HB1726

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

“Chapter

ADVANCED COLLEGE TUITION PAYMENT PROGRAM

§ -1 Definitions. As used in the chapter, unless the context otherwise requires:

"Board" means the advanced tuition payment and investment board established in section -3.

"College" means any institution of higher education in Hawaii that is recognized by the Internal Revenue Service under Section 529 of the Internal Revenue Code.

"Revolving fund" means the advanced college tution payment program revolving fund established in section -4.

"Tuition payment program" or "program" means the advanced college tuition payment program established in section -2.

§ -2 Advanced college tuition payment program; established; purpose. (a) There is established the advanced college tuition payment program in the university of Hawaii to help make higher education affordable and accessible to state residents by offering a savings incentive that will protect purchasers and beneficiaries against rising tuition costs. The program shall encourage savings and enhance the ability of Hawaii's residents to obtain financial access to institutions of higher education. In addition, the program shall encourage elementary and secondary school students to do well in school to prepare for and aspire to higher education attendance. This program is intended to promote a well-educated and financially secure population to the ultimate benefit of all citizens of the state.

(b) The advanced college tuition payment program shall consist of the sale of tuition units, which may be redeemed by the beneficiary at a future date for an equal number of tuition units regardless of any increase in the price of tuition that may have occurred in the interval. Each purchase shall be worth a specific number or fraction of tuition units at a college as determined by the board. The number of tuition units necessary to pay for a full year's, full-time undergraduate tuition and fee charges at a college shall be set by the board at the time a purchaser enters into a tuition unit contract.

§ -3 Advanced tuition payment and investment board; established. (a) There is created the advanced tuition payment and investment board consisting of nine members, of whom six shall be public members appointed by the governor as provided in section 26-34. Public members shall be appointed from each of the counties of Honolulu, Hawaii, Maui, and Kauai. At least four of the public members shall have knowledge and expertise in public or private financing and education. At least one public member shall represent community advocates for higher education. The public members of the board shall serve four-year staggered terms; provided that the initial appointments shall be as follows:

(1) Two members to be appointed for four years;

(2) Two members to be appointed for three years; and

(3) Two members to be appointed for two years.

The chairperson of the board of education, the superintendent of education, and the director of finance, or their designated representatives, and a representative of the governor's office, shall be ex officio voting members.

(b) The board shall select a chairperson and vice chairperson from among its members; provided that the chairperson shall be a public member.

(c) Five members shall constitute a quorum, whose affirmative vote shall be necessary for all actions. The members shall receive no compensation for services, but shall be entitled to necessary expenses, including travel expenses, incurred in the performance of their duties.

§ -4 Advanced college tuition payment program revolving fund. (a) There is created in the state treasury the advanced college tuition payment program revolving fund.

(b) The following shall be deposited into the revolving fund:

(1) All payments from the purchasers of tuition units;

(2) State appropriations; and

(3) Grants, donations, and private donations.

(d) Notwithstanding any other law to the contrary, no moneys from the revolving fund may be expended for any purposes other than the purposes set forth herein unless otherwise approved by the legislature.

(e) The moneys in the revolving fund shall be used by the board, without appropriation, to make payments to institutions of higher education on behalf of the qualified beneficiaries of the tuition payment program, make refunds, transfers, or direct payments upon the termination of the tuition payment program. Disbursements from the fund shall be made only on the authorization of the board.

(f) The board may invest, reinvest, manage, contract, sell, or exchange investment money in the revolving fund.

§ -5 Advanced college tuition and investment board; duties. (a) The board shall administer the program in a manner reasonably designed to be actuarially sound, such that the assets of the revolving fund will be sufficient to defray the obligations of the revolving fund, including the costs of administration. The board may, at its discretion, discount the minimum purchase price for certain kinds of purchases such as those made by families with young children, as long as the actuarial soundness of the program is not jeopardized.

(b) The board shall:

(1) Annually determine the current value of a tuition unit; and

(2) Promote, advertise, and publicize the program.

(1) Impose reasonable limits on the number of tuition units or units that may be used in any one year;

(2) Determine and set any time limits, if necessary, for the use of benefits under this chapter;

(3) Impose and collect administrative fees and charges in connection with any transaction under this chapter;

(4) Appoint and use advisory committees as needed to provide program direction and guidance;

(5) Formulate and adopt all other policies and rules necessary for the efficient administration of the program;

(6) Consider the addition of an advanced payment program for room and board contracts and also consider a college savings program;

(7) Purchase insurance from insurers licensed to do business in the state, to provide for coverage against any loss in connection with the account's property, assets, or activities or to further insure the value of the tuition units;

(8) Make, execute, and deliver contracts, conveyances, and other instruments necessary to the exercise and discharge of its powers and duties under this chapter;

(9) Contract for the provision of all or part of the services necessary for the management and operation of the program with other state or nonstate entities authorized to do business in the state;

(10) Contract for other services or for goods needed by the board in the conduct of its business under this chapter;

(11) Contract with financial consultants, actuaries, auditors, and other consultants as necessary to carry out its responsibilities under this chapter;

(12) Solicit and accept cash donations and grants from any person, governmental agency, private business, or organization;

(13) Seek the assistance of state agencies, private financial institutions, and any other qualified party with experience in the areas of accounting, actuary, risk management, or investment management to assist with preparing an accounting of the program and ensuring the fiscal soundness of the account; and

(14) Perform all acts necessary and proper to carry out the duties and responsibilities of this program under this chapter.

(c) The board may limit the number of tuition units purchased by any one purchaser or on behalf of any one beneficiary, however, no limit may be imposed that is less than that necessary to achieve four years of full-time, undergraduate tuition charges at a college as determined by the board. The board may also limit the number of participants to ensure the actuarial soundness and integrity of the program.

(d) No tuition unit may be redeemed until two years after the purchase of the unit. Units may be redeemed for enrollment at any college. Units redeemed at a nonstate institution of higher education or for graduate enrollment shall be redeemed at the rate for the university of Hawaii in effect at the time of redemption.

(e) The board shall determine the conditions under which the tuition benefit may be transferred to another family member. In permitting such transfers, the board may not allow the tuition benefit to be bought, sold, bartered, or otherwise exchanged for goods or services by either the beneficiary or the purchaser.

§ -6 Board members; liability. No member of the board shall be liable for negligence, default, or failure of any other person or member of the committee to perform the duties of office and no member may be considered or held to be an insurer of the funds or assets of the advanced college tuition payment program.

§ -7 Purchase of tuition units by organizations; rules; scholarship fund. (a) The board may, at its discretion, allow an organization to purchase tuition units for future use as scholarships. Such organizations electing to purchase tuition units for this purpose shall enter into a contract with the board which, at a minimum, ensures that the scholarship shall be freely given by the purchaser to a scholarship recipient. For such purchases, the purchaser need not name a beneficiary until four months before the date when the tuition units are first expected to be used.

(b) The board shall formulate and adopt such rules as are necessary to determine which organizations may qualify to purchase tuition units for scholarships under this section. The board may also consider additional rules for the use of tuition units if purchased as scholarships.

(c) The board may establish a scholarship fund with moneys from the advanced college tuition payment program revolving fund. A scholarship fund established under this subsection shall be administered by the board and shall be provided to students who demonstrate financial need. Financial need is not a criterion that any other organization need consider when using tuition units as scholarships. The board may also establish its own corporate-sponsored scholarship fund under this chapter.

§ -8 Contractual obligation; appropriations. Contracts with eligible participants shall be contractual obligations legally binding on the state as set forth in this chapter. If, and only if, the moneys in the account are projected to be insufficient to cover the State's contracted expenses for a given biennium, the legislature shall appropriate to the revolving fund the amount necessary to cover such expenses.

§ -9 Actuarial soundness; adjustment of tuition credit purchases. (a) The board shall annually evaluate, and cause to be evaluated by a nationally recognized actuary, the soundness of the revolving fund and determine the additional assets needed, if any, to defray the obligations of the revolving fund.

(b) If funds are insufficient to ensure the actuarial soundness of the revolving fund, the board shall adjust the price of subsequent tuition credit purchases to ensure the program's soundness.

(c) If there are insufficient numbers of new purchases to ensure the actuarial soundness of the revolving fund, the board shall request such funds from the legislature as are required to ensure the integrity of the program. Funds may be appropriated directly to the revolving fund if appropriated under the condition that they be repaid at a later date. The repayment shall be made at such time that the revolving fund is again determined to be actuarially sound.

§ -10 Discontinuation of program; use of units; refunds. (a) In the event that the state determines that the program is not financially feasible, or for any other reason, the state may declare the discontinuance of the program. At the time of such declaration, the board shall cease to accept any further tuition unit contracts or purchases.

(b) After a declaration of discontinuance, the remaining tuition units for all beneficiaries who have either enrolled in higher education or who are within four years of graduation from a secondary school shall be honored until such tuition units have been exhausted, or for ten fiscal years starting from the next fiscal year following the date that the program has been discontinued, whichever comes first. All other contract holders shall receive a refund equal to the value of the current tuition units in effect at the time the program was declared discontinued.

(c) At the end of the ten-year period, any tuition units remaining unused by currently active beneficiaries enrolled in higher education shall be refunded at the value of the current tuition unit in effect at the end of that ten-year period.

(d) At the end of the ten-year period, all other funds remaining in the account not needed to make refunds or to pay for administrative costs shall be deposited into the general fund.

(e) The board may make refunds under other exceptional circumstances as it deems fit. No tuition units may be honored after the end of the tenth fiscal year following the declaration of discontinuance of the program.

