82R8849 KSD-F

By: Patrick S.B. No. 1822

A BILL TO BE ENTITLED

AN ACT

relating to the administration of certain supplemental student loan programs and the issuance of private activity bonds by qualified nonprofit corporations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. The legislature, giving due consideration to the historical and continuing interest of the people of Texas in encouraging deserving and qualified persons to realize their aspirations for education beyond high school, finds and declares that postsecondary education for qualified Texans who desire to pursue such education is important to the welfare and security of this state and the nation and, consequently, is an important public purpose. The legislature finds and declares that the state can achieve its full economic and social potential only if every individual Texan has the opportunity to contribute to the full extent of the individual's capabilities and only when financial barriers to the individual's economic, social, and educational goals are removed. It is, therefore, the policy of the legislature and the purpose of this Act to assist and permit qualified nonprofit corporations to carry out one or more supplemental programs to assist qualified students by making financial and other assistance available to borrowers or institutions to finance the cost of attendance at an accredited postsecondary educational institution.

SECTION 2. Chapter 53B, Education Code, is amended by adding Subchapter D to read as follows:

SUBCHAPTER D. ADMINISTRATION OF SUPPLEMENTAL LOAN PROGRAMS AND

ISSUANCE OF PRIVATE ACTIVITY BONDS BY QUALIFIED

NONPROFIT CORPORATIONS

Sec. 53B.61. DEFINITIONS. In this subchapter:

(1) "Closing" means the issuance and delivery of a supplemental program bond by a qualified nonprofit corporation in exchange for the required payment for the supplemental program bond.

(2) "Internal Revenue Code" means the Internal Revenue Code of 1986 and its subsequent amendments.

(3) "Nationally recognized statistical rating organization" has the meaning assigned by Section 3(a)(62), Securities Exchange Act of 1934 (15 U.S.C. Section 78c(a)(62)).

(4) "Private activity bond" has the meaning assigned by Section 141(a), Internal Revenue Code.

(5) "Qualified student loan bond" has the meaning assigned by Section 144(b), Internal Revenue Code.

(6) "Supplemental program" means a program established, implemented, administered, and financed by a qualified nonprofit corporation under Section 53B.63 to provide supplemental program education loans.

(7) "Supplemental program bonds" includes bonds, notes, refunding bonds, commercial paper, pass-through instruments, or any other evidences of obligations of a qualified nonprofit corporation secured by a capital reserve fund established under Section 53B.65 and issued under this subchapter for the purpose of originating, acquiring, or financing supplemental program education loans.

(8) "Supplemental program education loan" means an alternative education loan made by a qualified nonprofit corporation under a supplemental program or by or on behalf of an accredited institution to a student or to parents of a student, or both, in amounts not to exceed the maximum amounts specified by a qualified nonprofit corporation under its supplemental program to finance part or all of the student's cost of attendance.

Sec. 53B.62. DETERMINATION BY COMPTROLLER OF QUALIFIED NONPROFIT CORPORATION AUTHORITY TO ISSUE PRIVATE ACTIVITY BONDS. The comptroller shall determine whether the definition of a qualified scholarship funding corporation under Section 150(d), Internal Revenue Code, allows a qualified nonprofit corporation to issue private activity bonds consisting of qualified student loan bonds in accordance with Section 144(b)(1)(B), Internal Revenue Code. On the making by the comptroller of a determination that the issuance is permissible:

(1) the comptroller shall provide notice of its determination to the Legislative Budget Board; and

(2) each qualified nonprofit corporation may apply for a student loan bond allocation in compliance with Chapter 1372, Government Code, with respect to its supplemental program bonds under this subchapter.

Sec. 53B.63. SUPPLEMENTAL PROGRAM. (a) A qualified nonprofit corporation may administer one or more supplemental programs approved by the comptroller under Section 53B.64 under which the qualified nonprofit corporation makes financial and other assistance available to borrowers or accredited institutions to finance the cost of attendance, issues supplemental program bonds, lends the proceeds of supplemental program bonds, and exercises any other powers authorized by this subchapter.

(b) Each qualified nonprofit corporation administering a supplemental program approved by the comptroller shall establish rules pertaining to participation in its supplemental programs, including rules relating to issuing supplemental program bonds, borrowing money, servicing and collection of supplemental program education loans, and other policies governing the operation of its supplemental programs.

(c) A qualified nonprofit corporation that has issued supplemental program bonds to support a supplemental program may continue to exercise the powers granted by the Texas Nonprofit Corporation Law, including the power to issue bonds or otherwise incur debt that does constitute a supplemental program bond and is not secured by a capital reserve fund created and established under Section 53B.65 for the purpose of financing or purchasing alternative education loans or guaranteed student loans.

