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 * * * * *