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                                         SUBSTITUTE SENATE BILL NO. 5221

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                                        AS AMENDED BY THE FREE CONFERENCE COMMITTEE

                                                   Passed Legislature - 1989 Reg. - Governor Vetoed

State of Washington                               51st Legislature                              1989 Regular Session

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

Read first time 3/1/89.

AN ACT Relating to the advance college payment program; creating new sections; and making an appropriation.

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

NEW SECTION. Sec. 1.     The higher education coordinating board shall study the feasibility of instituting an advance college payment program and submit a report, including recommendations, to the legislature by January 1, 1990.  This study shall include, but not be limited to:

          (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) An examination of alternative approaches to saving for college, including bonds, investment, and insurance programs, along with the ability of private sector financial institutions and others to provide such a program.  This shall include an examination of whether or not private investment opportunities will do as well or better for purchasers as state programs and consideration of state restrictions on commercial activities;

          (8) 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;

          (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;

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

          (13) An examination of policy issues such as those raised by the education commission of the states and the college board.

NEW SECTION. Sec. 2.     The higher education coordinating board may seek the assistance of 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 study required 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 study.

NEW SECTION. Sec. 3.     The sum of thirty thousand dollars, or as much thereof as may be necessary, is appropriated from the general fund to the higher education coordinating board for the biennium ending June 30, 1991, to carry out the purposes of this act.

                                                                                                                           Passed the Senate April 22, 1989.

                                                                                                                                       President of the Senate.

                                                                                                                           Passed the House April 22, 1989.

                                                                                                                                         Speaker of the House.