By Barrientos S.B. No. 1539 74R3068 SMH-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the establishment of a prepaid higher education tuition 1-3 program. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter 54, Education Code, is amended by adding 1-6 Subchapter F to read as follows: 1-7 SUBCHAPTER F. PREPAID HIGHER EDUCATION TUITION PROGRAM 1-8 Sec. 54.601. DEFINITIONS. In this subchapter: 1-9 (1) "Beneficiary" means a person who is entitled to 1-10 receive benefits under a prepaid tuition contract. 1-11 (2) "Board" means the Prepaid Higher Education Tuition 1-12 Board. 1-13 (3) "Fund" means the prepaid higher education tuition 1-14 trust fund. 1-15 (4) "Institution of higher education" has the meaning 1-16 assigned by Section 61.003. 1-17 (5) "Prepaid tuition contract" means a contract 1-18 entered into under this subchapter by the board and a purchaser to 1-19 provide for the payment of higher education tuition and required 1-20 fees of a beneficiary. 1-21 (6) "Private or independent institution of higher 1-22 education" has the meaning assigned by Section 61.003. 1-23 (7) "Program" means the prepaid higher education 1-24 tuition program. 2-1 (8) "Public junior college" has the meaning assigned 2-2 by Section 61.003. 2-3 (9) "Public senior college or university" has the 2-4 meaning assigned by Section 61.003. 2-5 (10) "Purchaser" means a person who is obligated to 2-6 make payments under a prepaid tuition contract. 2-7 Sec. 54.602. ESTABLISHMENT OF BOARD; FUNCTION. (a) The 2-8 Prepaid Higher Education Tuition Board is an agency of the state. 2-9 The board shall maintain its office in Austin. 2-10 (b) The board shall administer the program. 2-11 Sec. 54.603. SUNSET PROVISION. (a) The Prepaid Higher 2-12 Education Tuition Board is subject to Chapter 325, Government Code 2-13 (Texas Sunset Act). Unless continued in existence as provided by 2-14 that chapter, the board is abolished and this subchapter expires 2-15 September 1, 2007. 2-16 (b) If the board is abolished and this subchapter expires as 2-17 provided by Subsection (a), the board shall refund to the purchaser 2-18 of each prepaid tuition contract the amount provided by Section 2-19 54.630(c). 2-20 Sec. 54.604. MEMBERS OF BOARD; APPOINTMENT; TERMS OF OFFICE. 2-21 (a) The board consists of: 2-22 (1) the comptroller; 2-23 (2) two members appointed by the governor with the 2-24 advice and consent of the senate; and 2-25 (3) four members appointed by the lieutenant governor, 2-26 at least two of whom must be appointed from a list of persons 2-27 recommended by the speaker of the house of representatives. 3-1 (b) The appointed members must possess knowledge, skill, and 3-2 experience in higher education, business, or finance. 3-3 (c) The appointed members serve for staggered six-year 3-4 terms. The terms of one-third of the appointed members expire on 3-5 February 1 of each odd-numbered year. 3-6 Sec. 54.605. DUTY IN RECOMMENDING, MAKING, OR CONFIRMING 3-7 APPOINTMENTS. (a) In recommending, making, or confirming 3-8 appointments to the board, the governor, lieutenant governor, 3-9 speaker of the house of representatives, and senate shall ensure 3-10 that each appointee has the background and experience suitable for 3-11 performing the statutory responsibilities of a member of the board. 3-12 (b) Appointments to the board shall be made without regard 3-13 to the race, color, disability, sex, religion, age, or national 3-14 origin of the appointees. 3-15 Sec. 54.606. RESTRICTIONS ON BOARD APPOINTMENT, MEMBERSHIP, 3-16 AND EMPLOYMENT. (a) A person is not eligible for appointment as a 3-17 member of the board if the person or the person's spouse: 3-18 (1) is employed by or participates in the management 3-19 of a business entity receiving funds from the board; 3-20 (2) owns or controls, directly or indirectly, more 3-21 than a 10-percent interest in a business entity receiving funds 3-22 from the board; or 3-23 (3) uses or receives a substantial amount of tangible 3-24 goods, services, or funds from the board, other than compensation 3-25 or reimbursement authorized by law for board membership, 3-26 attendance, or expenses. 3-27 (b) An officer, employee, or paid consultant of a Texas 4-1 trade association in the field of higher education may not be a 4-2 member or employee of the board who is exempt from the state's 4-3 position classification plan or is compensated at or above the 4-4 amount prescribed by the General Appropriations Act for step 1, 4-5 salary group 17, of the position classification salary schedule. 