1-1 AN ACT
1-2 relating to the prepaid higher education tuition program.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Sections 54.619(d) and (e), Education Code, are
1-5 amended to read as follows:
1-6 (d) If the beneficiary of a plan described by Section
1-7 54.6251 enrolls in an institution of higher education, the board
1-8 shall pay:
1-9 (1) to the institution the tuition and required fees
1-10 of the institution; and
1-11 (2) to the purchaser [beneficiary] the amount by which
1-12 the estimated average private tuition and required fees exceeds the
1-13 tuition and required fees of the institution.
1-14 (e) If the beneficiary of a plan described by Section
1-15 54.6251 enrolls in a private or independent institution of higher
1-16 education, the board shall pay:
1-17 (1) to the institution the lesser of:
1-18 (A) the tuition and required fees of the
1-19 institution; or
1-20 (B) the estimated average private tuition and
1-21 required fees; and
1-22 (2) to the purchaser [beneficiary] the amount by which
1-23 the estimated average private tuition and required fees exceeds the
1-24 tuition and required fees of the institution.
2-1 SECTION 2. Section 54.621, Education Code, is amended to
2-2 read as follows:
2-3 Sec. 54.621. BENEFICIARY. (a) The beneficiary of a prepaid
2-4 tuition contract must be younger than 18 years of age or 18 years
2-5 of age or older and enrolled in high school at the time the
2-6 purchaser enters into the contract and must be:
2-7 (1) a resident of this state at the time the purchaser
2-8 enters into the contract; or
2-9 (2) a nonresident who is the child of a parent who is
2-10 a resident of this state at the time that parent enters into the
2-11 contract.
2-12 (b) The board may require a reasonable period of residence
2-13 in this state for a beneficiary or the parent of a beneficiary.
2-14 (c) Notwithstanding Section 54.052(d), the tuition and
2-15 required fees charged by an institution of higher education for
2-16 semester hours and fees that are paid for by a prepaid tuition
2-17 contract shall be determined as if the beneficiary of that contract
2-18 were a resident student [A beneficiary is considered a resident
2-19 for purposes of tuition regardless of the beneficiary's residence
2-20 on the date of enrollment].
2-21 SECTION 3. Subchapter F, Chapter 54, Education Code, is
2-22 amended by adding Sections 54.6252, 54.6261, and 54.6262 to read as
2-23 follows:
2-24 Sec. 54.6252. CONTRACT FOR ADDITIONAL CREDIT HOURS. (a)
2-25 The board may permit the purchaser of a prepaid tuition contract
2-26 for a senior college plan at any time during which the contract is
2-27 in effect and before the beneficiary graduates from high school to
3-1 enter into a supplemental contract to prepay the tuition and
3-2 required fees of the beneficiary for a number of undergraduate
3-3 credit hours, in addition to the undergraduate credit hours
3-4 included in the primary contract, equal to the number of credit
3-5 hours purchased for one year under the primary contract. The
3-6 additional credit hours must be for the same type of institution as
3-7 the credit hours purchased under the primary contract.
3-8 (b) The contract is subject to Section 54.620.
3-9 Sec. 54.6261. DEFERRED USE OF PREPAID CREDIT HOURS. (a) A
3-10 prepaid tuition contract must permit the beneficiary to elect to
3-11 pay from another source the beneficiary's tuition and required fees
3-12 for some or all of the semester credit hours to which the
3-13 beneficiary is entitled to payment under the contract, and to defer
3-14 to a subsequent semester or term the right to payment of the
3-15 beneficiary's tuition and required fees for the number of semester
3-16 credit hours remaining under the contract. The beneficiary is
3-17 responsible for payment of the amount of tuition and required fees
3-18 for the number of semester credit hours that the beneficiary elects
3-19 not to pay under the contract.
3-20 (b) This section does not affect the date on which a prepaid
3-21 tuition contract terminates under this subchapter and does not give
3-22 the beneficiary the right to any payment under the contract after
3-23 termination of the contract.
3-24 Sec. 54.6262. APPLICATION OF UNUSED CREDIT HOURS TO GRADUATE
3-25 TUITION. (a) If the beneficiary of a prepaid tuition contract
3-26 registers in a graduate or professional degree program before the
3-27 termination of the contract and the beneficiary has not received
4-1 payment under the contract for tuition and required fees for all of
4-2 the semester credit hours to which the beneficiary is entitled, the
4-3 beneficiary may apply the value of the remaining semester credit
4-4 hours under the contract to the payment of the beneficiary's
4-5 tuition and required fees in the graduate or professional degree
4-6 program.
