S-292                 _______________________________________________

 

                                                   SENATE BILL NO. 5221

                        _______________________________________________

 

State of Washington                               51st Legislature                              1989 Regular Session

 

By Senators Saling, Bauer, Patterson, Rinehart, Smitherman, Bailey, Lee, West and Warnke

 

 

Read first time 1/18/89 and referred to Committee on Higher Education.

 

 


AN ACT Relating to the advance college payment program; amending RCW 28B.80.360; 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 finds that the cost of a college education has increased dramatically over the past ten years and is continuing to increase at such a rate that the opportunity for many of this state's citizens to achieve a higher education is being endangered.  The legislature declares that it is in the interest of the state and its people to provide an advance college payment program which enhances the ability of citizens of this state to plan and provide for their children's college education.   The legislature, recognizing that the increase in college costs is due to both increases in tuition costs and increases in room and board costs, intends that the advance college payment program should provide the citizens of this state with economic protection against these rising college costs.   The legislature declares that this should be accomplished by providing this state's citizens with the opportunity to contract in advance for both tuition and room and board costs or for either of those costs, at their discretion, and be guaranteed by the program that these future college costs will be covered by their investment.

 

          NEW SECTION.  Sec. 2.     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

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

          (2) "Board" means the higher education coordinating board.

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

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

          (5) "Qualified beneficiary" means any person who is a resident of this state at the time the contract is entered into.

          (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 that is designated by the state as a state institution of higher education for purposes of this chapter.

          (7) "Independent college or university" means a private, nonprofit educational institution with the main campus permanently situated in the state that is open to residents of the state, provides programs of education leading to at least the baccalaureate degree, and is accredited by the northwest association of schools and colleges and other institutions that are approved by the board as meeting equivalent standards.

          (8) "Settlement sum" means the sum of money the purchaser is entitled to at the termination of the advance college payment contract.

          (9) "Tuition costs" means those fees, defined in RCW 28B.15.020 and 28B.15.041, assessed for full-time enrollment at a state institution of higher education, including mandatory fees imposed upon all full-time students as a condition of enrollment.

          (10) "Room and board costs" means the amount assessed for lodging and regularly scheduled meals provided to students pursuant to a contract for room and board with a state institution of higher education.

 

          NEW SECTION.  Sec. 3.     (1) There is created the Washington advance college payment fund as an irrevocable trust fund in the custody of the state treasurer.

          (2)  The state investment board shall establish and implement the investment policy for the fund.  All other policies regarding the fund shall be established and carried out by the higher education coordinating board.  The higher education coordinating board shall deposit in the fund all moneys received for the fund.  Moneys in the fund may be spent only for the purposes of the fund as specified in this chapter.  Disbursements from the fund shall be on authorization of the higher education coordinating board.

          (3) The fund shall consist of payments received from purchasers of advance college payment contracts and payments received from other sources, public or private.  Income from the investment of the fund shall be added to the fund.  The assets of the fund may be expended, upon order of the higher education coordinating board, for the purpose of making payments to state institutions of higher education on behalf of the qualified beneficiaries, making refunds, transfers, or direct payments upon the termination of an advance college payment contract, and paying the costs of administration and organization of the fund. The fund may be divided into separate accounts.  Regardless of allocations within the fund, all moneys in the fund may be commingled for investment with other funds subject to investment by the state investment board.

          (4) The higher education coordinating board and the state investment board shall fully cooperate in matters relating to the fund in order to ensure its solvency and ability to meet outstanding commitments.

 

          NEW SECTION.  Sec. 4.     (1) The board, on behalf of the state, may contract with a purchaser for the advance payment of tuition or room and board costs or both by the purchaser for a qualified beneficiary to attend a state institution of higher education to which the qualified beneficiary is admitted without further tuition or room and board cost to the qualified beneficiary.

          (2) An advance college 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 the dates upon which the payment or portions of the payment shall be due;

          (c) Provisions for late payment charges and for default;

          (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 of tuition costs or quarters or semesters of room and board costs 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, a person acting 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 or direct payment, 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 behalf of the state to provide for credit hours of tuition costs or quarters or semesters of room and board costs, not to exceed the number of credit hours required for the granting of a baccalaureate degree or the proportionate number of quarters or semesters of room and board, at any state institution of higher education to which the qualified beneficiary is admitted.  The advance college payment contract shall provide for the number of credit hours of tuition costs that a qualified beneficiary may receive under the contract if the qualified beneficiary is not entitled to resident tuition rates;

          (i) The period of time during which the qualified beneficiary may receive benefits under the contract; and

          (j) Other terms, conditions, and provisions the board considers to be necessary or appropriate.