Sec. 53B.64. COMPTROLLER APPROVAL OF SUPPLEMENTAL PROGRAMS. (a) Pursuant to Section 144(b)(1)(B), Internal Revenue Code, the comptroller on behalf of the state may approve supplemental programs administered by a qualified nonprofit corporation and shall establish procedures for that approval. The procedures established by the comptroller shall require that:

(1) the comptroller permit qualified nonprofit corporations to submit the terms of any proposed supplemental programs to the comptroller for approval on or after January 1 and before June 1 of each calendar year;

(2) the comptroller, after providing notice of the time, place, and purpose of the public hearing by publishing notice in a newspaper of general circulation earlier than the 10th day before the date of the hearing, conduct a public hearing before July 2 of each calendar year to consider the approval of proposed supplemental programs;

(3) a proposed supplemental program submitted by a qualified nonprofit corporation be accompanied by a nonrefundable application fee in the amount of $500 that the comptroller shall retain to offset the costs of holding the related public hearing;

(4) the approval of a supplemental program be memorialized in a written resolution adopted by the comptroller;

(5) any supplemental program bonds issued to support an approved supplemental program receive, on or before the closing date, an initial unenhanced credit rating of not less than an "A" category or the equivalent of that rating as rated by a nationally recognized statistical rating organization; and

(6) the comptroller not approve any supplemental program that discriminates on the basis of the location of the accredited institutions in which the students enroll.

(b) The comptroller may charge a qualified nonprofit corporation an annual capital reserve fund maintenance fee in an amount not to exceed 0.50 percent of the capital reserve requirement relating to a capital reserve fund created and established under Section 53B.65 that secures supplemental program bonds issued under a supplemental program. Any required capital reserve fund maintenance fee must be established in the written resolution approving the supplemental program. The payment of any required capital reserve fund maintenance fee by the related qualified nonprofit corporation shall commence on the closing date of the related supplemental program bonds and is payable annually in arrears on each anniversary date after the closing date of the related supplemental program bonds.

(c) Following the initial approval of a supplemental program by the comptroller, the comptroller shall establish:

(1) a process for the approval of any material changes in terms with respect to an approved supplemental program; and

(2) procedures allowing a qualified nonprofit corporation to petition for a special hearing for the approval of material changes in the terms with respect to an approved supplemental program.

Sec. 53B.65. CAPITAL RESERVE FUNDS; OBLIGATION OF THE STATE. (a) As part of a supplemental program administered under Section 53B.63, a qualified nonprofit corporation may create and establish one or more capital reserve funds and may pay into the capital reserve fund any money appropriated and made available by the state for the purposes of that fund, any proceeds of the sale by the qualified nonprofit corporation of supplemental program bonds to the extent determined by the qualified nonprofit corporation, and any other money available to the qualified nonprofit corporation. A qualified nonprofit corporation may not create or establish any capital reserve fund under this section to secure supplemental program bonds issued as qualified student loan bonds until the determination described by Section 53B.62 has been made by the comptroller.

(b) Except as otherwise provided by this section, money held in any capital reserve fund must be used solely with respect to supplemental program bonds, the repayment of which is secured by any such fund and solely for the payment of principal of supplemental program bonds, the purchase or redemption of those supplemental program bonds, including any fees or premiums, and the payment of interest on those supplemental program bonds. In addition, if a qualified nonprofit corporation obtains a letter of credit, insurance contract, surety bond, or similar financial undertaking to establish and fund a capital reserve fund under this section, money in that capital reserve fund may be used to pay all reimbursement obligations of the qualified nonprofit corporation established in connection with that letter of credit, insurance contract, surety bond, or other financial undertaking, including all fees, expenses, indemnities, and commissions. Money in excess of the reserve requirement established by Subsection (c) may be transferred to other funds and accounts of the qualified nonprofit corporation.

(c) A qualified nonprofit corporation may establish a capital reserve requirement for a capital reserve fund by providing that money in the fund may not be withdrawn at any time in an amount that would reduce the amount of the fund to less than the maximum amount of principal and interest becoming due by reason of maturity or a required sinking fund payment in the next succeeding period not exceeding 24 months within which any such maturity occurs or any such payment is required, except for the purpose of paying the amount due on any interest payment date or on maturity or making a sinking fund payment with respect to supplemental program bonds secured by the capital reserve fund.

(d) A qualified nonprofit corporation may provide that it will not issue supplemental program bonds if the capital reserve requirement established under Subsection (c) with respect to supplemental program bonds outstanding and to be issued that are secured by the capital reserve fund will exceed the amount of the capital reserve fund at the time of issuance, unless the qualified nonprofit corporation, at the time of issuance of the supplemental program bonds, deposits in the capital reserve fund from proceeds of the supplemental program bonds to be issued, or from other sources, an amount that, together with the amount in the capital reserve fund, is not less than the capital reserve requirement.

(e) On or before September 1 of each year, a qualified nonprofit corporation shall certify to the comptroller and the Legislative Budget Board the amount, if any, necessary to restore the amount in any capital reserve fund to which this subsection applies, as stated in the trust indenture or other document, to the capital reserve requirement. The comptroller shall cause to be paid directly from legislative appropriations or from other funds designated by the Legislative Budget Board under its budget execution authority to the qualified nonprofit corporation during the current state fiscal year the amount necessary to restore the amount in the capital reserve fund to the capital reserve requirement.

(f) Neither this state nor any political subdivision of this state is obligated to pay the principal of or the interest on supplemental program bonds, except from amounts on deposit in the applicable capital reserve funds, and neither the faith and credit nor the taxing power of this state or of any political subdivision of this state is pledged to the payment of the principal of, premium if any, or interest on supplemental program bonds. The issuance of supplemental program bonds does not directly, indirectly, or contingently obligate this state or any political subdivision of this state to levy or pledge any form of taxation whatsoever or to make any appropriation for the payment of supplemental program bonds.

(g) The aggregate sum of capital reserve requirements relating to capital reserve funds securing supplemental program bonds may not at any time exceed $98 million.

SECTION 3. This Act takes effect September 1, 2011.