Current Status Bill Number:3343 Type of Legislation:General Bill GB Introducing Body:House Introduced Date:19970130 Primary Sponsor:Limbaugh All Sponsors:Limbaugh, Allison, Altman, Askins, Barfield, Barrett, Battle, Bauer, Baxley, Beck, Boan, Bowers, Breeland, G. Brown, H. Brown,T. Brown, Campsen, Cato, Chellis, Cooper, Cromer, Dantzler, Davenport, Delleney, Edge, Felder, Fleming, Harrell, Harrison, Haskins, Hawkins, J. Hines, Hinson, Hodges, Inabinett, Jennings, Jordan, Keegan, Kelley, Kennedy, Kinon, Kirsh, Knotts, Koon, Leach, Lee, Limehouse, Littlejohn, Mack, Maddox, Mason, McCraw, McKay, McLeod, McMahand, McMaster, Meacham, Miller, Moody-Lawrence, Mullen, Neilson, Phillips, Pinckney, Quinn, Rice, Robinson, Rodgers, Sandifer, Seithel, Sheheen, Simrill, D. Smith, F. Smith, J. Smith, Stille, Stoddard, Stuart, Tripp, Trotter, Vaughn, Walker, Webb, Whatley, Whipper, Wilder, Wilkes, Wilkins, Witherspoon, Woodrum, Young and Young-Brickell Drafted Document Number:jic\5334htc.97 Companion Bill Number:272 Residing Body:House Current Committee:Ways and Means Committee 30 HWM Subject:Tuition Prepayment Program, Colleges and Universities
Body Date Action Description Com Leg Involved
______ ________ _______________________________________ _______ ____________
House 19970130 Introduced, read first time, 30 HWM
referred to Committee
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TO AMEND TITLE 59, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO EDUCATION, BY ADDING CHAPTER 4 SO AS TO ESTABLISH THE SOUTH CAROLINA TUITION PREPAYMENT PROGRAM WITHIN THE SOUTH CAROLINA BUDGET AND CONTROL BOARD THROUGH WHICH TUITION ASSOCIATED WITH PUBLIC POST-SECONDARY EDUCATION MAY BE PAID IN ADVANCE AND FIXED AT A GUARANTEED LEVEL FOR FOUR YEARS OF UNDERGRADUATE ENROLLMENT.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 59 of the 1976 Code is amended by adding:
Section 59-4-10. This chapter may be cited as the 'South Carolina Tuition Prepayment Program Act'.
Section 59-4-20. As used in this chapter:
(1) 'Advisory board' means the Advisory Board of the South Carolina Tuition Prepayment Program.
(2) 'Board' means the State Budget and Control Board.
(3) 'College or university' means a state-chartered four-year public educational institution of higher learning located in this State.
(4) 'Contributor' means a person who makes or is obligated to make advance payments in accordance with a prepaid tuition contract.
(5) 'Designated beneficiary' means the individual who is designated as the beneficiary of amounts paid or to be paid to the Tuition Prepayment Program or, in the case of a change in beneficiaries as permitted under this chapter, the individual who is the new beneficiary.
(6) 'Director' means the head of the South Carolina Tuition Prepayment Program.
(7) 'Fund' means the South Carolina Tuition Prepayment Fund.
(8) 'Prepaid tuition contract' means the contract entered into by the Director of the South Carolina Tuition Prepayment Program or his designee on behalf of the program and a contributor pursuant to this chapter for the advance payment by the contributor of undergraduate tuition at a fixed, guaranteed level for a designated beneficiary to attend a four-year public educational institution of higher learning in the State or to another educational institution of higher learning that may be provided in this chapter to which the designated beneficiary is admitted.
(9) 'Program' means the South Carolina Tuition Prepayment Program.
(10) 'Tuition' means the amount charged by an educational institution of higher learning for registering for a credit hour of undergraduate instruction and must not be construed to mean any other fees, charges, or costs of textbooks.
Section 59-4-30. (A) The South Carolina Tuition Prepayment Program is created as a program within the Budget and Control Board. The chief administrative and operating official for the program is the director, who must be appointed and supervised by the executive director of the board. The director must be a state official.
(B) To assist the board in its responsibilities there is created the advisory board of the program. The advisory board shall consult and advise the board on all aspects of investment policy, guidelines, and strategy, as well as the costs and termination and withdrawal options of the prepaid tuition contracts. The advisory board must have an opportunity to comment and advise the board before the adoption of investment policies, guidelines, and strategies for the fund.
(C) The advisory board shall consist of five members appointed by the Governor, with the advice and consent of the Senate. Each member shall possess knowledge, skill, and experience in one or more of the following areas: accounting, actuarial science, risk management, finance, banking, or investment management. The members shall serve five-year terms, except that in making the initial appointment the Governor shall appoint two members to terms of three years, two members to terms of four years, and one member to a term of five years. A person appointed to fill a vacancy on the advisory board must be appointed in this manner and shall serve for the remainder of the unexpired term. A member is eligible for reappointment and a member shall serve until a successor is appointed and qualified. To avoid a vacancy on the advisory board, a member appointed by the Governor is authorized to exercise all of the duties and powers of the position until the Senate votes upon the nomination.
(D) The Governor shall designate one member of the advisory board to serve as chairman. A majority of the membership constitutes a quorum. The members of the advisory board are not entitled to a salary for their service but shall receive per diem, subsistence, and mileage as provided by law for members of state boards, committees, and commissions. Administrative support for the advisory board is provided by the board.
(E) With the assistance of the advisory board, the board is responsible for developing and adopting the investment policies, guidelines, and strategies for the fund and determining the costs, termination, and withdrawal options of the prepaid tuition contracts. The board, with the assistance of the advisory board, also shall:
(1) prescribe the terms and conditions of the prepaid tuition contracts, including the terms and conditions under which payments may be withdrawn from the fund. However, the prepaid tuition contract must include a more than de minimis penalty on a refund which is not used for payment of tuition of the designated beneficiary or made on account of the death or disability of the designated beneficiary;
(2) prescribe the requirements, procedures, and guidelines regarding prepaid tuition contracts;
(3) provide for the receipt of advance payments which must be in cash, but may be in lump sums or installments;
(4) prescribe regulations governing the program; and
(5) prescribe and retain fees and costs for services provided by the program.
Section 59-4-40. The program shall implement the provisions of this chapter in accordance with its legislative intent including, but not limited to, the following:
(1) enter into all necessary contracts for services, supplies, goods, space, and equipment including the authority to hire temporary consultants, actuaries, managers, legal counsel, auditors, marketing services, and other professional and technical expertise;
(2) invest and manage the fund as directed by the board;
(3) accept gifts, grants, and other financial assistance from any source;
(4) establish and implement application procedures, prepare and distribute necessary forms and documents, and prepare and distribute the annual reports;
(5) establish other policies, procedures, and criteria to implement and administer the provisions of the chapter;
(6) establish eligibility requirements for designated beneficiaries including, but not limited to, a requirement of residency in this State on the date that a prepaid tuition contract is signed by all parties;
(7) provide adequate safeguards to prevent contributions on behalf of a designated beneficiary in excess of those necessary to provide for the qualified higher education expenses of the designated beneficiary; and
(8) prepare reports required by state and federal law.
Section 59-4-50. The fund is created as a nonpublic special, revolving fund and established and maintained by the State of South Carolina. The fund consists of monies received from contributors, state appropriations, other monies acquired from governmental and private sources, and proceeds from the investments of the fund. The fund is expended only for the purposes of this chapter. There must be a separate accounting for each designated beneficiary.
The fund must be invested as directed by the board after the advice from the advisory board. However, interest in the fund or any portion of the fund must not be used as security for a loan. An attempt to use the fund, a contract, or a portion of either as security for a loan is void. The fund may be invested in any manner authorized by law. The custody and management of the fund is directed by the board. The earnings from fund investments become a part of the fund and expended only for the purposes of this chapter.
Section 59-4-60. (A) The director shall construct prepaid tuition contracts in accordance with the provisions of this chapter and at the direction of the board. The contents of the contracts include, but are not limited to the:
(1) amount of the payment or payments, which must be made in cash only, and the number of payments required from the contributor on behalf of the designated beneficiary;
(2) terms and conditions under which contributors remit payments, including the date of the payments;
(3) provisions for late payment charges, defaults, withdrawals, refunds, and penalties;
(4) name and date of birth of the designated beneficiary upon whose behalf the contract is made and the terms and conditions under which another person may be substituted as then designated beneficiary including, but not limited to, additional payments that may be required;
(5) terms and conditions for termination of the contract including refunds, withdrawals, or transfers of prepayments, and the name of the persons or combination of persons entitled to terminate the contract. However, the program must impose a more than de minimis penalty on a refund of earnings from the account which are not:
(a) used for qualified higher education expenses for the designated beneficiary; or
(b) made on account of the death or disability of the designated beneficiary;
(6) time limitations within which the designated beneficiary must claim benefits through the program;
(7) number of credit hours contracted for by the contributor;
(8) contractual obligation of the program to the designated beneficiary to provide for the payment of a specified number of credit hours of undergraduate instruction at an educational institution of higher learning, not to exceed the average number of credit hours required for the conference of the degree that corresponds to the plan purchased on behalf of the designated beneficiary and to exceed the actual cost of tuition;
(9) provision that:
(a) all payments to the program must be made in cash only;
(b) an interest in the program, the contract, or in either, may not be used as security for a loan; and
(c) a contributor or designated beneficiary may not direct the investment of contributions to the program or earnings on the program;
(10) rights and obligations of the contributor and the fund; and
(11) terms and conditions which the director determines necessary and appropriate.
(B) A prepaid tuition contract shall provide that a contract which has not been terminated or the benefits exercised by the time the designated beneficiary reaches his thirtieth birthday is terminated. Not more than forty-eight continuous months expended by a designated beneficiary as an active duty member of any branch of the armed services of the State of South Carolina or the United States must be added to the time specified pursuant to this subsection.
(C) A prepaid tuition contract guarantees the full payment of tuition at a South Carolina public college or university or a South Carolina public two-year educational institution of higher learning for the number of credit hours purchased.
(D) Nothing in this chapter must be construed as a promise or guarantee that a designated beneficiary may be admitted to an educational institution of higher learning, allowed to continue enrollment at an educational institution of higher learning after admission, or graduated from an institution of higher learning.
(E) Information that identifies the contributors or designated beneficiaries of a prepaid tuition contract and their advance payment account activities is confidential and must not be disclosed without the consent of the designated beneficiary, in accordance with a judicial order, or to those persons with an official need to access the information.
(F) An act or undertaking of the program shall not constitute a debt of the State or any agency, department, institution, or political subdivision, or a pledge of the full faith and credit of the State or any agency, department, institution, or political subdivision, but is payable solely from the fund.
Section 59-4-70. (A) As authorized by the board, up to one percent of the fund each year may be applied and retained toward the costs of administering the program.
(B) The General Assembly shall provide an appropriation from the state's general fund for the necessary costs to initiate the administration and operation of the program.
(C) All of the agencies, departments, and institutions of higher learning of the State are required to provide reasonable cooperation and assistance to the board and the director in the implementation of the program under this chapter.
Section 59-4-80. The director or his designee shall prepare an annual financial report of the fund and the program. This report must be submitted to the board and the advisory board on the date required by the board and in the format prescribed by the board. The program and the fund also must be subject to audit by the State Auditor or his designee. The director or his designee annually shall evaluate the actuarial soundness of the fund and report this information to the board and the advisory board.
Section 59-4-90. The director shall solicit answers to applicable ruling requests from the Internal Revenue Service regarding the tax status of fees paid pursuant to a prepaid tuition contract to the contributor and to the designated beneficiary and from the Securities and Exchange Commission regarding the application of federal securities laws to the program. The director shall make the status of these requests known to the board and the advisory board.
Section 59-4-100. The Comptroller General and the chief finance officers of state agencies, departments, and institutions maintaining separate payroll accounts, at the request of a state employee, may collect and pay by payroll deduction to the fund the appropriate payment in accordance with a prepaid tuition contract.
Section 59-4-110. Notwithstanding any other provision of law, neither the program nor the fund is liable for income taxes, and neither the program nor the fund is liable for local taxes, fees, or assessments. In addition, contributions to the fund credited to a beneficiary's account do not entitle the contributor to a deduction for purposes of the state individual income tax, nor must these contributions be included in the South Carolina gross income of the beneficiary or anyone required to support the beneficiary. Earnings on the account, tuition waivers, credits or payments for tuition, or any money or payout that the designated beneficiary receives or from which he benefits are included in the gross income of the beneficiary or anyone required to support the beneficiary."
SECTION 2. This act takes effect July 1, 1997.