1-1 By: Stiles, Raymond, Kamel H.B. No. 9
1-2 (Senate Sponsor - Barrientos)
1-3 (In the Senate - Received from the House March 20, 1997;
1-4 March 24, 1997, read first time and referred to Committee on
1-5 Finance; April 28, 1997, reported favorably, as amended, by the
1-6 following vote: Yeas 13, Nays 0; April 28, 1997, sent to printer.)
1-7 COMMITTEE AMENDMENT NO. 1 By: Barrientos
1-8 Amend H.B. No. 9 in SECTION 5 of the bill as follows:
1-9 (1) In Section 54.633, Education Code, strike Subsections
1-10 (a)(1) and (2) (page 4, lines 7-11, house engrossment), as amended
1-11 by the bill and substitute the following:
1-12 (1) economic or [and] academic requirements adopted by
1-13 the board; or
1-14 (2) economic or academic requirements established by
1-15 the board of a direct-support organization that are approved by
1-16 the board [by rule].
1-17 (2) Strike Section 54.633(d), Education Code (page 4, lines
1-18 22 and 23, house engrossment), and substitute the following:
1-19 (d) Scholarships under this section may be [are] funded by
1-20 the private sector, the state, or a local government of the state.
1-21 (3) Strike Section 54.633(e)(3), Education Code, as added by
1-22 the bill (page 5, lines 5 and 6, house engrossment), and substitute
1-23 the following:
1-24 (3) establish economic and academic eligibility
1-25 requirements that are approved by the board.
1-26 A BILL TO BE ENTITLED
1-27 AN ACT
1-28 relating to the prepaid higher education tuition program.
1-29 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-30 SECTION 1. Sections 54.619(d) and (e), Education Code, are
1-31 amended to read as follows:
1-32 (d) If the beneficiary of a plan described by Section
1-33 54.6251 enrolls in an institution of higher education, the board
1-34 shall pay:
1-35 (1) to the institution the tuition and required fees
1-36 of the institution; and
1-37 (2) to the purchaser [beneficiary] the amount by which
1-38 the estimated average private tuition and required fees exceeds the
1-39 tuition and required fees of the institution.
1-40 (e) If the beneficiary of a plan described by Section
1-41 54.6251 enrolls in a private or independent institution of higher
1-42 education, the board shall pay:
1-43 (1) to the institution the lesser of:
1-44 (A) the tuition and required fees of the
1-45 institution; or
1-46 (B) the estimated average private tuition and
1-47 required fees; and
1-48 (2) to the purchaser [beneficiary] the amount by which
1-49 the estimated average private tuition and required fees exceeds the
1-50 tuition and required fees of the institution.
1-51 SECTION 2. Section 54.621, Education Code, is amended to
1-52 read as follows:
1-53 Sec. 54.621. BENEFICIARY. (a) The beneficiary of a prepaid
1-54 tuition contract must be younger than 18 years of age or 18 years
1-55 of age or older and enrolled in high school at the time the
1-56 purchaser enters into the contract and must be:
1-57 (1) a resident of this state at the time the purchaser
1-58 enters into the contract; or
1-59 (2) a nonresident who is the child of a parent who is
1-60 a resident of this state at the time that parent enters into the
1-61 contract.
1-62 (b) The board may require a reasonable period of residence
1-63 in this state for a beneficiary or the parent of a beneficiary.
1-64 (c) Notwithstanding Section 54.052(d), the tuition and
2-1 required fees charged by an institution of higher education for
2-2 semester hours and fees that are paid for by a prepaid tuition
2-3 contract shall be determined as if the beneficiary of that contract
2-4 were a resident student [A beneficiary is considered a resident
2-5 for purposes of tuition regardless of the beneficiary's residence
2-6 on the date of enrollment].
2-7 SECTION 3. Section 54.627, Education Code, is amended to
2-8 read as follows:
2-9 Sec. 54.627. CHANGE OF BENEFICIARY. (a) The purchaser of a
2-10 prepaid tuition contract may designate a new beneficiary instead of
2-11 the original beneficiary if the new beneficiary meets the
2-12 requirements of a beneficiary on the date the designation is
2-13 changed. Except as provided by Subsection (b) [If the purchaser is
2-14 an individual], the new beneficiary must meet the requirements of
2-15 Section 529 of the Internal Revenue Code of 1986 so that the change
2-16 of beneficiary is not treated as a distribution under that law [be
2-17 a sibling, step-sibling, or half-sibling of the original
2-18 beneficiary].
2-19 (b) If the purchaser is this state, a local government of
2-20 this state, or an organization exempt from taxation under Section
2-21 501(a) of the Internal Revenue Code of 1986 because it is listed in
2-22 Section 501(c)(3) of that code that purchases an interest in a
2-23 prepaid tuition contract as part of a scholarship program operated
2-24 by the government or organization, the purchaser may designate a
2-25 new beneficiary without regard to the relationship of the new
2-26 beneficiary to the original beneficiary.
