AN ACT Relating to education; adding a new section to chapter 21.20 RCW; adding a new section to chapter 82.04 RCW; adding a new chapter to Title 28B RCW; and creating a new section.

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

NEW SECTION. Sec. 1. The legislature hereby finds and declares the following:

(1) It is an essential function of state government to encourage schools and the means of education;

(2) It is a responsibility of state government to maintain state institutions of higher education;

(3) It is an essential function of state government to encourage attendance at state institutions of higher education;

(4) Tuition costs at public institutions of higher education are difficult for many to afford and are difficult to predict in order to enable individuals and families to plan;

(5) It is in the best interest of the people of this state to foster public higher education in order to provide well-educated citizens;

(6) It is in the best interest of the people of this state to encourage state residents to enroll in state public institutions of higher learning;

(7) Students in elementary and secondary schools tend to achieve a higher level of performance when the payment of tuition for their higher education is secured; and

(8) Providing assistance to assure the higher education of the citizens of this state is necessary and desirable for the public health, safety, and welfare.

NEW SECTION. Sec. 2. In light of the findings described in section 1 of this act, the legislature declares the purposes of this chapter and of the baccalaureate education system trust created by this chapter to be:

(1) To encourage education and the means of education;

(2) To maintain state institutions of higher education by helping to provide a stable financial base to these institutions;

(3) To provide wide and affordable access to state institutions of higher education for the residents of this state;

(4) To encourage attendance at state institutions of higher education;

(5) To provide students and their parents economic protection against rising tuition costs;

(6) To provide students and their parents financing assistance for postsecondary education;

(7) To help provide the benefits of higher education to the people of this state; and

(8) To encourage elementary and secondary students in this state to achieve high standards of performance.

NEW SECTION. Sec. 3. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter:

(1) "Advance tuition payment contract" means a contract entered into by the trust and a purchaser pursuant to this chapter to provide for the higher education of a qualified beneficiary.

(2) "Board" means the baccalaureate education system trust board of directors created in section 9 of this act.

(3) "Fund" means the advance tuition payment fund created in section 8 of this act.

(4) "Purchaser" means a person who makes or is obligated to make advance tuition payments pursuant to an advance tuition payment contract.

(5) "Qualified beneficiary" means any resident of this state.

(6) "State institution of higher education" means a state college or university described in Title 28B RCW or any two or four-year degree-granting institution established by the state after the effective date of this section, which institution is designated by the state as a state institution of higher education for purposes of this chapter.

(7) "Trust" means the baccalaureate education system trust created in section 4 of this act.

NEW SECTION. Sec. 4. (1) There is created the Washington baccalaureate education system trust. The trust shall be in the custody of the state treasurer, but the board shall exercise its prescribed statutory powers, duties, and functions independently of the state treasurer.

(2) The purposes, powers, and duties of the Washington baccalaureate education system trust are vested in and shall be exercised by a board of directors created in section 9 of this act.

NEW SECTION. Sec. 5. (1) The board, on behalf of the trust and the state, may contract with a purchaser for the advance payment of tuition by the purchaser for a qualified beneficiary to attend any of the state institutions of higher education to which the qualified beneficiary is admitted, without further tuition cost to the qualified beneficiary. In addition, an advance tuition payment contract shall set forth the following:

(a) The amount of the payment or payments required from the purchaser on behalf of the qualified beneficiary;

(b) The terms and conditions for making the payment, including, but not limited to, the date or dates upon which the payment, or portions of the payment, shall be due;

(d) The name and age of the qualified beneficiary under the contract. The purchaser, with the approval of and on conditions determined by the board, may subsequently substitute another person for the qualified beneficiary originally named;

(e) The number of credit hours covered by the contract;

(f) The name of the person entitled to terminate the contract, who, as provided by the contract, may be the purchaser, the qualified beneficiary, or a person to act on behalf of the purchaser or qualified beneficiary, or any combination of these persons;

(g) The terms and conditions under which the contract may be terminated and the amount of the refund, if any, to which the person terminating the contract, or specifically the purchaser or designated qualified beneficiary if the contract so provides, shall be entitled upon termination;

(h) The assumption of a contractual obligation by the board to the qualified beneficiary on its own behalf and on behalf of the state to provide for .... credit hours of higher education, not to exceed the .... credit hours required for the granting of a baccalaureate degree, at any state institution of higher education to which the qualified beneficiary is admitted. The advance tuition payment contract shall provide for the .... credit hours of higher education that a qualified beneficiary may receive under the contract if the qualified beneficiary is not entitled to in-state tuition rates;

(i) The period of time from the beginning to the end of which the qualified beneficiary may receive the benefits under the contract; and

(j) Other terms, conditions, and provisions as the board considers in its sole discretion to be necessary or appropriate.

