PRIOR PRINTER'S NO. 283 PRINTER'S NO. 3710
No. 255 Session of 1989
INTRODUCED BY O'DONNELL, HAYES, COWELL, COLAFELLA, BATTISTO,
KOSINSKI, COY, LESCOVITZ, LINTON, RUDY, TIGUE, YANDRISEVITS,
HERMAN, FOX, PERZEL, LaGROTTA, GIGLIOTTI, RYBAK, F. TAYLOR,
DeWEESE, FEE, MICHLOVIC, KASUNIC, J. L. WRIGHT, GEIST,
WOZNIAK, WOGAN, LLOYD, WAMBACH, FLICK, BUNT, S. H. SMITH,
HALUSKA, MOWERY, STEIGHNER, BOYES, McCALL, DOMBROWSKI,
ROBINSON, PHILLIPS, DIETTERICK, MAIALE, GODSHALL, DORR,
SERAFINI, MELIO, KENNEY, STABACK, LEVDANSKY, FARMER, NOYE,
HUGHES, VROON, TANGRETTI, PISTELLA, VEON, KUKOVICH, FREEMAN,
FARGO, MAINE, LUCYK, SAURMAN, LAUGHLIN, NAHILL, MOEHLMANN,
REINARD, GLADECK, CAPPABIANCA, DeLUCA, BELARDI, D. R. WRIGHT,
MERRY, WESTON, CORRIGAN, ADOLPH, STISH, PRESTON, STUBAN,
HASAY, LETTERMAN, MORRIS, PRESSMANN, JAROLIN, TRELLO, ARGALL,
DEMPSEY, CAWLEY, D. W. SNYDER, MURPHY, BOWLEY, McVERRY,
VAN HORNE, HECKLER, LASHINGER, GANNON, CORNELL, OLASZ,
COLAIZZO, SEMMEL, CIVERA, HAGARTY, DALEY, ITKIN, CLYMER,
JOHNSON, JOSEPHS, SALOOM, REBER, TRICH, RAYMOND, HAYDEN,
McNALLY, LANGTRY, EVANS, HOWLETT, MRKONIC AND ROEBUCK,
FEBRUARY 6, 1989
AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, JUNE 12, 1990
AN ACT
1 Providing for the issuance AND SALE of certain bonds; and <--
2 providing for further duties of the Pennsylvania Higher
3 Education Assistance Agency.
4 The General Assembly finds and declares that, for the benefit
5 of the people of the Commonwealth of Pennsylvania, the conduct
6 and increase of their commerce, the protection and enhancement
7 of their welfare, the development of continued prosperity and
8 the improvement of their health and living conditions, it is
9 essential that this and future generations of youth be given the
1 fullest opportunity to learn and to develop their intellectual
2 and mental capacities and skills; and that, to achieve these
3 ends, it is of the utmost importance that Pennsylvania residents
4 be provided with investment alternatives to enhance their
5 financial access to institutions of higher education. It is the
6 intent of this act to encourage enrollment in institutions of
7 higher education located within Pennsylvania.
8 The General Assembly of the Commonwealth of Pennsylvania
9 hereby enacts as follows:
10 Section 1. Short title.
11 This act shall be known and may be cited as the College
12 Savings Bond Act.
13 Section 2. Definitions.
14 The following words and phrases when used in this act shall
15 have the meanings given to them in this section unless the
16 context clearly indicates otherwise:
17 "Agency." The Pennsylvania Higher Education Assistance
18 Agency.
19 "Bonds" or "college savings bonds." Bonds issued to fund the <--
20 purposes of this act.
21 "BOND." A CERTIFICATE OR EVIDENCE OF A DEBT ON WHICH THE <--
22 ISSUING GOVERNMENTAL BODY PROMISES TO PAY THE BONDHOLDERS A
23 SPECIFIED AMOUNT OF INTEREST FOR A SPECIFIED LENGTH OF TIME, AND
24 TO REPAY THE LOAN ON THE EXPIRATION DATE.
25 "COLLEGE SAVINGS BONDS." A CLASS OF BONDS ISSUED BY THE
26 COMMONWEALTH AS ZERO COUPON BONDS PURSUANT TO ANY UNISSUED DEBT
27 AUTHORIZATION AND THE PROVISIONS OF THIS ACT.
28 "Institution of higher education." All public and private
29 colleges and universities located within this Commonwealth,
30 including, but not limited to, State-owned and State-related
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1 colleges and universities and, member institutions of the State <--
2 System of Higher Education AND COMMUNITY AND JUNIOR COLLEGES. <--
3 The term does not include any educational institution engaged in
4 sectarian instruction, or any place of religious teaching or
5 worship.