2-27 (c) [(b)] The board may adjust the terms of the contract so
2-28 that the purchaser is required to pay the amount the purchaser
2-29 would have been required to pay had the purchaser originally
2-30 designated the new beneficiary as the beneficiary, taking into
2-31 account any payments made before the date the designation is
2-32 changed.
2-33 (d) [(c)] The purchaser of a prepaid tuition contract may
2-34 not sell the contract.
2-35 SECTION 4. Section 54.632, Education Code, is amended by
2-36 adding Subsection (d) to read as follows:
2-37 (d) The board shall comply with Section 529 of the Internal
2-38 Revenue Code of 1986 in imposing penalties for refunds and excess
2-39 amounts payable under Sections 54.619(d) and (e).
2-40 SECTION 5. Section 54.633, Education Code, is amended to
2-41 read as follows:
2-42 Sec. 54.633. PREPAID HIGHER EDUCATION TUITION SCHOLARSHIPS
2-43 FOR [NEEDY] STUDENTS. (a) To the extent money is available, the
2-44 board or the board of a direct-support organization established by
2-45 the board under Subsection (e) may award a prepaid higher
2-46 education tuition scholarship to a student who meets:
2-47 (1) economic or [and] academic requirements adopted by
2-48 the board by rule; or
2-49 (2) economic or academic requirements established by
2-50 the board of a direct-support organization that are consistent
2-51 with board rules.
2-52 (b) A scholarship awarded under this section terminates if
2-53 the student to whom the scholarship is awarded is:
2-54 (1) convicted of, or adjudicated as having engaged in
2-55 delinquent conduct constituting, an offense under Chapter 481,
2-56 Health and Safety Code; or
2-57 (2) convicted of, or adjudicated as having engaged in
2-58 delinquent conduct constituting, a felony or Class A misdemeanor.
2-59 (c) The board shall ensure that each region of the state is
2-60 equitably represented in the awarding of scholarships under this
2-61 section.
2-62 (d) Scholarships under this section are funded by the
2-63 private sector.
2-64 (e) The board may establish a direct-support organization
2-65 under the Texas Non-Profit Corporation Act (Article 1396-1.01 et
2-66 seq., Vernon's Texas Civil Statutes) to:
2-67 (1) receive, hold, invest, and administer money,
2-68 gifts, grants, loans, or other property for or on behalf of the
2-69 program; [and]
3-1 (2) purchase and award scholarships under this
3-2 section; and
3-3 (3) establish economic and academic eligibility
3-4 requirements consistent with board rules.
3-5 (f) The board of directors of the direct-support
3-6 organization consists of:
3-7 (1) the comptroller;
3-8 (2) a member appointed by the governor with the advice
3-9 and consent of the senate; and
3-10 (3) three members appointed jointly by the comptroller
3-11 and the member appointed by the governor.
3-12 (g) The comptroller serves as executive director of the
3-13 board of the direct-support organization. The comptroller shall:
3-14 (1) select and assign employees of the comptroller to
3-15 serve as the staff to the board of the direct-support organization;
3-16 (2) select and supervise the staff of the board of the
3-17 direct-support organization and perform other duties delegated to
3-18 the comptroller by the board of the direct-support organization;
3-19 and
3-20 (3) provide to the board of the direct-support
3-21 organization and to that board's staff, as necessary, information
3-22 regarding that board's qualifications for office or employment
3-23 under this subchapter and responsibilities under applicable laws
3-24 relating to standards of conduct for state officers or employees.
3-25 (h) The board of the direct-support organization shall
3-26 develop and implement policies that clearly separate the
3-27 policy-making responsibilities of the board of the direct-support
3-28 organization and the management responsibilities of the comptroller
3-29 and the staff of the board of the direct-support organization.
3-30 (i) [(g)] The board must certify that the direct-support
3-31 organization operates in a manner consistent with the goals of this
3-32 state and in the best interests of this state.
3-33 (j) [(h)] The board may contract with an independent
3-34 certified public accountant to annually audit the direct-support
3-35 organization under rules adopted by the board. The board shall
3-36 submit the audit to the comptroller, governor, lieutenant governor,
3-37 speaker of the house of representatives, Legislative Budget Board,
3-38 Legislative Audit Committee, state auditor, and Texas Higher
3-39 Education Coordinating Board. The comptroller or state auditor may
3-40 require the direct-support organization or independent certified
3-41 public accountant to provide additional information relating to the
3-42 operation of the organization.
3-43 (k) [(i)] The identity of a donor under this section who
3-44 desires to remain anonymous and the records of the direct-support
3-45 organization, other than the records disclosed under Subsection (j)
3-46 [(h)], are confidential.
3-47 (l) A prepaid tuition contract may be purchased for
3-48 scholarship purposes under this section without identifying a
3-49 specific beneficiary.