4-7 (b) For purposes of this section, the value of a semester
4-8 credit hour under a prepaid tuition contract is equal to the
4-9 average amount of undergraduate tuition and required fees for a
4-10 semester credit hour that would have been paid under the contract
4-11 if the beneficiary registered in an undergraduate program for the
4-12 same term or semester for which the beneficiary applies the payment
4-13 to the beneficiary's tuition and required fees in a graduate or
4-14 professional degree program under this section.
4-15 (c) This section does not affect the date on which a prepaid
4-16 tuition contract terminates under this subchapter and does not give
4-17 the beneficiary the right to any payment under the contract after
4-18 termination of the contract.
4-19 SECTION 4. Section 54.627, Education Code, is amended to
4-20 read as follows:
4-21 Sec. 54.627. CHANGE OF BENEFICIARY. (a) The purchaser of a
4-22 prepaid tuition contract may designate a new beneficiary instead of
4-23 the original beneficiary if the new beneficiary meets the
4-24 requirements of a beneficiary on the date the designation is
4-25 changed. Except as provided by Subsection (b) [If the purchaser is
4-26 an individual], the new beneficiary must meet the requirements of
4-27 Section 529 of the Internal Revenue Code of 1986 so that the change
5-1 of beneficiary is not treated as a distribution under that law [be
5-2 a sibling, step-sibling, or half-sibling of the original
5-3 beneficiary].
5-4 (b) If the purchaser is this state, a local government of
5-5 this state, or an organization exempt from taxation under Section
5-6 501(a) of the Internal Revenue Code of 1986 because it is listed in
5-7 Section 501(c)(3) of that code that purchases an interest in a
5-8 prepaid tuition contract as part of a scholarship program operated
5-9 by the government or organization, the purchaser may designate a
5-10 new beneficiary without regard to the relationship of the new
5-11 beneficiary to the original beneficiary.
5-12 (c) [(b)] The board may adjust the terms of the contract so
5-13 that the purchaser is required to pay the amount the purchaser
5-14 would have been required to pay had the purchaser originally
5-15 designated the new beneficiary as the beneficiary, taking into
5-16 account any payments made before the date the designation is
5-17 changed.
5-18 (d) [(c)] The purchaser of a prepaid tuition contract may
5-19 not sell the contract.
5-20 SECTION 5. Section 54.632, Education Code, is amended by
5-21 adding Subsection (d) to read as follows:
5-22 (d) The board shall comply with Section 529 of the Internal
5-23 Revenue Code of 1986 in imposing penalties for refunds and excess
5-24 amounts payable under Sections 54.619(d) and (e).
5-25 SECTION 6. Section 54.633, Education Code, is amended to
5-26 read as follows:
5-27 Sec. 54.633. PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS
6-1 FOR [NEEDY] STUDENTS. (a) To the extent money is available, the
6-2 board or the board of a direct-support organization established by
6-3 the board under Subsection (e) may award a prepaid higher
6-4 education tuition scholarship to a student who meets:
6-5 (1) economic or [and] academic requirements adopted by
6-6 the board; or
6-7 (2) economic or academic requirements established by
6-8 the board of a direct-support organization that are approved by
6-9 the board [by rule].
6-10 (b) A scholarship awarded under this section terminates if
6-11 the student to whom the scholarship is awarded is:
6-12 (1) convicted of, or adjudicated as having engaged in
6-13 delinquent conduct constituting, an offense under Chapter 481,
6-14 Health and Safety Code; or
6-15 (2) convicted of, or adjudicated as having engaged in
6-16 delinquent conduct constituting, a felony or Class A misdemeanor.
6-17 (c) The board shall ensure that each region of the state is
6-18 equitably represented in the awarding of scholarships under this
6-19 section.
6-20 (d) Scholarships under this section may be [are] funded by
6-21 the private sector, the state, or a local government of the state.