6 "ISSUING OFFICIALS." THE GOVERNOR, THE AUDITOR GENERAL AND <--
7 THE STATE TREASURER.
8 "ZERO COUPON BOND." A BOND SOLD AT AN INITIAL PURCHASE PRICE
9 BELOW ITS MATURITY VALUE WHICH DOES NOT ENTITLE ITS HOLDER TO
10 RECEIVE PERIODIC PAYMENTS OF INTEREST BUT WHOSE MATURITY VALUE
11 IS PAYABLE IN ONE PAYMENT ON A FIXED DATE.
12 Section 3. Issuance and sale of college savings bonds.
13 (A) GENERAL RULE.--In order to provide investors with <--
14 investment alternatives to enhance their financial access to
15 institutions of higher education located within this
16 Commonwealth, and in furtherance of the public policy of this
17 act, a certain percentage of the general obligation bonds issued <--
18 by the Commonwealth, as the agency shall annually determine,
19 shall be designated as college savings bonds, and which shall be
20 zero-coupon bonds. The agency shall annually determine the
21 amount needed to carry out this act and shall so notify the
22 State Treasurer prior to the beginning of the respective fiscal
23 year. A PORTION OF THE BONDS ISSUED SHOULD BE DESIGNATED AS <--
24 COLLEGE SAVINGS BONDS. WHERE FEASIBLE, THE ISSUING OFFICIALS
25 SHALL FOLLOW THE RECOMMENDATION OF THE AGENCY AND DESIGNATE THE
26 ISSUE, IN WHOLE OR IN PART, AS COLLEGE SAVINGS BONDS.
27 (B) ANNUAL RECOMMENDATION.--THE AGENCY SHALL ANNUALLY
28 RECOMMEND THE AMOUNT NEEDED TO CARRY OUT THIS ACT AND SHALL SO
29 NOTIFY THE ISSUING OFFICIALS.
30 Section 4. Nature of bonds.
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1 Bonds to be issued and sold as college savings bonds shall be
2 designated by the Governor, the State Treasurer and the agency <--
3 ISSUING OFFICIALS as college savings bonds in the proceedings <--
4 authorizing the issuance of such bonds. College savings bonds
5 may bear interest payable at such time or times and may be sold <--
6 at such prices and in such manner as may be determined by the
7 Governor and the State Treasurer. College savings bonds may be <--
8 sold at negotiated sale if the State Treasurer determines that a
9 negotiated sale will result in either a more efficient and
10 economical sale of such bonds or greater access to such bonds by
11 investors who are residents of this Commonwealth. If any college
12 savings bonds are sold at a negotiated sale, the underwriter or
13 underwriters to which such bonds are sold shall:
14 (1) be organized, incorporated or have their principal
15 place of business in this Commonwealth; or
16 (2) in the judgment of the State Treasurer, have
17 sufficient capability to make a broad distribution of such
18 bonds to investors resident in this Commonwealth.
19 In determining the aggregate principal amount of college savings
20 bonds which have been issued to fund this act, the aggregate
21 original principal amount of such bonds issued and sold shall be
22 taken into account. Any bond issued under this act shall be
23 payable in one payment on a fixed date, unless the Governor and
24 the State Treasurer determine otherwise.
25 Section 5. Security of college savings bonds.
26 Any college savings bonds issued to fund this act shall be
27 direct, general obligations of the Commonwealth. The Governor
28 and the State Treasurer may covenant on behalf of the
29 Commonwealth with or for the benefit of the holders of such
30 bonds as to all matters deemed advisable by such officials,
19890H0255B3710 - 4 -
1 including the terms and conditions for creating and maintaining
2 sinking funds, reserve funds and such other special funds as may
3 be created, separate and apart from all other funds and accounts
4 of the Commonwealth, and such officials may make such other
5 covenants as may be deemed necessary or desirable to assure the
6 prompt payment of the principal of and interest on such bonds.
7 Section 6. Exemption from taxation.
8 As provided in this act, the issuance of college savings
9 bonds is in all respects for the benefit of the people of this
10 Commonwealth, the conduct and increase of their commerce, the
11 protection and enhancement of their welfare, the development of
12 continued prosperity and the improvement of their health and
13 living conditions, and the issuance of such bonds is for public
14 purposes. In consideration thereof, college savings bonds and
15 the income derived therefrom shall be free from all taxation by
16 the Commonwealth or its political subdivisions.
17 Section 7. Additional financial incentives.
18 The Governor and the agency shall also provide for additional
19 financial incentives to be provided to holders of bonds to
20 encourage the enrollment of students at institutions of higher
21 education in this Commonwealth. These financial incentives shall
22 be in such forms as determined by the agency at the time of the
23 authorization of such college savings bonds and may include,
24 among others, supplemental payments to the holders of such bonds
25 at maturity to be applied to tuition costs at institutions of
26 higher education. These financial incentives shall be provided
27 only if, in the sole judgment of the Governor and the agency,
28 the cost of such incentives shall not cause the cost to the
29 Commonwealth of the proceeds of the college savings bonds being
30 sold to be increased by more than 0.5%. ISSUING OFFICIALS. <--
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1 SECTION 5. SALE OF COLLEGE SAVINGS BONDS.
2 (A) GENERAL RULE.--COLLEGE SAVINGS BONDS MAY BE SOLD AT
3 COMPETITIVE OR NEGOTIATED SALE, AS DIRECTED BY THE ISSUING
4 OFFICIALS, FOR PRICES AS THE ISSUING OFFICIALS SHALL DETERMINE.
5 HOWEVER, A NEGOTIATED SALE SHALL BE AUTHORIZED ONLY UPON A
6 DETERMINATION BY THE ISSUING OFFICIALS THAT A NEGOTIATED SALE
7 WILL RESULT IN EITHER A MORE EFFICIENT SALE OF COLLEGE SAVINGS
8 BONDS OR GREATER ACCESS TO THE BONDS BY INVESTORS WHO ARE
9 RESIDENTS OF THIS COMMONWEALTH.
10 (B) SUBSCRIPTIONS.--WHETHER COLLEGE SAVINGS BONDS ARE SOLD
11 BY COMPETITIVE OR NEGOTIATED SALE, THE ISSUING OFFICIALS MAY
12 DIRECT THE STATE TREASURER, THE AGENCY, A DEPARTMENT OR AGENCY
13 UNDER THE JURISDICTION OF THE GOVERNOR, OR MAY ENTER INTO ANY
14 AGREEMENT OR AGREEMENTS WITH BANKS, TRUST COMPANIES OR OTHER
15 FIRMS CAPABLE OF PERFORMING SUCH DUTIES, TO ACCEPT SUBSCRIPTIONS
16 AND PAYMENTS FOR THE PURCHASE OF COLLEGE SAVINGS BONDS. AT THE
17 OPTION OF THE ISSUING OFFICIALS, THE SUBSCRIPTIONS SHALL BE
18 FILLED BY THE COLLEGE SAVINGS BOND UNDERWRITERS; OR THE ISSUING
19 OFFICIALS SHALL SELL BONDS TO SUBSCRIBERS RESIDING IN THIS
20 COMMONWEALTH AT MARKET PRICES AND RATES OF ACCRETION AS THE
21 ISSUING OFFICIALS SHALL ESTABLISH.
22 (C) ACCRETION RATES.--COLLEGE SAVINGS BONDS MAY BEAR A FIXED
23 OR VARIABLE ACCRETION RATE. TO THE EXTENT VARIABLE RATE DEBT IS
24 ISSUED, THE ISSUING OFFICIALS ARE EMPOWERED TO ENTER INTO
25 CONTRACTUAL ARRANGEMENTS WITH THIRD PARTIES, WHEREBY SUCH
26 PARTIES AGREE TO ABSORB ACCRETION RATE RISK IN EXCHANGE FOR
27 ASSUMING A FIXED-RATE PAYMENT SCHEDULE OR OTHER CONSIDERATION
28 PURSUANT TO ACCRETION RATE SWAPS, HEDGES AND OTHER FINANCIAL
29 DEVICES, IN ORDER TO REDUCE ACCRETION RATE RISK TO THE
30 COMMONWEALTH. NO AGREEMENT OR ARRANGEMENT WITH THIRD PARTIES TO
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1 ABSORB ACCRETION RATE RISK AS DESCRIBED IN THIS SUBSECTION SHALL
2 BE ENTERED INTO UNLESS, IN THE JUDGMENT OF THE STATE TREASURER,
3 ADEQUATE PROVISION HAS BEEN MADE TO COLLATERALIZE OR OTHERWISE
4 PROTECT THE ABILITY OF THE COMMONWEALTH TO REALIZE ITS INTERESTS
5 UNDER THE AGREEMENT OR ARRANGEMENT CONSISTENT WITH THE
6 PROVISIONS OF THE ACT OF APRIL 9, 1929 (P.L.343, NO.176), KNOWN
7 AS THE FISCAL CODE.
8 SECTION 6. MAXIMUM BONDS TO BE ISSUED.
9 COLLEGE SAVINGS BONDS SHALL NOT BE ISSUED IN ANY GIVEN FISCAL
10 YEAR IN AN AGGREGATE PRINCIPAL AMOUNT GREATER THAN 1/3 OF THE
11 TOTAL AGGREGATE PRINCIPAL AMOUNT OF GENERAL OBLIGATION BONDS
