HOUSE BILL REPORT

ESSB 6591

BYSenate Committee on Higher Education (originally sponsored by Senators Saling, Smitherman, Johnson, Rinehart, von Reichbauer, McMullen, Anderson, Gaspard, Patterson, Stratton, Cantu, Garrett and Smith)

Establishing a college savings bond program.

House Committe on Higher Education

Majority Report:  Do pass with amendments.  (12)

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

House Staff:Joan Elgee (786-7166)

AS REPORTED BY COMMITTEE ON HIGHER EDUCATION FEBRUARY 17, 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:

BILL AS AMENDED: A college savings bond program is established to encourage savings for college and provide an investment alternative to enhance financial access to higher education.

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 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.

AMENDED BILL COMPARED TO ENGROSSED SUBSTITUTE: The state finance committee is specifically directed to consider methods for encouraging purchase of the bonds as a means of college savings. The HEC Board's educational program is to cover the need to save for college and the options available, in addition to college savings bonds.  The study date is changed from 1990 to 1991 and the study is to specifically include the advisability of offering incentives to purchase the bonds.

The exemption on interest from any state income tax is deleted.

Other nonsubstantive changes are made.

Fiscal Note:      Available.

House Committee ‑ Testified For:    None Presented.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    None Presented.

House Committee - Testimony Against:      None Presented.