6-22 (e) The board may establish a direct-support organization
6-23 under the Texas Non-Profit Corporation Act (Article 1396-1.01 et
6-24 seq., Vernon's Texas Civil Statutes) to:
6-25 (1) receive, hold, invest, and administer money,
6-26 gifts, grants, loans, or other property for or on behalf of the
6-27 program; [and]
7-1 (2) purchase and award scholarships under this
7-2 section; and
7-3 (3) establish economic and academic eligibility
7-4 requirements that are approved by the board.
7-5 (f) The board of directors of the direct-support
7-6 organization consists of:
7-7 (1) the comptroller;
7-8 (2) a member appointed by the governor with the advice
7-9 and consent of the senate; and
7-10 (3) three members appointed jointly by the comptroller
7-11 and the member appointed by the governor.
7-12 (g) The comptroller serves as executive director of the
7-13 board of the direct-support organization. The comptroller shall:
7-14 (1) select and assign employees of the comptroller to
7-15 serve as the staff to the board of the direct-support organization;
7-16 (2) select and supervise the staff of the board of the
7-17 direct-support organization and perform other duties delegated to
7-18 the comptroller by the board of the direct-support organization;
7-19 and
7-20 (3) provide to the board of the direct-support
7-21 organization and to that board's staff, as necessary, information
7-22 regarding that board's qualifications for office or employment
7-23 under this subchapter and responsibilities under applicable laws
7-24 relating to standards of conduct for state officers or employees.
7-25 (h) The board of the direct-support organization shall
7-26 develop and implement policies that clearly separate the
7-27 policy-making responsibilities of the board of the direct-support
8-1 organization and the management responsibilities of the comptroller
8-2 and the staff of the board of the direct-support organization.
8-3 (i) [(g)] The board must certify that the direct-support
8-4 organization operates in a manner consistent with the goals of this
8-5 state and in the best interests of this state.
8-6 (j) [(h)] The board may contract with an independent
8-7 certified public accountant to annually audit the direct-support
8-8 organization under rules adopted by the board. The board shall
8-9 submit the audit to the comptroller, governor, lieutenant governor,
8-10 speaker of the house of representatives, Legislative Budget Board,
8-11 Legislative Audit Committee, state auditor, and Texas Higher
8-12 Education Coordinating Board. The comptroller or state auditor may
8-13 require the direct-support organization or independent certified
8-14 public accountant to provide additional information relating to the
8-15 operation of the organization.
8-16 (k) [(i)] The identity of a donor under this section who
8-17 desires to remain anonymous and the records of the direct-support
8-18 organization, other than the records disclosed under Subsection (j)
8-19 [(h)], are confidential.
8-20 (l) A prepaid tuition contract may be purchased for
8-21 scholarship purposes under this section without identifying a
8-22 specific beneficiary.
8-23 (m) In awarding a scholarship under this section, the
8-24 awarding entity may not award a scholarship using funds derived
8-25 from this state or a local government unless the awarding entity
8-26 determines, using sound actuarial principles, that awarding the
8-27 scholarship will not jeopardize the soundness of the fund or
9-1 require an appropriation from the state to cover the tuition and
9-2 required fees.
9-3 SECTION 7. Section 54.636(e), Education Code, is amended to
9-4 read as follows:
9-5 (e) In making investments of the assets of the fund, the
9-6 board shall exercise the judgment and care, under the circumstances
9-7 at the time of the investment, that a person of ordinary prudence,
9-8 discretion, and intelligence would exercise in the management of
9-9 the person's own affairs, not for speculation but for making a
9-10 permanent disposition of funds, considering the probable income
9-11 from the disposition and the probable safety of capital [The board
9-12 shall invest the assets of the fund in accordance with the Public
9-13 Funds Investment Act (Subchapter A, Chapter 2256, Government
9-14 Code)].
9-15 SECTION 8. Section 54.639, Education Code, is amended to
9-16 read as follows:
9-17 Sec. 54.639. EXEMPTION FROM CREDITORS' CLAIMS. (a) Money
9-18 in the fund is exempt from claims of creditors, including claims of
9-19 creditors of a purchaser, a [or] beneficiary, or a successor in
9-20 interest of a purchaser or beneficiary.
9-21 (b) The rights of a purchaser, beneficiary, or successor in
9-22 interest of a purchaser or beneficiary in and under a prepaid
9-23 tuition contract and the payment of tuition and required fees for a
9-24 beneficiary under a prepaid tuition contract to an institution of
9-25 higher education or a private or independent institution of higher
9-26 education under this chapter are exempt from attachment, levy,
9-27 garnishment, execution, and seizure for the satisfaction of any
10-1 debt, judgment, or claim against a purchaser, beneficiary, or
10-2 successor in interest of a purchaser or beneficiary.
