HBA-LJP, JLV H.B. 2816 77(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 2816
By: Brown, Fred
Higher Education
4/1/2001
Introduced



BACKGROUND AND PURPOSE 

Under current law, qualified scholarship funding corporations are
authorized at the request of a city or cities to issue revenue bonds to
acquire student loan notes guaranteed under the federal education loan
program. In 1996, Congress amended law to authorize these non-profit
corporations to change their tax status to that of a 501(c)(3) corporation,
but retain the original tax exemptions on the bonds by transferring them to
a taxable subsidiary.  To enable a nonprofit corporation to transfer all of
its bond obligations under the federal requirements of these amendments,
current provisions regulating higher education authorities need to be
amended.  House Bill 2816 authorizes a governing body of a city or cities
to create a nonprofit corporation as a higher education authority to issue
revenue bonds and loan the proceeds to an entity that has assumed the
obligations of the nonprofit corporation for the purpose of refunding the
tax-exempt obligations. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 2816 amends the Education Code to authorize the governing body
of a city to create a nonprofit corporation as a higher education authority
to act on its behalf with an appointed board of directors that are subject
to removal by the governing body of a city.  The bill authorizes the
nonprofit corporation, upon approval of the city, to issue revenue bonds
and loan the proceeds of the revenue bonds to an entity that has assumed
the outstanding bond obligations of a nonprofit corporation.  The bill
requires that the loan be for the purpose of refunding outstanding bonds.
The bonds to be refunded must be originally issued as qualified scholarship
funding bonds by a nonprofit corporation, in accordance with the provisions
regarding bonds for purchase of loan notes, that subsequently elects to
cease operation as a qualified scholarship funding corporation.  The bill
provides that any refunded bond is the sole obligation of the nonprofit
corporation and the nonprofit corporation is prohibited from constituting a
debt or obligation of the city. 

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001.