          (3) The board shall make any arrangements that are necessary or appropriate with state institutions of higher education to fulfill its obligations under advance college payment contracts. Such arrangements may include payment by the fund of current resident tuition costs and room and board costs on behalf of a qualified beneficiary to a state institution of higher education.

          (4) An advance college payment contract shall provide that: (a) The fund shall provide for the qualified beneficiary to attend a community college in this state before entering a state college or university if the beneficiary chooses; and (b) the contract may be terminated pursuant to section 5 of this act after completion of the requirements for a degree at the community college in this state or before entering a state college or university.

          (5) An advance college 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 fund shall retain the amounts otherwise payable and the rights of the qualified beneficiary, the purchaser, or the agent of either shall be considered terminated.

          (6) The board may offer various types of contracts to purchasers, at different levels of expense to the purchaser and with various payment structures, to provide for either tuition or room and board costs or for both.

          (7) The board may offer various types of contracts, at different levels of expense to the purchaser, in which a settlement sum may be paid that either includes or excludes accrued investment income.

          (8) Contracts offered by the board may allow the purchaser to direct the fund to transfer the amount the purchaser is entitled to receive as a settlement sum to the independent college or university of the purchaser's choice on behalf of the qualified beneficiary, should the qualified beneficiary choose to attend an independent college or university.  The settlement sum shall not exceed the maximum amount of tuition or room and board costs or both which would have been received under the contract had the qualified beneficiary attended a state institution of higher education.

 

          NEW SECTION.  Sec. 5.     (1) An advance college payment contract may not be terminated unless:

          (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 college payment contract be terminated; or

          (d) Special conditions adopted by the board have been met.

          (2) 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 awarding a baccalaureate degree.  This provision shall not affect the termination and refund rights of a graduate of a community college.

 

          NEW SECTION.  Sec. 6.     An advance college payment contract may provide for a refund upon termination of the contract.  The settlement sum shall be calculated and paid pursuant to the terms and conditions of the contract.

          (1) The amount of a refund shall not exceed the prevailing tuition or room and board costs on the date of termination for the credit hours or quarters or semesters covered by the contract at the state institution of higher education which charges the highest rates for tuition and fees or room and board.

          (2) 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 4(4) of this act and by the amount transferred to a state college or university on behalf of a qualified beneficiary.

          (3) The right to receive a settlement sum shall not be authorized under a contract if the qualified beneficiary has completed more than one-half of the credit hours required by the state institution of higher education for awarding a baccalaureate degree.  This provision shall not affect the termination and refund rights of a graduate of a community college.

 

          NEW SECTION.  Sec. 7.     The higher education coordinating board shall annually prepare or cause to be prepared an accounting of the fund.  The higher education coordinating board shall also transmit a copy of the accounting to the governor, the majority leader of the senate, the speaker of the house of representatives, the respective minority leaders of the senate and house of representatives, and the state investment board.  The higher education coordinating board shall make available the accounting of the fund to purchasers.

 

          NEW SECTION.  Sec. 8.     (1) The fund shall be administered in a manner reasonably designed to be actuarially sound so that the assets of the fund will be sufficient to defray the obligations of the fund.

          (2) In the accounting of the fund made pursuant to section 7 of this act, the higher education coordinating board shall annually evaluate or cause to be evaluated the actuarial soundness of the fund and determine the additional assets needed, if any, to defray the obligations of the fund.

          (3) If there are not moneys sufficient to ensure the actuarial soundness of the fund, the board shall adjust payments of subsequent purchases to ensure its actuarial soundness.  If there are insufficient numbers of new purchasers to ensure the actuarial soundness of the fund, the state may, if necessary, take action to ensure the actuarial soundness of the fund.

          (4) Before entering into advance college payment contracts with purchasers, the higher education coordinating board 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. The state investment board shall provide whatever assistance may be needed by the higher education coordinating board in formulating this request for information.  No contracts may be entered into without the higher education coordinating board making known the status of the request.

          (5) Before entering into advance college payment contracts with purchasers, the higher education coordinating board shall solicit answers to appropriate ruling requests from the securities and exchange commission regarding the application of federal security laws to the fund.  The state investment board shall provide whatever assistance may be needed by the higher education coordinating board in formulating this request for information.  No contracts may be entered into without the higher education coordinating board making known the status of the request.

