified
   8-60  public accountant to annually audit the direct-support organization
   8-61  under rules adopted by the board.  The board shall submit the audit
   8-62  to the comptroller, governor, lieutenant governor, speaker of the
   8-63  house of representatives, Legislative Budget Board, Legislative
   8-64  Audit Committee, state auditor, and Texas Higher Education
   8-65  Coordinating Board.  The comptroller or state auditor may require
   8-66  the direct-support organization or independent certified public
   8-67  accountant to provide additional information relating to the
   8-68  operation of the organization.
   8-69        (i)  The identity of a donor under this section who desires
   8-70  to remain anonymous and the records of the direct-support
    9-1  organization, other than the records disclosed under Subsection
    9-2  (h), are confidential.
    9-3        Sec. 54.634.  ESTABLISHMENT OF FUND.  (a)  The Texas tomorrow
    9-4  fund is outside the state treasury.  The fund consists of:
    9-5              (1)  state appropriations for purposes of the fund;
    9-6              (2)  money acquired from other governmental or private
    9-7  sources;
    9-8              (3)  money paid under prepaid tuition contracts; and
    9-9              (4)  the income from money deposited in the fund.
   9-10        (b)  The board shall administer the assets of the fund.  The
   9-11  board is the trustee of the fund's assets.
   9-12        (c)  The board may:
   9-13              (1)  segregate contributions and payments to the fund
   9-14  into various accounts; and
   9-15              (2)  acquire, hold, manage, purchase, sell, assign,
   9-16  trade, transfer, and dispose of any security, evidence of
   9-17  indebtedness, or other investment in which the fund's assets may be
   9-18  invested.
   9-19        Sec. 54.635.  STATE TREASURER.  (a)  Except as provided by
   9-20  Subsections (d) and (e), the state treasurer is the custodian of
   9-21  the assets of the fund.
   9-22        (b)  The state treasurer shall pay money from the fund on a
   9-23  warrant drawn by the comptroller supported only on a voucher signed
   9-24  by the comptroller or the comptroller's authorized representative.
   9-25        (c)  The state treasurer annually shall furnish to the board
   9-26  a sworn statement of the amount of the fund's assets in the
   9-27  treasurer's custody.
   9-28        (d)  The board may select one or more commercial banks,
   9-29  depository trust companies, or other entities to serve as custodian
   9-30  of all or part of the fund's assets.
   9-31        (e)  If the office of the state treasurer is abolished, the
   9-32  comptroller is the custodian of the assets of the fund.
   9-33        Sec. 54.636.  INVESTMENT OF FUND ASSETS.  (a)  The board
   9-34  shall invest the assets of the fund.
   9-35        (b)  The board may contract with private professional
   9-36  investment managers to assist the board in investing the assets of
   9-37  the fund.
   9-38        (c)  The board shall develop written investment objectives
   9-39  concerning the investment of the assets of the fund.  The
   9-40  objectives may address desired rates of return, risks involved,
   9-41  investment time frames, and any other relevant considerations.
   9-42        (d)  The comptroller shall develop a comprehensive plan for
   9-43  the investment of the assets of the fund consistent with the
   9-44  objectives developed by the board under Subsection (c).  The plan
   9-45  shall specify the policies under which the board shall invest the
   9-46  assets of the fund.  The board must approve the plan.
   9-47        (e)  The board shall invest the assets of the fund in
   9-48  accordance with the Public Funds Investment Act (Subchapter A,
   9-49  Chapter 2256, Government Code).
   9-50        Sec. 54.637.  USE OF FUND ASSETS.  The assets of the fund may
   9-51  be used only to:
   9-52              (1)  pay the costs of program administration and
   9-53  operations;
   9-54              (2)  make payments to institutions of higher education
   9-55  or private or independent institutions of higher education on
   9-56  behalf of beneficiaries; and
   9-57              (3)  make refunds under prepaid tuition contracts.
   9-58        Sec. 54.638.  REQUEST OF RULINGS FROM INTERNAL REVENUE
   9-59  SERVICE AND SECURITIES AND EXCHANGE COMMISSION.  (a)  The board
   9-60  shall request rulings from:
   9-61              (1)  the Internal Revenue Service regarding the tax
   9-62  consequences to purchasers and beneficiaries of participating in
   9-63  the program; and
   9-64              (2)  the Securities and Exchange Commission regarding
   9-65  the application of federal securities laws to the fund.
   9-66        (b)  The board shall inform a purchaser of the status of the
   9-67  requests under Subsection (a) before the purchaser enters into a
   9-68  prepaid tuition contract.
   9-69        Sec. 54.6385.  EXEMPTION FROM SECURITIES LAWS.  The
   9-70  registration requirements of The Securities Act (Article 581-1 et
   10-1  seq., Vernon's Texas Civil Statutes) do not apply to the sale of a
   10-2  prepaid tuition contract by the board or by a registered securities
   10-3  dealer.