12 PROJECTED TO BE ISSUED BY THE COMMONWEALTH DURING THAT FISCAL
13 YEAR OR $100,000,000, WHICHEVER IS GREATER. FOR PURPOSES OF
14 CALCULATING THE AGGREGATE PRINCIPAL AMOUNT OF COLLEGE SAVINGS
15 BONDS FOR PURPOSES OF THIS ACT OR FOR CALCULATING DEBT WITHIN
16 THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY LIMITATION ON THE
17 INCURRING OF DEBT, THE AGGREGATE PRINCIPAL AMOUNT OF ANY
18 DISCOUNT BOND SHALL BE THE AGGREGATE OF THE INITIAL OFFERING
19 PRICES AT WHICH SUCH BONDS ARE OFFERED FOR SALE TO THE PUBLIC,
20 WITHOUT REDUCTION FOR UNDERWRITER'S DISCOUNT OR OTHER EXPENSES.
21 SECTION 7. BOND AMORTIZATION AND MATURITY.
22 THE ISSUING OFFICIALS SHALL PROVIDE FOR THE AMORTIZATION OF
23 DEBT REPRESENTED BY COLLEGE SAVINGS BONDS OVER THE TERM OF THE
24 BONDS AS PRESCRIBED BY THE CONSTITUTION FOR DEBT TO BE AMORTIZED
25 IN SUBSTANTIAL AND REGULAR AMOUNTS. THE FIRST AMORTIZATION SHALL
26 BE DUE PRIOR TO THE EXPIRATION OF A PERIOD EQUAL TO 1/10 OF THE
27 TERM OF THE DEBT. FOR THE PURPOSES OF THIS ACT, BONDS ARE
28 AMORTIZED IN SUBSTANTIAL AND REGULAR AMOUNTS IF THEY MATURE
29 ANNUALLY OR SEMIANNUALLY AND THE LARGEST INITIAL PRINCIPAL
30 AMOUNT SCHEDULED TO MATURE IN ANY ONE BOND YEAR DOES NOT EXCEED
19890H0255B3710 - 7 -
1 AN AMOUNT EQUAL TO THREE TIMES THE AVERAGE OF THE ANNUAL INITIAL
2 PRINCIPAL AMOUNTS FOR ALL OTHER BOND YEARS OF THE COLLEGE
3 SAVINGS BOND ISSUE. WITHIN THE LIMITS IMPOSED BY THE
4 CONSTITUTION AND THIS ACT, THE ISSUING OFFICIALS SHALL ESTABLISH
5 PERIODIC MATURITY AMOUNTS SO AS TO REASONABLY MEET ANTICIPATED
6 DEMAND BY INDIVIDUAL INVESTORS FOR THE VARIOUS MATURITIES; BUT
7 IN NO CASE SHALL A COLLEGE SAVINGS BOND HAVE A MATURITY DATE
8 GREATER THAN 20 YEARS FOLLOWING THE DATE OF ORIGINAL ISSUE.
9 Section 8. Financial aid.
10 No contributions toward the purchase of the first $25,000 of <--
11 bonds or accumulated bonds and interest IN MATURITY VALUE OF <--
12 COLLEGE SAVINGS BONDS shall be considered in evaluating the
13 financial situation of a student, or be deemed a financial
14 resource of, or a form of financial aid or assistance to, such
15 student for purposes of determining the eligibility of such
16 student for any scholarship, grant or monetary assistance
17 awarded by the agency, the Commonwealth or any agency thereof;
18 nor shall the first $25,000 of any bond or interest IN MATURITY <--
19 VALUE OF COLLEGE SAVINGS BONDS provided for a qualified student
20 under this act reduce the amount of any scholarship, grant or
21 monetary assistance which such student is entitled to be awarded
22 by the agency, the Commonwealth or any agency thereof as
23 provided by law.
24 Section 9. Program. <--
25 The agency shall develop and implement an educational program
26 and marketing strategies designed to inform parents about the
27 options available for financing a college education and the need
28 to accumulate the financial resources necessary to pay for a
29 college education. The agency shall report to the Governor and
30 the General Assembly on the program and its operation prior to
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1 April 30, 1990.
2 SECTION 9. OTHER LAW. <--
3 EXCEPT AS INCONSISTENT WITH THIS ACT, ALL OTHER PROVISIONS OF
4 LAW RELATING TO DEBT AUTHORIZATION APPLY TO BONDS ISSUED UNDER
5 THIS ACT.
6 Section 10. Effective date.
7 This act shall take effect immediately.
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