4-6 (c) A person who is the spouse of an officer, manager, or 4-7 paid consultant of a Texas trade association in the field of higher 4-8 education may not be a board member and may not be a board employee 4-9 who is exempt from the state's position classification plan or is 4-10 compensated at or above the amount prescribed by the General 4-11 Appropriations Act for step 1, salary group 17, of the position 4-12 classification salary schedule. 4-13 (d) A person may not serve as a member of the board or act 4-14 as the general counsel to the board if the person is required to 4-15 register as a lobbyist under Chapter 305, Government Code, because 4-16 of the person's activities for compensation on behalf of a 4-17 profession related to the operation of the board. 4-18 (e) For the purposes of this section, a Texas trade 4-19 association is a nonprofit, cooperative, and voluntarily joined 4-20 association of business or professional competitors in this state 4-21 designed to assist its members and its industry or profession in 4-22 dealing with mutual business or professional problems and in 4-23 promoting their common interest. 4-24 Sec. 54.607. REMOVAL OF BOARD MEMBER. (a) It is a ground 4-25 for removal from the board if a member: 4-26 (1) violates a prohibition established by Section 4-27 54.606; 5-1 (2) cannot because of illness or disability discharge 5-2 the member's duties for a substantial part of the term for which 5-3 the member is appointed; or 5-4 (3) is absent from more than half of the regularly 5-5 scheduled board meetings that the member is eligible to attend 5-6 during a calendar year unless the absence is excused by majority 5-7 vote of the board. 5-8 (b) The validity of an action of the board is not affected 5-9 by the fact that the action was taken when a ground for removal of 5-10 a board member existed. 5-11 (c) If the executive director has knowledge that a potential 5-12 ground for removal exists, the executive director shall notify the 5-13 presiding officer of the board of the potential ground. The 5-14 presiding officer shall then notify the governor and the attorney 5-15 general that a potential ground for removal exists. If the 5-16 potential ground for removal involves the presiding officer, the 5-17 executive director shall notify the next highest officer of the 5-18 board, who shall notify the governor and the attorney general that 5-19 a potential ground for removal exists. 5-20 Sec. 54.608. TRAINING OF BOARD MEMBERS. (a) Before a 5-21 member of the board may assume the member's duties and before an 5-22 appointed member may be confirmed by the senate, the member must 5-23 complete at least one course of the training program established 5-24 under this section. 5-25 (b) A training program established under this section shall 5-26 provide information to the member regarding: 5-27 (1) the enabling legislation that created the board; 6-1 (2) the programs operated by the board; 6-2 (3) the role and functions of the board; 6-3 (4) the rules of the board, with an emphasis on the 6-4 rules that relate to disciplinary and investigatory authority; 6-5 (5) the current budget for the board; 6-6 (6) the results of the most recent formal audit of the 6-7 board; 6-8 (7) the requirements of the: 6-9 (A) open meetings law, Chapter 551, Government 6-10 Code; 6-11 (B) open records law, Chapter 552, Government 6-12 Code; and 6-13 (C) administrative procedure law, Chapter 2001, 6-14 Government Code; 6-15 (8) the requirements of the conflict of interest laws 6-16 and other laws relating to public officials; and 6-17 (9) any applicable ethics policies adopted by the 6-18 board or the Texas Ethics Commission. 6-19 Sec. 54.609. BOARD OFFICERS. (a) The comptroller serves as 6-20 the presiding officer of the board. 6-21 (b) The board shall appoint a secretary of the board whose 6-22 duties may be prescribed by law and by the board. 6-23 Sec. 54.610. COMPENSATION AND EXPENSES OF APPOINTED BOARD 6-24 MEMBERS. Appointed members of the board shall serve without pay 6-25 but shall be reimbursed for their actual expenses incurred in 6-26 attending meetings of the board or in performing other work of the 6-27 board when that work is approved by the presiding officer of the 7-1 board. 7-2 Sec. 54.611. MEETINGS. (a) The board shall hold regular 7-3 quarterly meetings in the city of Austin and other meetings at 7-4 places and times scheduled by the board in formal sessions and 7-5 called by the presiding officer. 7-6 (b) The board shall develop and implement policies that 7-7 provide the public with a reasonable opportunity to appear before 7-8 the board and to speak on any issue under the jurisdiction of the 7-9 board. 7-10 (c) Minutes of all meetings shall be available in the 7-11 board's office for public inspection. 7-12 Sec. 54.612. APPLICABILITY OF OPEN MEETINGS LAW AND 7-13 ADMINISTRATIVE PROCEDURE LAW. The board is subject to the open 7-14 meetings law, Chapter 551, Government Code, and the administrative 7-15 procedure law, Chapter 2001, Government Code. 7-16 Sec. 54.613. EXECUTIVE DIRECTOR. (a) The board shall 7-17 appoint an executive director, who shall select and supervise the 7-18 board's staff and perform other duties delegated to the executive 7-19 director by the board. The executive director serves at the 7-20 pleasure of the board. 7-21 (b) The executive director must be a person of high 7-22 professional qualifications having a thorough background by 7-23 training and experience in the fields of higher education, 7-24 business, or finance, and must possess any other qualifications the 7-25 board prescribes. 7-26 (c) The executive director shall develop an intra-agency 7-27 career ladder program that addresses opportunities for mobility and 8-1 advancement for employees of the board. The program shall require 8-2 intra-agency postings of all positions concurrently with any public 8-3 posting. 8-4 (d) The executive director shall develop a system of annual 8-5 performance evaluations based on documented employee performance. 8-6 All merit pay for board employees must be based on the system 8-7 established under this subsection. 8-8 (e) The executive director shall prepare and maintain a 8-9 written policy statement to assure implementation of a program of 8-10 equal employment opportunity under which all personnel transactions 8-11 are made without regard to race, color, disability, sex, religion, 8-12 age, or national origin. The policy statement must include: 8-13 (1) personnel policies, including policies relating to 8-14 recruitment, evaluation, selection, appointment, training, and 8-15 promotion of personnel that are in compliance with requirements of 8-16 Chapter 21, Labor Code; 8-17 (2) a comprehensive analysis of the board's workforce 8-18 that meets federal and state guidelines; 8-19 (3) procedures by which a determination can be made of 8-20 the extent of underuse in the board's workforce of all persons for 8-21 whom federal or state guidelines encourage a more equitable 8-22 balance; and 8-23 (4) reasonable methods to appropriately address those 8-24 areas of underuse. 8-25 (f) A policy statement prepared under Subsection (e) must 8-26 cover an annual period, be updated annually and reviewed by the 8-27 Texas Commission on Human Rights for compliance with Subsection 9-1 (e)(1), and be filed with the governor's office. 9-2 (g) The governor's office shall deliver a biennial report to 9-3 the legislature based on the information received under Subsection 9-4 (f). The report may be made separately or as a part of other 9-5 biennial reports made to the legislature. 9-6 (h) The executive director shall provide to members of the 9-7 board and to board employees, as often as necessary, information 9-8 regarding their qualifications for office or employment under this 9-9 subchapter and their responsibilities under applicable laws 9-10 relating to standards of conduct for state officers or employees. 9-11 (i) The board shall develop and implement policies that 9-12 clearly separate the policy-making responsibilities of the board 9-13 and the management responsibilities of the executive director and 9-14 the staff of the board. 9-15 Sec. 54.614. PROGRAM AND FACILITY ACCESSIBILITY. (a) The 9-16 board shall comply with federal and state laws related to program 9-17 and facility accessibility. 9-18 (b) The board shall prepare and maintain a written plan that 9-19 describes how a person who does not speak English can be provided 9-20 reasonable access to the board's programs and services. 9-21 Sec. 54.615. PUBLIC INTEREST INFORMATION AND COMPLAINTS. 9-22 (a) The board shall prepare information of public interest 9-23 describing the functions of the board and the board's procedures by 9-24 which complaints are filed with and resolved by the board. The 9-25 board shall make the information available to the public and 9-26 appropriate state agencies. 9-27 (b) The board by rule shall establish methods by which 10-1 consumers and service recipients are notified of the name, mailing 10-2 address, and telephone number of the board for the purpose of 10-3 directing complaints to the board. 10-4 (c) The board shall keep information about each complaint 10-5 filed with the board. The information shall include: 10-6 (1) the date the complaint is received; 10-7 (2) the name of the complainant; 10-8 (3) the subject matter of the complaint; 10-9 (4) a record of all persons contacted in relation to 10-10 the complaint; 10-11 (5) a summary of the results of the review or 10-12 investigation of the complaint; and 10-13 (6) for complaints for which the board took no action, 10-14 an explanation of the reason the complaint was closed without 10-15 action. 10-16 (d) The board shall keep a file for each written complaint 10-17 filed with the board that the board has authority to resolve. The 10-18 board shall provide to the person filing the complaint and the 10-19 persons or entities complained about the board's policies and 10-20 procedures pertaining to complaint investigation and resolution. 10-21 The board, at least quarterly and until final disposition of the 10-22 complaint, shall notify the person filing the complaint and the 10-23 persons or entities complained about of the status of the complaint 10-24 unless the notice would jeopardize an undercover investigation. 10-25 Sec. 54.616. POWERS OF BOARD. (a) The board has the powers 10-26 necessary or proper to carry out this subchapter. 10-27 (b) The board may: 11-1 (1) adopt an official seal; 11-2 (2) adopt rules to implement this subchapter; 11-3 (3) sue and be sued; 11-4 (4) enter into contracts and other necessary 11-5 instruments; 11-6 (5) enter into agreements or other transactions with 11-7 the United States, state agencies, including institutions of higher 11-8 education, and local governments; 11-9 (6) appear in its own behalf before governmental 11-10 agencies; 11-11 (7) contract for necessary goods and services, employ 11-12 necessary personnel, and engage the services of private 11-13 consultants, actuaries, managers, legal counsel, and auditors for 11-14 administrative or technical assistance; 11-15 (8) solicit and accept gifts, grants, loans, and other 11-16 aid from any source or participate in any other way in any 11-17 government program to carry out this subchapter; 11-18 (9) impose administrative fees; 11-19 (10) contract with a person to market the program; 11-20 (11) purchase liability insurance covering the board 11-21 and employees and agents of the board; and 11-22 (12) establish other policies, procedures, and 11-23 eligibility criteria to implement this subchapter. 11-24 Sec. 54.617. PREPAID HIGHER EDUCATION TUITION PROGRAM. (a) 11-25 Under the program, a purchaser may enter into a prepaid tuition 11-26 contract with the board under which the purchaser agrees to prepay 11-27 the tuition and required fees for a beneficiary to attend an 12-1 institution of higher education. 12-2 (b) The board shall deposit the money paid under a prepaid 12-3 tuition contract in the fund, invest the money and credit the 12-4 income earned to the fund, and apply money in the fund to the 12-5 tuition and required fees of the institution of higher education in 12-6 which the beneficiary enrolls as provided by the prepaid tuition 12-7 contract. 12-8 (c) If there is not enough money in the fund to pay the 12-9 tuition and required fees of the institution of higher education in 12-10 which a beneficiary enrolls as provided by the prepaid tuition 12-11 contract, the legislature shall appropriate to the fund the amount 12-12 necessary for the board to pay the tuition and required fees of the 12-13 institution. 12-14 (d) If the beneficiary enrolls in a private or independent 12-15 institution of higher education, the board shall pay the 12-16 institution the tuition and required fees the board would have paid 12-17 had the student enrolled in an institution of higher education 12-18 covered by the plan selected in the prepaid tuition contract. The 12-19 purchaser must pay the private or independent institution of higher 12-20 education the amount by which the tuition and required fees of the 12-21 institution exceed the tuition and required fees paid by the board. 12-22 Sec. 54.618. PREPAID TUITION CONTRACT. (a) The board may 12-23 contract with a purchaser for the purchaser to prepay the tuition 12-24 and required fees for a beneficiary to attend an institution of 12-25 higher education to which the beneficiary is admitted as a student. 12-26 (b) The board shall adopt a form for a prepaid tuition 12-27 contract to be used by the board and purchasers. 13-1 (c) A prepaid tuition contract must: 13-2 (1) specify the amount and number of payments required 13-3 from the purchaser on behalf of the beneficiary; 13-4 (2) specify the terms under which the purchaser shall 13-5 make payments, including the date on which each payment is due; 13-6 (3) specify the consequences of default; 13-7 (4) specify the name and date of birth of the 13-8 beneficiary of the contract and the terms under which another 13-9 person may be substituted as the beneficiary; 13-10 (5) specify the number of credit hours contracted by 13-11 the purchaser; 13-12 (6) specify the type of plan toward which the 13-13 contracted credit hours shall be applied; 13-14 (7) contain an assumption of a contractual obligation 13-15 by the board to the beneficiary to provide for a specified number 13-16 of credit hours of undergraduate instruction at an institution of 13-17 higher education, not to exceed the typical number of credit hours 13-18 required for the degree that corresponds to the plan purchased on 13-19 behalf of the beneficiary; 13-20 (8) specify the date the beneficiary is projected to 13-21 graduate from the institution of higher education; and 13-22 (9) contain any other provisions the board considers 13-23 necessary or appropriate. 13-24 (d) A prepaid tuition contract does not cover the cost of 13-25 laboratory fees charged for specific courses. 13-26 Sec. 54.619. BENEFICIARY. (a) The beneficiary of a prepaid 13-27 tuition contract must be younger than 18 years of age at the time 14-1 the purchaser enters into the contract and must be: 14-2 (1) a resident of this state at the time the purchaser 14-3 enters into the contract; or 14-4 (2) a nonresident who is the child of a parent who is 14-5 a resident of this state at the time that parent enters into the 14-6 contract. 14-7 (b) The board may require a reasonable period of residence 14-8 in this state for a beneficiary or the parent of a beneficiary. 14-9 (c) A beneficiary is considered a resident for purposes of 14-10 tuition regardless of the beneficiary's residence on the date of 14-11 enrollment. 14-12 Sec. 54.620. TYPES OF PLANS; RESTRICTION ON NUMBER OF 14-13 PARTICIPANTS. (a) The board shall make prepaid tuition contracts 14-14 available for the: 14-15 (1) junior college plan; 14-16 (2) senior college plan; and 14-17 (3) junior-senior college plan. 14-18 (b) The board may restrict the number of participants in the 14-19 junior college plan, senior college plan, or junior-senior college 14-20 plan. 14-21 Sec. 54.621. JUNIOR COLLEGE PLAN. (a) Through the junior 14-22 college plan, a prepaid tuition contract shall provide prepaid 14-23 tuition and required fees for the beneficiary to attend a public 14-24 junior college for a specified number of undergraduate credit hours 14-25 not to exceed the typical number of hours required for a 14-26 certificate or an associate degree awarded by a public junior 14-27 college. 15-1 (b) The cost of participation in the junior college plan 15-2 shall be based on: 15-3 (1) the current tuition and required fees of public 15-4 junior colleges; 15-5 (2) the projected rate of inflation of tuition and 15-6 required fees of public junior colleges; and 15-7 (3) the number of years expected to elapse between the 15-8 purchase of the plan on behalf of a beneficiary and the 15-9 beneficiary's exercise of the benefits provided in the plan. 15-10 Sec. 54.622. SENIOR COLLEGE PLAN. (a) Through the senior 15-11 college plan, a prepaid tuition contract shall provide prepaid 15-12 tuition and required fees for the beneficiary to attend a public 15-13 senior college or university for a specified number of 15-14 undergraduate credit hours not to exceed the typical number of 15-15 hours required for a baccalaureate degree awarded by a public 15-16 senior college or university. 15-17 (b) The cost of participation in the senior college plan 15-18 shall be based on: 15-19 (1) the current tuition and required fees of public 15-20 senior colleges or universities; 15-21 (2) the projected rate of inflation of tuition and 15-22 required fees of public senior colleges or universities; and 15-23 (3) the number of years expected to elapse between the 15-24 purchase of the plan on behalf of a beneficiary and the 15-25 beneficiary's exercise of the benefits provided in the plan. 15-26 Sec. 54.623. JUNIOR-SENIOR COLLEGE PLAN. (a) Through the 15-27 junior-senior college plan, a prepaid tuition contract shall 16-1 provide prepaid tuition and required fees for the beneficiary to 16-2 attend: 16-3 (1) a public junior college for a specified number of 16-4 undergraduate credit hours not to exceed the typical number of 16-5 hours required for a person to receive a certificate or associate 16-6 degree awarded by a public junior college; and 16-7 (2) a public senior college or university for a 16-8 specified number of credit hours not to exceed the typical number 16-9 of additional hours required for the person to receive a 16-10 baccalaureate degree awarded by a public senior college or 16-11 university. 16-12 (b) The cost of participation in the junior-senior college 16-13 plan shall be based on: 16-14 (1) the current tuition and required fees of public 16-15 junior colleges and public senior colleges or universities; 16-16 (2) the projected rate of inflation of tuition and 16-17 required fees of public junior colleges and public senior colleges 16-18 or universities; and 16-19 (3) the number of years expected to elapse between the 16-20 purchase of the plan on behalf of a beneficiary and the 16-21 beneficiary's exercise of the benefits provided in the plan. 16-22 Sec. 54.624. CONTRACT PAYMENT. (a) The board may provide 16-23 for the receipt of payments under prepaid tuition contracts in lump 16-24 sums or installment payments. 16-25 (b) A purchaser may make payments under a prepaid tuition 16-26 contract by electronic funds transfer. 16-27 (c) An employee of the state or a political subdivision of 17-1 the state may make payments under a prepaid tuition contract by 17-2 payroll deductions made by the appropriate officer of the state or 17-3 political subdivision. 17-4 (d) The board may impose a fee for a late payment under a 17-5 prepaid tuition contract. 17-6 Sec. 54.625. CHANGE OF BENEFICIARY. (a) The purchaser of a 17-7 prepaid tuition contract may designate a sibling, step-sibling, or 17-8 half-sibling of the original beneficiary as the beneficiary in 17-9 place of the original beneficiary if the sibling, step-sibling, or 17-10 half-sibling meets the requirements of a beneficiary on the date 17-11 the designation is changed. 17-12 (b) The board may adjust the terms of the contract so that 17-13 the purchaser is required to pay the amount the purchaser would 17-14 have been required to pay had the purchaser originally designated 17-15 the new beneficiary as the beneficiary, taking into account any 17-16 payments made before the date the designation is changed. 17-17 Sec. 54.626. CONVERSION TO ANOTHER PLAN. (a) A purchaser 17-18 may convert a prepaid tuition contract from one plan to another 17-19 plan. 17-20 (b) The board may adjust the terms of the contract so that 17-21 the purchaser is required to pay the amount required under the plan 17-22 to which the contract is converted, taking into account any 17-23 payments made before the date the contract is converted. 17-24 Sec. 54.627. VERIFICATION UNDER OATH. The board may require 17-25 a purchaser to verify under oath a request to: 17-26 (1) change a beneficiary; 17-27 (2) convert a contract to another plan; or 18-1 (3) terminate a contract. 18-2 Sec. 54.628. PROMISE OR GUARANTEE OF ADMISSION. (a) Except 18-3 as provided by Subsection (b), this subchapter is not a promise or 18-4 guarantee that a beneficiary will be: 18-5 (1) admitted to any institution of higher education; 18-6 (2) admitted to a particular institution of higher 18-7 education; 18-8 (3) allowed to continue enrollment at an institution 18-9 of higher education after admission; or 18-10 (4) graduated from an institution of higher education. 18-11 (b) A beneficiary may not be denied admission to a public 18-12 junior college on academic grounds. 18-13 Sec. 54.629. CONTRACT TERMINATION. (a) A prepaid tuition 18-14 contract shall specify: 18-15 (1) the name of any person who may terminate the 18-16 contract; and 18-17 (2) the terms under which the contract may be 18-18 terminated. 18-19 (b) A prepaid tuition contract terminates if: 18-20 (1) the purchaser: 18-21 (A) gives notice of termination; or 18-22 (B) defaults on the contract; or 18-23 (2) the beneficiary: 18-24 (A) dies; 18-25 (B) becomes permanently and totally disabled; 18-26 (C) is denied admission by each institution of 18-27 higher education to which the beneficiary applies; or 19-1 (D) enrolls in an institution of higher 19-2 education but does not graduate from the institution on or before 19-3 the 10th anniversary of the projected graduation date, not counting 19-4 time spent by the beneficiary as an active duty member of the 19-5 United States armed services. 19-6 Sec. 54.630. REFUND. (a) A prepaid tuition contract shall 19-7 specify: 19-8 (1) the name of the person entitled to any refund if 19-9 the contract is terminated; and 19-10 (2) the terms under which a person is entitled to a 19-11 refund. 19-12 (b) The person named in the contract is entitled to a refund 19-13 following termination of a prepaid tuition contract. 19-14 (c) The amount of the refund is the sum of the payments made 19-15 under the prepaid tuition contract, together with five percent 19-16 interest on each payment accruing from the date the payment is 19-17 received to the date the refund is paid, multiplied by a fraction, 19-18 the numerator of which is the number of credit hours remaining 19-19 under the contract and the denominator of which is the number of 19-20 credit hours originally covered by the contract. 