§ -11 Refunds. (a) Refunds of the value of tuition units shall be issued only under specific conditions, including:

(1) If there is certification that the beneficiary, who is eighteen years of age or older, will not attend an institution of higher education, will result in a refund not to exceed the current value, as determined by the board, in effect at the time of such certification minus a penalty at a rate established by the board and less any administrative processing fees assessed by the board. The refund shall be made no sooner than ninety days after such certification;

(2) If there is certification of the death or disability of the beneficiary, the refund shall be equal to one hundred per cent of any remaining unused tuition units at the current value, as determined by the board, at the time that such certification is submitted to the board, less any administrative processing fees assessed by the board. The board may, in its discretion, impose a penalty if needed to comply with federal tax rules;

(3) If there is certification by the student of graduation or program completion, the refund shall be as great as one hundred per cent of any remaining unused tuition units at the current value, as determine by the board, at the time that such certification is submitted to the board, less any administrative processing fees assessed by the board. The board, at its discretion, may impose a penalty if needed to comply with federal tax rules;

(4) If there is certification of other tuition and fee scholarships which will cover the cost of tuition for the eligible beneficiary, the refund shall be equal to one hundred per cent of the current value of tuition units, as determined by the board, in effect at the time of the refund request, less any administrative processing fees assessed by the board. The refund under this paragraph may not exceed the value of the scholarship;

(5) Incorrect or misleading information provided by the purchaser or beneficiaries may result in a refund of the purchaser's investment, less any administrative processing fees assesed by the board. The value of the refund shall not exceed the actual dollar value of the purchaser's contributions; and

(6) The board may determine other circumstances qualifying for refunds of remaining unused tuition units and may determine the value of that refund.

(b) With the exception of subsection (a)(1)(2), (5), and (6), no refunds may be made before the units have been held for two years.

§ -12 Exemption from bankruptcy and enforcement of judgments. In regard to bankruptcy filings and enforcement of judgments, tuition units purchased more than two years prior to the date of filing or judgment shall be considered excluded personal assets.

§ - 13 College savings program. (a) The board may establish a college savings program in such form as may be determined by the board, to be a qualified tuition program as defined by the Internal Revenue Service under Section 529 of the Internal Revenue Code, and shall be administered in a manner consistent with the advanced college tuition payment program. The board in planning and devising the college savings program, shall consult with the director of finance, a qualified actuarial consulting firm with appropriate expertise to evaluate such plans, the legislative fiscal and higher education committees, and institutions of higher education.

(b) Up to $200,000 of administrative fees collected from the guaranteed education tuition program participants may be applied as a loan to fund the development of the college savings program. This loan shall be repaid with interest before the conclusion of the biennium in which the committee draws funds for this purpose from the advanced college tuition payment program revolving fund.

(c) If such a college savings program is established, there shall be established in the state treasury the college savings special fund which shall consist of the loan amount in subsection (b) and any interest generated from that amount. The board shall determine the investment policies for the college savings program. The board may contract with an investment company licensed to conduct business in this state to do the investing. The board shall keep full and adequate accounts and records of the assets of each individual participant in the college savings program.

(d) Neither the State nor any eligible educational institution may be considered or held to be an insurer of the funds or assets of the individual participant accounts in the college savings program created by this section nor may any such entity be held liable for any shortage of funds in the event that balances in the individual participant accounts are insufficient to meet the educational expenses of the institution chosen by the student for which the individual participant account was intended.

(e) The board shall adopt rules to implement this section. Such rules shall include:

(1) Administration, investment management, promotion, and marketing;

(2) Compliance with Internal Revenue Service standards; (3) Application procedures and fees;

(4) Start-up costs;

(5) Phasing in the savings program and withdrawals there from;

(6) Deterrents to early withdrawals and provisions for hardship withdrawals; and

(7) Reenrollment in the savings program after withdrawal.

(f) The board may, at its discretion, determine to cease operation of the college savings program if it determines the continuation is not in the best interest, of the state. The committee shall adopt rules to implement this section addressing the orderly distribution of assets.

§ -14 Limitations. (a) This chapter shall not be construed as a promise that any beneficiary shall be granted admission to any institution of higher education, will earn any specific or minimum number of academic credits, or will graduate from any such institution. In addition, this chapter shall not be construed as a promise of either course or program availability.

(b) Participation in this program shall not guarantee an eligible beneficiary the right to resident tuition and fees.

(c) This chapter shall not be construed to imply that the redemption of tuition units shall be equal to any value greater than the undergraduate tuition and services and activities fees at a state institution of higher education as computed pursuant to this chapter. Eligible beneficiaries shall be responsible for payment of any other fee that does not qualify as a services and activities fee, including any expenses for tuition surcharges, tuition overload fees, laboratory fees, equipment fees, book fees, rental fees, room and board charges, or fines."

SECTION 2. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1726
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII