6508-S2

AN ACT Relating to the advance college payment program; adding a new section to chapter 28B.80 RCW; and creating a new section.

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

NEW SECTION. Sec. 1. A new section is added to chapter 28B.80 RCW to read as follows:

In order to help make higher education affordable and accessible to all citizens of the state of Washington, to maintain state institutions of higher education by helping to provide a stable financial base to these institutions, to provide the citizens of Washington with financing assistance for higher education and protection against rising tuition costs, to encourage saving to enhance the ability of Washington citizens to obtain financial access to institutions of higher education, to encourage elementary and secondary students of the state to achieve academic excellence, and to promote a well-educated and financially secure population to the ultimate benefit of all citizens of the state of Washington, the advance college payment program is established. The higher education coordinating board shall develop the program to begin operation by July 1, 1998. Various programs are currently operating in a number of states and should be studied for their applicability to the state of Washington. Recommendations and proposed legislation to implement the Washington advance college payment program shall be submitted to the legislature by December 1, 1996. The program shall include, but not be limited to, recommendations regarding the following issues:

(1) An examination of potential income tax and unrelated business income tax consequences of establishing a program;

(2) Consideration of the impact of federal and state securities, insurance, and annuity laws on the sale of advance college payment contracts;

(3) An examination of state constitutional issues raised by the establishment of an advance college payment program, including limitations on state debt and prohibitions on gifts and loans of the state's credit;

(4) A review of state and federal financial aid policies and a determination of how such a program would impact present financial aid programs and how the plan matches the state's present and projected needs;

(5) An examination of the effect such a program would have on tuition, enrollment, residency, and admission policies;

(6) An actuarial analysis examining program risks and potential yields, computed over at least an eighteen-year horizon. This should include consideration of investment policy and participation rates necessary for maintaining an actuarially sound program;

(7) Consideration of who should bear the risk and pay the difference if tuition costs increase faster than interest earnings or interest earnings are lower than expected and cannot cover tuition. This shall include an examination of how purchasers can be protected from investment shortfalls and the means by which the state can reduce its liability and risk in case the program proves to be actuarially unsound; this shall be based on the assumption that an advance college payment contract is a general obligation of the state of Washington and shall contain a pledge of the full faith and credit of the state;

(8) Consideration of the amount, method, and timing of purchase and use, withdrawal from the program, and refunds;

(9) A determination of how much it would cost to start up and maintain an adequate program, including but not limited to staff, equipment, travel, and advertising needs;

(10) Consideration of whether the plans should cover more than undergraduate tuition costs, such as room and board, mandatory fees, graduate tuition, books, materials, and fees. This shall include consideration of potential state tax incentives and whether the program should be limited to full-time or include part-time attendance;

(11) An examination of ways to involve independent institutions in the program; and

(12) An examination of the portability of benefits across state lines, including the effect on reciprocity and other agreements.

NEW SECTION. Sec. 2. The higher education coordinating board in consultation with the state investment board, the state treasurer, the state actuary, the office of financial management, private financial institutions, and any other qualified party with experience in the areas of accounting, actuary, risk management, or investment management to assist with the development of the program in section 1 of this act. Within existing appropriations, the state investment board, the state treasurer, the state actuary, the office of financial management, and any other state agency, including legislative staff, shall fully cooperate with the higher education coordinating board in matters relating to the development of the program.