3-50 (m) In awarding a scholarship under this section, the
3-51 awarding entity may not award a scholarship using funds derived
3-52 from this state or a local government unless the awarding entity
3-53 determines, using sound actuarial principles, that awarding the
3-54 scholarship will not jeopardize the soundness of the fund or
3-55 require an appropriation from the state to cover the tuition and
3-56 required fees.
3-57 SECTION 6. Section 54.636(e), Education Code, is amended to
3-58 read as follows:
3-59 (e) In making investments of the assets of the fund, the
3-60 board shall exercise the judgment and care, under the circumstances
3-61 at the time of the investment, that a person of ordinary prudence,
3-62 discretion, and intelligence would exercise in the management of
3-63 the person's own affairs, not for speculation but for making a
3-64 permanent disposition of funds, considering the probable income
3-65 from the disposition and the probable safety of capital [The board
3-66 shall invest the assets of the fund in accordance with the Public
3-67 Funds Investment Act (Subchapter A, Chapter 2256, Government
3-68 Code)].
3-69 SECTION 7. Section 54.639, Education Code, is amended to
4-1 read as follows:
4-2 Sec. 54.639. EXEMPTION FROM CREDITORS' CLAIMS. (a) Money
4-3 in the fund is exempt from claims of creditors, including claims of
4-4 creditors of a purchaser, a [or] beneficiary, or a successor in
4-5 interest of a purchaser or beneficiary.
4-6 (b) The rights of a purchaser, beneficiary, or successor in
4-7 interest of a purchaser or beneficiary in and under a prepaid
4-8 tuition contract and the payment of tuition and required fees for a
4-9 beneficiary under a prepaid tuition contract to an institution of
4-10 higher education or a private or independent institution of higher
4-11 education under this chapter are exempt from attachment, levy,
4-12 garnishment, execution, and seizure for the satisfaction of any
4-13 debt, judgment, or claim against a purchaser, beneficiary, or
4-14 successor in interest of a purchaser or beneficiary.
4-15 (c) A claim or judgment against a purchaser, beneficiary, or
4-16 a successor in interest of a purchaser or beneficiary does not
4-17 impair or entitle the claim or judgment holder to assert or enforce
4-18 a lien against:
4-19 (1) the rights of a purchaser, beneficiary, or
4-20 successor in interest of a purchaser or beneficiary in and under a
4-21 prepaid tuition contract; or
4-22 (2) the right of a beneficiary to the payment of
4-23 tuition and required fees to an institution of higher education or
4-24 a private or independent institution of higher education under a
4-25 prepaid tuition contract.
4-26 SECTION 8. Section 54.641(a), Education Code, is amended to
4-27 read as follows:
4-28 (a) Not later than January [December] 1 of each year, the
4-29 board shall furnish without charge to each purchaser a statement
4-30 of:
4-31 (1) the amount paid by the purchaser under the prepaid
4-32 tuition contract;
4-33 (2) the number of credit hours originally covered by
4-34 the contract;
4-35 (3) the number of credit hours remaining under the
4-36 contract; and
4-37 (4) any other information the board determines by rule
4-38 is necessary or appropriate.
4-39 SECTION 9. Section 54.643, Education Code, is amended by
4-40 adding Subsection (c) to read as follows:
4-41 (c) Notwithstanding any other provision of this subchapter,
4-42 the board may release information to the Internal Revenue Service
4-43 and to any state tax agencies as required by applicable tax law.
4-44 SECTION 10. Subchapter F, Chapter 54, Education Code, is
4-45 amended by adding Section 54.644 to read as follows:
4-46 Sec. 54.644. TAX EXEMPT STATUS REQUIREMENTS. (a) The
4-47 provisions of this section are intended to meet the requirements of
4-48 Section 529 of the Internal Revenue Code of 1986.
4-49 (b) A payment of an amount due to the fund for a prepaid
4-50 tuition contract must be made in cash. A person may not make a
4-51 payment to the fund in excess of the amounts required to be paid
4-52 under a prepaid tuition contract.
4-53 (c) The board shall maintain a separate accounting for each
4-54 beneficiary.
4-55 (d) The purchaser of a prepaid tuition contract and the
4-56 beneficiary of the contract may not control or direct the
4-57 investment of payments under the contract or any earnings of the
4-58 fund.
4-59 (e) The purchaser of a prepaid tuition contract and the
4-60 beneficiary of the contract may not use any interest in the
4-61 contract as security for a loan or other obligation.
4-62 (f) The board shall make reports required by the secretary
4-63 of the United States Treasury.
4-64 SECTION 11. Section 54.638, Education Code, is repealed.
4-65 SECTION 12. The importance of this legislation and the
4-66 crowded condition of the calendars in both houses create an
4-67 emergency and an imperative public necessity that the
4-68 constitutional rule requiring bills to be read on three several
4-69 days in each house be suspended, and this rule is hereby suspended,
5-1 and that this Act take effect and be in force from and after its
5-2 passage, and it is so enacted.
5-3 * * * * *