19-21 Sec. 54.631. PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS 19-22 FOR NEEDY STUDENTS. (a) To the extent money is available, the 19-23 board may award a prepaid higher education tuition scholarship to a 19-24 student who meets economic and academic requirements adopted by the 19-25 board by rule. 19-26 (b) A scholarship awarded under this section terminates if 19-27 the student to whom the scholarship is awarded is: 20-1 (1) convicted of, or adjudicated as having engaged in 20-2 delinquent conduct constituting, an offense under Chapter 481, 20-3 Health and Safety Code; or 20-4 (2) convicted of, or adjudicated as having engaged in 20-5 delinquent conduct constituting, a felony or Class A misdemeanor. 20-6 (c) The board shall ensure that each region of the state is 20-7 equitably represented in the awarding of scholarships under this 20-8 section. 20-9 (d) Scholarships under this section are funded by the 20-10 private sector, the United States, and this state. The legislature 20-11 shall appropriate an amount for the scholarships equal to the 20-12 amount provided by the private sector and the United States. 20-13 Sec. 54.632. ESTABLISHMENT OF FUND. (a) The prepaid higher 20-14 education tuition trust fund is outside the state treasury. The 20-15 fund consists of: 20-16 (1) state appropriations for purposes of the fund; 20-17 (2) money acquired from other governmental or private 20-18 sources; 20-19 (3) money paid under prepaid tuition contracts; and 20-20 (4) the income from money deposited in the fund. 20-21 (b) The board shall administer the assets of the fund. The 20-22 board is the trustee of the fund's assets. 20-23 (c) The board may: 20-24 (1) segregate contributions and payments to the fund 20-25 into various accounts; 20-26 (2) acquire, hold, manage, purchase, sell, assign, 20-27 trade, transfer, and dispose of any security, evidence of 21-1 indebtedness, or other investment in which the fund's assets may be 21-2 invested; 21-3 (3) pay money in the fund to an institution of higher 21-4 education; and 21-5 (4) refund money in the fund to the person designated 21-6 by a prepaid tuition contract. 21-7 Sec. 54.633. STATE TREASURER. (a) Except as provided by 21-8 Subsection (d), the state treasurer is the custodian of the assets 21-9 of the fund. 21-10 (b) The state treasurer shall pay money from the fund on a 21-11 warrant drawn by the comptroller supported only on a voucher signed 21-12 by the comptroller and the executive director or their authorized 21-13 representatives. 21-14 (c) The state treasurer annually shall furnish to the board 21-15 a sworn statement of the amount of the fund's assets in the 21-16 treasurer's custody. 21-17 (d) The board may select one or more commercial banks, 21-18 depository trust companies, or other entities to serve as custodian 21-19 of all or part of the fund's assets. 21-20 Sec. 54.634. INVESTMENT OF FUND ASSETS. (a) The board 21-21 shall invest the assets of the fund. 21-22 (b) The board may contract with private professional 21-23 investment managers to assist the board in investing the assets of 21-24 the fund. 21-25 (c) The board shall develop written investment objectives 21-26 concerning the investment of assets of the fund. The objectives 21-27 may address desired rates of return, risks involved, investment 22-1 time frames, and any other relevant considerations. 22-2 (d) In investing the assets of the fund, the board shall 22-3 exercise the judgment and care, under the circumstances prevailing 22-4 at the time of the investment, that persons of ordinary prudence, 22-5 discretion, and intelligence exercise in the management of their 22-6 own affairs, not in speculation but when making a permanent 22-7 disposition of their money, considering the probable income from 22-8 the disposition and the probable safety of their capital. 22-9 Sec. 54.635. USE OF FUND ASSETS. The assets of the fund may 22-10 be used only to: 22-11 (1) pay the costs of program administration and 22-12 operations; 22-13 (2) make payments to institutions of higher education 22-14 on behalf of beneficiaries; and 22-15 (3) make refunds under prepaid tuition contracts. 22-16 Sec. 54.636. REQUEST OF RULINGS FROM INTERNAL REVENUE 22-17 SERVICE AND SECURITIES AND EXCHANGE COMMISSION. (a) The board 22-18 shall request rulings from: 22-19 (1) the Internal Revenue Service regarding the tax 22-20 consequences to purchasers and beneficiaries of participating in 22-21 the program; and 22-22 (2) the Securities and Exchange Commission regarding 22-23 the application of federal securities laws to the fund. 22-24 (b) The board shall inform a purchaser of the status of the 22-25 requests under Subsection (a) before the purchaser enters into a 22-26 prepaid tuition contract. 22-27 Sec. 54.637. EXEMPTION FROM CREDITORS' CLAIMS. Money in the 23-1 fund is exempt from claims of creditors of a purchaser or 23-2 beneficiary. 23-3 Sec. 54.638. ACTUARIAL SOUNDNESS OF FUND. (a) The board 23-4 shall administer the fund in a manner that is sufficiently 23-5 actuarially sound to meet the obligations of the program. 