   10-4        Sec. 54.639.  EXEMPTION FROM CREDITORS' CLAIMS.  Money in the
   10-5  fund is exempt from claims of creditors of a purchaser or
   10-6  beneficiary.
   10-7        Sec. 54.640.  ACTUARIAL SOUNDNESS OF FUND.  (a)  The board
   10-8  shall administer the fund in a manner that is sufficiently
   10-9  actuarially sound to pay the costs of program administration and
  10-10  operations and meet the obligations of the program.
  10-11        (b)  The board shall annually evaluate the actuarial
  10-12  soundness of the fund.
  10-13        (c)  The board may adjust the terms of subsequent prepaid
  10-14  tuition contracts as necessary to ensure the actuarial soundness of
  10-15  the fund.
  10-16        Sec. 54.641.  STATEMENT REGARDING STATUS OF PREPAID TUITION
  10-17  CONTRACT.  (a)  Not later than December 1 of each year, the board
  10-18  shall furnish without charge to each purchaser a statement of:
  10-19              (1)  the amount paid by the purchaser under the prepaid
  10-20  tuition contract;
  10-21              (2)  the number of credit hours originally covered by
  10-22  the contract;
  10-23              (3)  the number of credit hours remaining under the
  10-24  contract; and
  10-25              (4)  any other information the board determines by rule
  10-26  is necessary or appropriate.
  10-27        (b)  The board shall furnish a statement complying with
  10-28  Subsection (a) to a purchaser or beneficiary on written request.
  10-29  The board may charge a reasonable fee for each statement furnished
  10-30  under this subsection.
  10-31        Sec. 54.642.  REPORTS.  (a)  Not later than December 1 of
  10-32  each year, the board shall submit to the governor, lieutenant
  10-33  governor, speaker of the house of representatives, Legislative
  10-34  Budget Board, Legislative Audit Committee, state auditor, and Texas
  10-35  Higher Education Coordinating Board a report including:
  10-36              (1)  the board's fiscal transactions during the
  10-37  preceding fiscal year;
  10-38              (2)  the market and book value of the fund as of the
  10-39  end of the preceding fiscal year;
  10-40              (3)  the asset allocations of the fund expressed in
  10-41  percentages of stocks, fixed income, cash, or other financial
  10-42  investments;
  10-43              (4)  the rate of return on the investment of the fund's
  10-44  assets during the preceding fiscal year; and
  10-45              (5)  an actuarial valuation of the assets and
  10-46  liabilities of the program, including the extent to which the
  10-47  program's liabilities are unfunded.
  10-48        (b)  The board shall make the report described by Subsection
  10-49  (a) available to purchasers of prepaid tuition contracts.
  10-50        (c)  Not later than December 1 of each year, the board shall
  10-51  provide to the Texas Higher Education Coordinating Board complete
  10-52  prepaid tuition contract sales information, including projected
  10-53  enrollments of beneficiaries at institutions of higher education.
  10-54        Sec. 54.643.  CONFIDENTIALITY.  (a)  Records in the custody
  10-55  of the board relating to the participation of specific purchasers
  10-56  and beneficiaries in the program are confidential.
  10-57        (b)  Notwithstanding Subsection (a), the board may release
  10-58  information described by that subsection to an institution of
  10-59  higher education in which a beneficiary may enroll or is enrolled.
  10-60  The institution of higher education shall keep the information
  10-61  confidential.
  10-62        SECTION 2.  (a)  As soon as possible on or after the
  10-63  effective date of this Act, the governor and lieutenant governor
  10-64  shall appoint the members of the Prepaid Higher Education Tuition
  10-65  Board appointed by those officers.  In making the appointments, the
  10-66  governor shall designate one member for a term expiring February 1,
  10-67  1997, and one member for a term expiring February 1, 1999.  In
  10-68  making the appointments, the lieutenant governor shall designate
  10-69  one member for a term expiring February 1, 1997, one member
  10-70  appointed from a list of persons recommended by the speaker of the
   11-1  house of representatives for a term expiring February 1, 1999, and
   11-2  two members for terms expiring February 1, 2001, one of whom must
   11-3  be appointed from a list of persons recommended by the speaker of
   11-4  the house of representatives.
   11-5        (b)  The legislature may appropriate to the board an amount
   11-6  sufficient to cover the board's administrative costs for the state
   11-7  fiscal biennium ending August 31, 1997.
   11-8        (c)  The board shall be prepared to enter into a prepaid
   11-9  tuition contract not later than the 90th day after the date all the
  11-10  members are appointed or January 1, 1996, whichever occurs later.
  11-11        SECTION 3.  This Act takes effect September 1, 1995.
  11-12        SECTION 4.  The importance of this legislation and the
  11-13  crowded condition of the calendars in both houses create an
  11-14  emergency and an imperative public necessity that the
  11-15  constitutional rule requiring bills to be read on three several
  11-16  days in each house be suspended, and this rule is hereby suspended.
  11-17                               * * * * *