(2) The form of any advance tuition payment contract to be entered into by the board shall first be approved by the higher education coordinating board.

(3) The board shall make any arrangements that are necessary or appropriate with state institutions of higher education in order to fulfill its obligations under advance tuition payment contracts, which arrangements may include, but need not be limited to, the payment by the trust of the then actual in-state tuition cost on behalf of a qualified beneficiary to the state institution of higher education.

(4) An advance tuition payment contract shall provide that the trust provide for the qualified beneficiary to attend a community college in this state before entering a state institution of higher education if the beneficiary so chooses and that the contract may be terminated pursuant to section 7 of this act after completing the requirements for a degree at the community college in this state or before entering the state institution of higher education.

(5) An advance tuition payment contract may provide that, if after a number of years specified in the contract the contract has not been terminated or the qualified beneficiary's rights under the contract have not been exercised, the trust shall retain the amounts otherwise payable and the rights of the qualified beneficiary, the purchaser, or the agent of either shall be considered terminated.

NEW SECTION. Sec. 6. (1) At a minimum, the board shall offer contracts of the two types set forth in subsections (2) and (3) of this section, to be known as plan A and plan B, respectively.

(2) Under plan A:

(a) A payment or series of payments shall be required from the purchaser on behalf of a qualified beneficiary;

(b) The face amount of the payment or payments may be refunded from the trust upon termination of the contract pursuant to section 7 of this act and in accordance with the terms of the contract, less any administrative fee specified in the contract, but any investment income attributable to the payments shall not be refundable;

(c) The trust shall provide for the qualified beneficiary to attend a state institution of higher education at which the qualified beneficiary attends for the number of credit hours required by the institution for the awarding of a baccalaureate degree, without further tuition cost to the qualified beneficiary, except as provided in section 5(1) of this act for a qualified beneficiary who is not entitled to in-state tuition rates.

(3) Under plan B:

(a) A payment or series of payments shall be required on behalf of a qualified beneficiary;

(b) The face amount of the payment or payments may be refunded from the trust upon termination of the contract pursuant to section 7 of this act and in accordance with the terms of the contract, less any administrative fee specified in the contract, together will all or a specified portion of accrued investment income attributable to the payment or payments as may be agreed to in the contract;

(4) Contracts required to be offered by this section may require that payment or payments from a purchaser, on behalf of a qualified beneficiary who may attend a state institution of higher education in fewer than four years after the date the contract is entered into by the purchaser, be based upon attendance at a certain state institution of higher education or at that state institution of higher education with the highest prevailing tuition cost for the number of credit hours covered by the contract.

NEW SECTION. Sec. 7. (1) An advance tuition payment contract shall not authorize termination of the contract except when one of the following occurs:

(a) The qualified beneficiary dies;

(b) The qualified beneficiary is not admitted to a state institution of higher education after making proper application;

(c) The qualified beneficiary certifies to the board, after attaining the age of majority, that he or she has decided not to attend a state institution of higher education and requests, in writing, that the advance tuition payment contract be terminated; or

(d) Other circumstances, determined by the board and set forth in the advance tuition payment contract, occur.

(2) An advance tuition payment contract may provide for a refund pursuant to this section to a person to whom the refund is payable under the contract upon termination of the contract. The refund may include all or a portion of the payment or payments made by the purchaser under the contract and all or a portion of the accrued investment income attributable to the payment or payments. However, except as provided by subsection (4) of this section, the amount of a refund shall not exceed the prevailing tuition cost on the date of termination for the .... credit hours covered by the contract at the state institution of higher education that charges the lowest rate of tuition. The amount of a refund shall be reduced by the amount transferred to a community college on behalf of a qualified beneficiary when the contract is terminated as provided in section 5(4) of this act and by the amount transferred to a state institution of higher education on behalf of a qualified beneficiary. Termination of a contract and the right to receive a refund shall not be authorized under the contract if the qualified beneficiary has completed more than one-half of the .... credit hours required by the state institution of higher education for the awarding of a baccalaureate degree. However, this provision shall not affect the termination and refund rights of a graduate of a community college.

(3) An advance tuition payment contract may authorize a person who is entitled under the advance tuition payment contract to terminate the contract, to direct payment of the refund to an independent degree-granting college or university in this state or to a community college in this state. If directed to make payments under this subsection, the board shall transfer to the designated institution from the trust an amount equal to the tuition due for the qualified beneficiary, but the board shall not transfer a cumulative amount greater than the refund to which the person is entitled. If the refund exceeds the total amount of transfers directed to the designated institution, the excess shall be returned to the person to whom the refund is otherwise payable.

(4) The amount of a refund paid upon termination of the advance tuition payment contract by a person who directs the board pursuant to subsection (3) of this section to transfer the refund to an independent degree-granting college or university located in this state shall not be greater than the prevailing average tuition cost of state institutions of higher education for the number of credit hours covered by the contract on the date of termination.

NEW SECTION. Sec. 8. (1) There is created in the custody of the state treasurer an advance tuition payment fund. Payments received by the trust from purchasers on behalf of qualified beneficiaries or from any other source, public or private, shall be placed in the fund. The fund may be divided into separate accounts.

(2) Assets of the trust shall not be considered state money, common cash of the state, or state revenues for the purposes of Article VIII of the state Constitution or general funds, except as specifically designated.

(3) Unless otherwise provided by resolution of the board, assets of the trust shall be expended in the following order of priority:

(a) To make payments to state institutions of higher education on behalf of qualified beneficiaries;

(b) To make refunds upon termination of an advance tuition payment contract;

(4) Assets of the trust may be invested in any instrument, obligation, security, or property considered appropriate by the board and may be pooled for investment purposes with investments of the state, including, but not limited to, state pension funds, on such terms and conditions as are agreeable to the board.

NEW SECTION. Sec. 9. (1) The baccalaureate education system trust board of directors is hereby created to consist of the state treasurer and six other members with knowledge, skill, and experience in the academic, business, or financial field, who shall be appointed by the governor, by and with the advice and consent of the senate. Not more than two of the six appointed members of the board shall be, during their terms of office on the board, either officials, appointees, or employees of the state. Four of the six appointed members shall serve for fixed terms. Of the four such members first appointed, two shall be appointed for terms that expire December 31, 1987, and two shall be appointed for terms that expire December 31, 1988. Upon completion of each fixed term, a member shall be appointed for a term of three years. A member shall serve until a successor is appointed, and a vacancy shall be filled for the balance of the unexpired term in the same manner as the original appointment. The chief executive officer or director of any state department who is a designated member of or an appointee to the board may appoint a deputy to serve as a voting member of the board in the absence of the chief executive officer or director. The governor shall designate one member of the board to serve as its chairperson. The governor shall appoint two members of the board to serve at the pleasure of the governor, one of whom shall be designated by the governor as the president and chief executive officer of the trust and one of whom shall be designated by the governor as the vice-president of the trust.

(2) Members of the board, other than the president and vice-president if they are not otherwise employees of the state, shall serve without compensation, but shall be reimbursed for travel expenses as provided in RCW 43.03.050 and 43.03.060.

(3) The board may delegate to its president, vice-president, or others such functions and authority as the board considers necessary or appropriate. These functions may include, but are not limited to, the oversight and supervision of employees of the trust.

(4) A majority of the members of the board serving shall constitute a quorum for the transaction of business at a meeting of the board, or the exercise of a power or function of the trust, notwithstanding the existence of one or more vacancies. Voting upon action taken by the board shall be conducted by majority vote of the members present in person at a meeting of the board, and, if authorized by the bylaws of the board and when a quorum is present in person at the meeting, by use of amplified telephonic equipment. The board shall meet at the call of the chairperson and as may be provided in the bylaws of the trust. Meetings of the board may be held anywhere within the state.

(5) The business which the board may perform shall be conducted at a public meeting of the board held in compliance with the open public meetings act. Public notice of the time, date, and place of the meeting shall be given in the manner required by law.

(6) A writing prepared, owned, used, in the possession of, or retained by the board in the performance of an official function shall be made available to the public in compliance with the chapter 42.17 RCW.

NEW SECTION. Sec. 10. In addition to the powers granted by other provisions of this chapter, the board shall have the powers necessary or convenient to carry out and effectuate the purposes, objectives, and provisions of this chapter, the purposes and objectives of the trust, and the powers delegated by other laws or executive orders, including, but not limited to, the power to:

(1) Invest any money of the trust, at the board's discretion, in any instruments, obligations, securities, or property determined proper by the board, and name and use depositories for its money;

(2) Pay money to state institutions of higher education from the trust;

(3) Impose reasonable residency requirements for qualified beneficiaries;

(4) Impose reasonable limits on the number of participants in the trust;

(5) Segregate contributions and payments to the trust into various accounts and funds;

(6) Contract for goods and services and employ personnel as is necessary and engage the services of private consultants, actuaries, managers, legal counsel, and auditors for rendering professional, management, and technical assistance and advice, payable out of any money of the trust;

(7) Solicit and accept gifts, grants, loans, and other aids from any person or the federal, state, or a local government or any agency of the federal, state, or a local government, or participate in any other way in any federal, state, or local government program;

(8) Charge, impose, and collect administrative fees and charges in connection with any transaction and provide for reasonable penalties, including default, for delinquent payment of fees or charges or for fraud;

(9) Procure insurance against any loss in connection with the trust's property, assets, or activities;

(10) Sue and be sued; to have a seal and alter the same at pleasure; to have perpetual succession; to make, execute, and deliver contracts, conveyances, and other instruments necessary or convenient to the exercise of its powers; and to make and amend bylaws;

