STAND. COM. REP. NO. 863-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2760
                                     H.D. 2




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Finance, to which was referred H.B. No.
2760, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO THE COLLEGE SAVINGS PROGRAM,"

begs leave to report as follows:

     The purpose of this bill is to encourage participation in
the College Savings Program (Savings Program) by:

     (1)  Allowing an income tax deduction for contributions made
          to a Savings Program up to $5,000 for an individual
          filer and up to $10,000 for joint filers for each
          taxable year; and

     (2)  Providing an income tax exemption for qualified
          withdrawals from a Savings Program account.

     Upon further consideration, your Committee has amended this
bill to provide clear guidance for the implementation of the
Savings Program by:

     (1)  Authorizing the Director of Finance (Director) to
          directly enter into tuition savings agreements;

     (2)  Providing flexibility to the Director in choosing the
          most appropriate method for investment services by
          deleting the specification that the financial
          organization chosen to manage the program provide only
          one type of investment instrument;

 
 
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     (3)  Requiring the managing financial organization to
          disclose pertinent information to account owners;

     (4)  Giving the Director the flexibility to conduct
          transition arrangements by deleting the section
          governing the management of accounts when the contract
          with the managing financial organization is terminated;

     (5)  Encouraging wider participation in the Savings Program
          by allowing the Director to establish the length of
          time for a participant to be in the Savings Program
          before making withdrawals;

     (6)  Consolidating the provisions regarding costs and
          clarifies that all costs from the Savings Program be
          paid from the assets of the trust fund; and

     (7)  Clarifying definitions.

     Your Committee recognizes that the promotion of a means of
funding college education is a laudable goal, especially when one
considers that a well-educated citizenry is one of the driving
factors behind an active, thriving economy.  However, this must
be balanced against possible negative tax revenue implications in
a time of fiscal austerity.  Given the fact that earnings within
the Savings Program accounts are tax deferred, and withdrawals
are made at the usually lower tax rate of the beneficiary, your
Committee has determined that such additional tax incentives are
not prudent at this time.

     Therefore, your Committee has further amended this bill by
removing the tax deduction and exemption.  Amendments were also
made to bring the law within the safe harbor provision of the
federal tax code.  Additionally, technical amendments were made
for the purposes of clarity and style.

     As affirmed by the record of votes of the members of your
Committee on Finance that is attached to this report, your
Committee is in accord with the intent and purpose of H.B. No.
2760, H.D. 1, as amended herein, and recommends that it pass
Third Reading in the form attached hereto as H.B. No. 2760, H.D.
2.


 
 
 
 
 
 
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                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Finance,



                                   ______________________________
                                   DWIGHT Y. TAKAMINE, Chair