HOUSE BILL REPORT

HB 1356

BYRepresentatives Valle, Miller, Jacobsen, Wineberry, Silver, Belcher, Nelson, P. King and Hine

Establishing a college savings bond program.

House Committe on Higher Education

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (11)

      Signed by Representatives Jacobsen, Chair; Heavey, Vice Chair; Basich, Fox, Jesernig, Miller, Nelson, Prince, Silver, Unsoeld and K. Wilson.

Minority Report:  Do not pass.  (1)

      Signed by Representative Barnes.

House Staff:Joan Elgee (786-7166)

Rereferred House Committee on Ways & Means/Appropriations

Majority Report:  The second substitute bill be substituted therefor and the second substitute bill do pass.  (17)

      Signed by Representatives Locke, Chair; Braddock, Bristow, Butterfield, Ebersole, Fuhrman, Grimm, Hine, McLean, Peery, Sayan, Silver, H. Sommers, Spanel, Sprenkle, Wang and B. Williams.

Minority Report:  Do not pass.  (3)

      Signed by Representatives Brough, Grant and Nealey.

House Staff:      Bill Robinson (786-7136)

AS REPORTED BY COMMITTEE ON WAYS & MEANS/APPROPRIATIONS

FEBRUARY 6, 1988

BACKGROUND:

As families are called upon to meet an increasing portion of higher education costs, many states, including Washington, have considered various forms of educational savings programs.

In 1987, Illinois enacted a college savings bond program under which state general obligation bonds are sold. To encourage purchase of the bonds and enrollment in Illinois public and private institutions of higher education, the Act authorizes supplemental payments to bondholders to be applied to tuition costs, provides for exclusion of $25,000 of bonds in determining state financial aid, and makes the interest on the bonds exempt from the state income tax.  The first bond sale in January, 1988 was very successful.

SUMMARY:

SUBSTITUTE BILL: A college savings bond program is established to encourage savings for college and enrollment in higher education institutions in the state.

The state finance committee is authorized to issue $50 million general obligation bonds for capital improvements at the state higher education institutions.

The state finance committee is given discretion to determine the manner of sale and issuance of the bonds.  However, if the committee determines it is economically feasible and in the best interest of the state, the committee shall sell the bonds at a "deep discount" (meaning the total amount of principal and interest would be payable at maturity).

In marketing the bonds, the committee shall consider methods for encouraging purchase of the bonds as a means of college savings.  The committee may provide additional financial incentives to bondholders to encourage attendance at Washington public and private institutions of higher education.  These incentives may include making supplemental payments at maturity to a bondholder who can demonstrate that his or her dependent is attending a Washington institution of higher education.

The HEC Board is directed to develop and implement an educational program and marketing strategies to inform parents about the options available for financing a college education, including college savings bonds.

By December, 1991, the state finance committee and the HEC Board shall evaluate the effectiveness of the college savings bond program and report to the legislature and the governor on the program and any recommended changes. The report shall specifically consider the advisability of offering incentives to purchase college savings bonds.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The amount of bonds authorized is stated to be $50 million.  An authorization to the HEC Board to exclude up to $25,000 of college bond assets in the financial aid need determination is deleted.  The HEC Board and the state finance committee are specifically directed to consider the advisability of offering incentives to purchase the bonds.

CHANGES PROPOSED BY COMMITTEE ON WAYS & MEANS/APPROPRIATIONS: Removes the state finance committee's authority to provide additional financial incentives to encourage the sale of bonds.

Fiscal Note:      Requested February 3, 1988.

House Committee ‑ Testified For:    (Higher Education) Rep. Georgette Valle, sponsor.

(Ways & Means/Appropriations) Rep. Georgette Valle, sponsor and Tim Kerr, State Treasurers Office.

House Committee - Testified Against:      (Higher Education) None Presented.

(Ways & Means/Appropriation) None Presented.

House Committee - Testimony For:    (Higher Education) A similar program in Illinois proved very popular.  The first bond sale was oversubscribed.

(Ways & Means/Appropriations) The college savings bond program is an economical way to encourage people to save for a college education at no additional cost to the state.

House Committee - Testimony Against:      (Higher Education) None Presented.

(Ways & Means/Appropriations) None Presented.