10-3 (c) A claim or judgment against a purchaser, beneficiary, or
10-4 a successor in interest of a purchaser or beneficiary does not
10-5 impair or entitle the claim or judgment holder to assert or enforce
10-6 a lien against:
10-7 (1) the rights of a purchaser, beneficiary, or
10-8 successor in interest of a purchaser or beneficiary in and under a
10-9 prepaid tuition contract; or
10-10 (2) the right of a beneficiary to the payment of
10-11 tuition and required fees to an institution of higher education or
10-12 a private or independent institution of higher education under a
10-13 prepaid tuition contract.
10-14 SECTION 9. Section 54.641(a), Education Code, is amended to
10-15 read as follows:
10-16 (a) Not later than January [December] 1 of each year, the
10-17 board shall furnish without charge to each purchaser a statement
10-18 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 SECTION 10. Section 54.643, Education Code, is amended by
11-1 adding Subsection (c) to read as follows:
11-2 (c) Notwithstanding any other provision of this subchapter,
11-3 the board may release information to the Internal Revenue Service
11-4 and to any state tax agencies as required by applicable tax law.
11-5 SECTION 11. Subchapter F, Chapter 54, Education Code, is
11-6 amended by adding Section 54.644 to read as follows:
11-7 Sec. 54.644. TAX EXEMPT STATUS REQUIREMENTS. (a) The
11-8 provisions of this section are intended to meet the requirements of
11-9 Section 529 of the Internal Revenue Code of 1986.
11-10 (b) A payment of an amount due to the fund for a prepaid
11-11 tuition contract must be made in cash. A person may not make a
11-12 payment to the fund in excess of the amounts required to be paid
11-13 under a prepaid tuition contract.
11-14 (c) The board shall maintain a separate accounting for each
11-15 beneficiary.
11-16 (d) The purchaser of a prepaid tuition contract and the
11-17 beneficiary of the contract may not control or direct the
11-18 investment of payments under the contract or any earnings of the
11-19 fund.
11-20 (e) The purchaser of a prepaid tuition contract and the
11-21 beneficiary of the contract may not use any interest in the
11-22 contract as security for a loan or other obligation.
11-23 (f) The board shall make reports required by the secretary
11-24 of the United States Treasury.
11-25 SECTION 12. Section 54.638, Education Code, is repealed.
11-26 SECTION 13. The comptroller shall study the feasibility of
11-27 and potential options for providing prepaid tuition and fees for
12-1 residents of this state who may enroll in a graduate or
12-2 professional degree program. Not later than December 1, 1998, the
12-3 comptroller shall report to the legislature the results of the
12-4 study and make any recommendations for legislative or
12-5 administrative action relating to the provision of prepaid tuition
12-6 for graduate and professional degree programs.
12-7 SECTION 14. (a) Except as provided by Subsection (b) of
12-8 this section, Sections 54.6261 and 54.6262, Education Code, as
12-9 added by this Act, do not apply to a prepaid tuition contract
12-10 entered into before the effective date of this Act.
12-11 (b) The Prepaid Higher Education Tuition Board may permit
12-12 the purchaser of a prepaid tuition contract entered into before the
12-13 effective date of this Act to amend the contract to conform to
12-14 Sections 54.6261 and 54.6262, Education Code, as added by this Act.
12-15 The board may require the purchaser to make increased or additional
12-16 payments as necessary to compensate for any additional costs that
12-17 the board estimates will be incurred under the contract because of
12-18 the contract amendment.
12-19 SECTION 15. The importance of this legislation and the
12-20 crowded condition of the calendars in both houses create an
12-21 emergency and an imperative public necessity that the
12-22 constitutional rule requiring bills to be read on three several
12-23 days in each house be suspended, and this rule is hereby suspended,
12-24 and that this Act take effect and be in force from and after its
12-25 passage, and it is so enacted.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 9 was passed by the House on March
19, 1997, by the following vote: Yeas 148, Nays 0, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 9 on May 19, 1997, by a non-record vote.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 9 was passed by the Senate, with
amendments, on May 7, 1997, by the following vote: Yeas 25, Nays
4, 1 present, not voting.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor