SENATE BILL REPORT

SSB 5221

BYSenate Committee on Higher Education (originally sponsored by Senators Saling, Bauer, Patterson, Rinehart, Smitherman, Bailey, Lee, West and Warnke)

Establishing the advance college payment program.

Senate Committee on Higher Education

Senate Hearing Date(s):January 25, 1989; February 6, 1989; February 21, 1989; February 28, 1989

Majority Report:  That Substitute Senate Bill No. 5221 be substituted therefor, and the substitute bill do pass.

      Signed by Senators Saling, Chairman; Patterson, Vice Chairman; Bauer, Cantu, Smitherman, Stratton, von Reichbauer.

Senate Staff:Shawn Newman (786-7784)

                  March 2, 1989

Senate Committee on Ways & Means

Senate Hearing Date(s):March 3, 1989; March 6, 1989

Majority Report:  That Substitute Senate Bill No. 5221 as recommended by Committee on Higher Education be substituted therefor, and the substitute bill do pass.

      Signed by Senators McDonald, Chairman; Craswell, Vice Chairman; Bailey, Bauer, Bluechel, Cantu, Gaspard, Hayner, Johnson, Lee, Matson, Moore, Owen, Saling, Smith, Talmadge, Warnke, Wojahn.

Senate Staff:Linda Brownell (786-7715)

                  April 5, 1989

AS PASSED SENATE, MARCH 13, 1989

BACKGROUND:

Tuition costs at state colleges and universities have tripled over the last ten years making it more difficult for families and students to afford higher education.  Nationally, charges have risen 113 percent at public colleges and 152 percent at private colleges between 1977-78 and 1987-88.  These increases surpassed the rise in the Consumer Price Index, which was about 85 percent during the same ten-year period.  Concern has been raised that financial aid has not kept pace with these increased costs.

SUMMARY:

The advance college payment program is created to allow any natural or artificial person to contract for future undergraduate tuition, for any beneficiary, named or unnamed, at state institutions of higher education.  Payments received from the sale of these contracts will be deposited in an account in the custody of the State Treasurer.  The State Investment Board establishes and implements investment policy for the account while the Higher Education Coordinating Board administers the program.  The Higher Education Coordinating Board may seek assistance from the State Investment Board, the State Treasurer, the State Actuary, the Office of Financial Management, private financial institutions and any other qualified party to assist with preparing an accounting of the program and ensuring the fiscal soundness of the account.  The Higher Education Coordinating Board is also authorized to:  limit program participation; offer different contract plans; purchase insurance; and contract out services, especially marketing, billing, record keeping and accounting.  The account will be used to pay tuition or make refunds, and pay administrative costs.

Contracts cover a specific number of credit hours of tuition but not more than what is required for a baccalaureate degree.  Contracts apply to any state community college, college or university but do not guarantee admission, continued attendance or graduation.

If the beneficiary dies, fails to get admitted to a state institution or decides, after reaching the age of majority, not to attend a state institution, a refund, not to exceed the average tuition for the state postsecondary system contracted for may be paid.  The Higher Education Coordinating Board may approve substitutions for the original beneficiary.

Except for contracts which are terminated after graduation from a community college, there is no right to any refund if the student completes more than one-half of the credit hours required for a baccalaureate degree.  Contractual benefits which have not been used within five years will be presumed abandoned under the Uniform Unclaimed Property Act, Chapter 63.29 RCW.

The state's obligation is expressly limited to the advance college payment program account.  The contracts do not constitute any guarantee, debt, liability, or pledge of the faith and credit of the state or any agency of the state beyond the funds in the account.  Each year the Higher Education Coordinating Board will prepare an accounting and evaluate the actuarial soundness of the program.  Express language is required in all contracts explaining that in the event the Higher Education Coordinating Board finds the program to be financially unsound, purchasers would only get their pro-rata share of available account assets.

Before entering into any contracts, the Higher Education Coordinating Board is required to solicit and make known the status of ruling requests from the Internal Revenue Service and the Security and Exchange Commission.

The Higher Education Coordinating Board is required to study the program and submit a report, including recommendations, to the Legislature by January 1, 1990.  Specific study items are enumerated and an appropriation is made to carry out the study.  Before the Higher Education Coordinating Board can offer or sell any contracts, the program must also be reviewed and approved by the Legislature.  In no event shall any contracts be offered or sold before June 30, 1990.

Appropriation:    $45,000

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: HIGHER EDUCATION:  Stephanie Adams, Washington Student Lobby; Elizabeth Woody, Washington Student Lobby; Tim Kerr, Deputy State Treasurer; Michael Coan, Greater Seattle Chamber of Commerce; Dr. Joseph Olander, President, The Evergreen State College; Doug Chandler; John Klacik, Higher Education Coordinating Board

Senate Committee - Testified: WAYS & MEANS:  No one

HOUSE AMENDMENT:

Specific program language is stricken and the State Treasurer, rather than the Higher Education Coordinating Board, is required to study the feasibility of instituting a program.  Language is added to the study requiring the treasurer to solicit appropriate rulings from the Internal Revenue Service and examine other policy issues such as those raised by the Education Commission of the States and the college board.