(11) Enter into contracts on behalf of the state;

(12) Administer the funds of the trust;

(13) Indemnify or procure insurance indemnifying any member of the board from personal loss or accountability from liability resulting from a member's action or inaction as a member of the board, including, but not limited to, liability asserted by a person on any bonds or notes of the authority;

(14) Impose reasonable time limits on use of the tuition benefits provided by the trust, if the limits are made a part of the contract;

(15) Define the terms and conditions under which money may be withdrawn from the trust, including, but not limited to, reasonable charges and fees for any such withdrawal, if the terms and conditions are made a part of the contract;

(16) Provide for receiving contributions in lump sums or periodic sums; and

(17) Establish policies, procedures, and eligibility criteria to implement this chapter.

NEW SECTION. Sec. 11. The board shall annually prepare or cause to be prepared an accounting of the trust and shall transmit a copy of the accounting to the governor, the majority leader of the senate, the speaker of the house of representatives, and the respective minority leaders of the senate and house of representatives. The board shall also make available the accounting of the trust to the purchasers of the trust. The accounts of the board shall be subject to annual audits by the state auditor general or a certified public accountant appointed by the auditor general.

NEW SECTION. Sec. 12. (1) The trust shall be administered in a manner reasonably designed to be actuarially sound such that the assets of the trust will be sufficient to defray the obligations of the trust.

(2) In the accounting of the trust made pursuant to section 11 of this act, the board shall annually evaluate or cause to be evaluated the actuarial soundness of the trust and determine the additional assets needed, if any, to defray the obligations of the trust. If there are not funds sufficient to ensure the actuarial soundness of the trust, the trust shall adjust payments of subsequent purchases to ensure its actuarial soundness.

(3) Before entering into advance tuition payment contracts with purchasers, the state shall solicit answers to appropriate ruling requests from the internal revenue service regarding the tax status of the value received under the contract to the purchaser or qualified beneficiary. No contracts may be entered into without the state making known the status of the request.

(4) Before entering into advance tuition payment contracts with purchasers, the state shall solicit answers to appropriate ruling requests from the securities and exchange commission regarding the application of federal security laws to the trust. No contracts may be entered into without the state making known the status of the request.

NEW SECTION. Sec. 13. State institutions of higher education, purchasers, and qualified beneficiaries may enforce this chapter and any contract entered into pursuant to this chapter in the superior court for Thurston county.

NEW SECTION. Sec. 14. The trust, in its discretion, may contract with others, public or private, to provide all or a portion of the services necessary for the management and operation of the trust. The trust shall also endeavor to work with private sector investment managers and independent degree-granting colleges and universities in this state to study the feasibility of instituting programs between these parties that ensure full tuition payment upon purchase of a prepayment plan with the private college or university.

NEW SECTION. Sec. 15. The assets of the trust shall be preserved, invested, and expended solely pursuant to and for the purposes set forth in this chapter and shall not be loaned or otherwise transferred or used by the state for any purpose other than the purposes of this chapter. This section shall not be construed to prohibit the trust from investing in, by purchase or otherwise, bonds, notes, or other obligations of the state, an agency of the state, or an instrumentality of the state.

NEW SECTION. Sec. 16. Nothing in this chapter or in an advance tuition payment contract entered into pursuant to this chapter shall be construed as a promise or guarantee by the trust or the state that a person will be admitted to a state institution of higher education or to a particular state institution of higher education, will be allowed to continue to attend a state institution of higher education after having been admitted, or will be graduated from a state institution of higher education.

NEW SECTION. Sec. 17. An advance tuition payment contract shall be exempt from chapter 21.20 RCW. An advance tuition payment contract may not be sold or otherwise transferred by the purchaser or qualified beneficiary without the prior approval of the board.

NEW SECTION. Sec. 18. This chapter shall be known and may be cited as the Washington baccalaureate education system trust act.

NEW SECTION. Sec. 19. A new section is added to chapter 21.20 RCW to read as follows:

Advance tuition payments under chapter 28B.-- RCW (sections 1 through 18 of this act) are exempt from this chapter.

NEW SECTION. Sec. 20. A new section is added to chapter 82.04 RCW to read as follows:

This chapter shall not apply to the baccalaureate education system trust created in chapter 28B.-- RCW (sections 1 through 18 of this act).

NEW SECTION. Sec. 21. Sections 1 through 18 of this act shall constitute a new chapter in Title 28B RCW.

NEW SECTION. Sec. 22. This act shall be construed liberally to effectuate the legislative intent, the purposes of the act, and as complete and independent authority for the performance of each and every act and thing authorized in the act, and all powers granted in the act shall be broadly interpreted to effectuate such intent and purposes and not as to limitation of powers.

NEW SECTION. Sec. 23. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.