23-6 (b) The board shall annually evaluate the actuarial 23-7 soundness of the fund. 23-8 (c) The board may adjust the terms of subsequent prepaid 23-9 tuition contracts as necessary to ensure the actuarial soundness of 23-10 the fund. 23-11 Sec. 54.639. STATEMENT REGARDING STATUS OF PREPAID TUITION 23-12 CONTRACT. (a) Not later than December 1 of each year, the board 23-13 shall furnish without charge to each purchaser a statement of: 23-14 (1) the amount paid by the purchaser under the prepaid 23-15 tuition contract; 23-16 (2) the number of credit hours originally covered by 23-17 the contract; 23-18 (3) the number of credit hours remaining under the 23-19 contract; 23-20 (4) the amount of the refund to which the person 23-21 designated by the contract would be entitled if the contract were 23-22 terminated on the date of the statement; and 23-23 (5) any other information the board determines by rule 23-24 is necessary or appropriate. 23-25 (b) The board shall furnish a statement complying with 23-26 Subsection (a) to a purchaser or beneficiary on written request. 23-27 The board may charge a reasonable fee for each statement furnished 24-1 under this subsection. 24-2 Sec. 54.640. REPORTS. (a) Not later than December 1 of 24-3 each year, the board shall submit to the governor, lieutenant 24-4 governor, speaker of the house of representatives, Legislative 24-5 Budget Board, Legislative Audit Committee, state auditor, and Texas 24-6 Higher Education Coordinating Board a report including: 24-7 (1) the board's fiscal transactions during the 24-8 preceding fiscal year; 24-9 (2) the market and book value of the fund as of the 24-10 end of the preceding fiscal year; 24-11 (3) the asset allocations of the fund expressed in 24-12 percentages of stocks, fixed income, cash, or other financial 24-13 investments; 24-14 (4) the rate of return on the investment of the fund's 24-15 assets during the preceding fiscal year; and 24-16 (5) an actuarial valuation of the assets and 24-17 liabilities of the program, including the extent to which the 24-18 program's liabilities are unfunded. 24-19 (b) The board shall make the report described by Subsection 24-20 (a) available to purchasers of prepaid tuition contracts. 24-21 (c) Not later than December 1 of each year, the board shall 24-22 provide to the Texas Higher Education Coordinating Board complete 24-23 prepaid tuition contract sales information, including projected 24-24 enrollments of beneficiaries at institutions of higher education. 24-25 Sec. 54.641. CONFIDENTIALITY. (a) Records in the custody 24-26 of the board relating to the participation of specific purchasers 24-27 and beneficiaries in the program are confidential. 25-1 (b) Notwithstanding Subsection (a), the board may release 25-2 information described by that subsection to an institution of 25-3 higher education in which a beneficiary may enroll or is enrolled. 25-4 The institution of higher education shall keep the information 25-5 confidential. 25-6 SECTION 2. (a) As soon as possible on or after the 25-7 effective date of this Act, the governor and lieutenant governor 25-8 shall appoint the members of the Prepaid Higher Education Tuition 25-9 Board appointed by those officers. In making the appointments, the 25-10 governor shall designate one member for a term expiring February 1, 25-11 1997, and one member for a term expiring February 1, 1999. In 25-12 making the appointments, the lieutenant governor shall designate 25-13 one member for a term expiring February 1, 1997, one member 25-14 appointed from a list of persons recommended by the speaker of the 25-15 house of representatives for a term expiring February 1, 1999, and 25-16 two members for terms expiring February 1, 2001, one of whom must 25-17 be appointed from a list of persons recommended by the speaker of 25-18 the house of representatives. 25-19 (b) The legislature may appropriate to the board an amount 25-20 sufficient to cover the board's administrative costs for the state 25-21 fiscal biennium ending August 31, 1997. 25-22 (c) The board shall be prepared to enter into a prepaid 25-23 tuition contract not later than the 90th day after the date all the 25-24 members are appointed or January 1, 1996, whichever occurs later. 25-25 SECTION 3. This Act takes effect September 1, 1995. 25-26 SECTION 4. The importance of this legislation and the 25-27 crowded condition of the calendars in both houses create an 26-1 emergency and an imperative public necessity that the 26-2 constitutional rule requiring bills to be read on three several 26-3 days in each house be suspended, and this rule is hereby suspended.