 

          NEW SECTION.  Sec. 9.     State institutions of higher education, purchasers, and qualified beneficiaries may enforce this chapter and any contract entered pursuant to this chapter in the superior court for Thurston county.

 

          NEW SECTION.  Sec. 10.    The assets of the fund 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 other purpose.  This section shall not be construed to prohibit the fund 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. 11.    Nothing in this chapter or in an advance college payment contract entered into pursuant to this chapter shall be construed as a promise or guarantee by the fund 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. 12.    An advance college payment contract shall be exempt from chapter 21.20 RCW.  An advance college 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. 13.    The board may delegate such functions and authority as the board considers necessary or appropriate.

 

          NEW SECTION.  Sec. 14.    The board shall adopt rules under chapter 34.05 RCW to carry out its powers and duties under this chapter.

 

          NEW SECTION.  Sec. 15.    The state investment board shall adopt rules under chapter 34.05 RCW to carry out its powers and duties under this chapter.

 

        Sec. 16.  Section 7, chapter 370, Laws of 1985 as amended by section 20, chapter 136, Laws of 1986 and RCW 28B.80.360 are each amended to read as follows:

          The board shall perform the following administrative responsibilities:

          (1) Administer the programs set forth in the following statutes:  Chapter 28A.58 RCW (Washington scholars); chapter 28B.04 RCW (displaced homemakers); chapter 28B.85 RCW (degree-granting institutions); chapter 28B.-- RCW (sections 1 through 15 of this act) (advance college payment program); RCW 28B.10.210 through 28B.10.220 (blind students subsidy); RCW 28B.10.800 through 28B.10.824 (student financial aid program); chapter 28B.12 RCW (work study); RCW 28B.15.067 through 28B.15.076 (educational costs for establishing tuition and fees); RCW 28B.15.543 (tuition waivers for Washington scholars); RCW 28B.15.760 through 28B.15.766 (math and science loans); RCW 28B.80.150 through 28B.80.170 (student exchange compact); RCW 28B.80.240 (student aid programs); and RCW 28B.80.210 (federal programs).

          (2) Study the delegation of the administration of the following:  RCW 28B.65.040 through 28B.65.060 (high-technology board); chapter 28B.85 RCW (degree-granting institutions); RCW 28B.80.150 through 28B.80.170 (student exchange compact programs); RCW 28B.80.200 (state commission for federal law purposes); RCW 28B.80.210 (enumerated federal programs); RCW 28B.80.230 (receipt of federal funds); RCW 28B.80.240 (student financial aid programs); RCW 28A.58.824 through 28A.58.830 (Washington scholars); RCW 28B.15.543 (Washington scholars); RCW 28B.04.020 through 28B.04.110 (displaced homemakers); RCW 28B.10.215 and 28B.10.220 (blind students); RCW 28B.10.790, 28B.10.792, and 28B.10.802 through 28B.10.844 (student financial aid); RCW 28B.12.040 through 28B.12.070 (student work study); RCW 28B.15.100 (reciprocity agreement); RCW 28B.15.730 through 28B.15.736 (Oregon reciprocity); RCW 28B.15.750 through 28B.15.754 (Idaho reciprocity); RCW 28B.15.756 and 28B.15.758 (British Columbia reciprocity); and RCW 28B.15.760 through 28B.15.764 (math/science loans).  The board shall report the results of its study and recommendations to the legislature.

 

          NEW SECTION.  Sec. 17.  A new section is added to chapter 21.20 RCW to read as follows:

          Advance college payments under chapter 28B.-- RCW (sections 1 through 15 of this act) are exempt from this chapter.

 

          NEW SECTION.  Sec. 18.  A new section is added to chapter 82.04 RCW to read as follows:

          This chapter shall not apply to the advance college payment fund created in chapter 28B.-- RCW (sections 1 through 15 of this act).

 

          NEW SECTION.  Sec. 19.    Sections 1 through 15 of this act shall constitute a new chapter in Title 28B RCW.

 

          NEW SECTION.  Sec. 20.    This act shall be liberally construed to effectuate the legislative intent, the purposes of this act, and as complete and independent authority for the performance of each and every act and thing authorized in this act, and all powers granted in this act shall be broadly interpreted to effectuate such intent and purposes and not as to limitation of powers.

 

          NEW SECTION.  Sec. 21.    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.