PRIOR PRINTER'S NO. 457 PRINTER'S NO. 1292
No. 2 Session of 1991
INTRODUCED BY O'DONNELL, SCRIMENTI, COWELL, DeWEESE, THOMAS,
HALUSKA, MRKONIC, BUNT, JOHNSON, COLAIZZO, WAMBACH,
S. H. SMITH, JOSEPHS, STISH, CAPPABIANCA, BATTISTO, WOGAN,
KASUNIC, ROEBUCK, MERRY, RAYMOND, RUDY, PESCI, GERLACH,
PRESTON, TIGUE, LEVDANSKY, ITKIN, E. Z. TAYLOR, ROBINSON,
HANNA, BELARDI, KENNEY, R. C. WRIGHT, STEIGHNER,
D. W. SNYDER, JAMES, HASAY, TRICH, VEON, BROUJOS, SERAFINI,
ADOLPH, TANGRETTI, HUGHES, TELEK, KOSINSKI, GEORGE, LINTON,
McNALLY, LaGROTTA, CORRIGAN, FAIRCHILD, MAIALE, GLADECK,
STUBAN, DALEY, HAGARTY, LUCYK, FEE, BELFANTI, FARMER,
STABACK, MARKOSEK, D. R. WRIGHT, HERMAN, MICHLOVIC, TRELLO,
MELIO, OLASZ, HECKLER, NAHILL, VAN HORNE, FARGO, SAURMAN,
O'BRIEN, DeLUCA, CORNELL, BISHOP, HAYES, DERMODY, PERZEL,
GIGLIOTTI, REINARD, REBER, COLAFELLA, HAYDEN, LAUGHLIN,
KRUSZEWSKI, CLYMER, LESCOVITZ, COHEN, FLICK, CLARK AND FOX,
FEBRUARY 12, 1991
AS RE-REPORTED FROM COMMITTEE ON APPROPRIATIONS, HOUSE OF
REPRESENTATIVES, AS AMENDED, APRIL 15, 1991
AN ACT
1 Providing for the issuance and sale of certain bonds; and
2 further providing for 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
10 fullest opportunity to learn and to develop their intellectual
11 and mental capacities and skills; and that, to achieve these
1 ends, it is of the utmost importance that Pennsylvania residents
2 be provided with investment alternatives to enhance their
3 financial access to institutions of higher education. It is the
4 intent of this act to encourage enrollment in institutions of
5 higher education located within Pennsylvania.
6 The General Assembly of the Commonwealth of Pennsylvania
7 hereby enacts as follows:
8 Section 1. Short title.
9 This act shall be known and may be cited as the College
10 Savings Bond Act.
11 Section 2. Definitions.
12 The following words and phrases when used in this act shall
13 have the meanings given to them in this section unless the
14 context clearly indicates otherwise:
15 "Agency." The Pennsylvania Higher Education Assistance
16 Agency.
17 "Bond." A certificate or evidence of a debt on which the
18 issuing governmental body promises to pay the bondholders a
19 specified amount of interest for a specified length of time, and
20 to repay the loan on the expiration date.
21 "College savings bonds." A class of bonds issued by the
22 Commonwealth as zero coupon bonds pursuant to any unissued debt
23 authorization and the provisions of this act.
24 "Institution of higher education." All public and private
25 colleges and universities located within this Commonwealth,
26 including, but not limited to, State-owned and State-related
27 colleges and universities, member institutions of the State
28 System of Higher Education and community and junior colleges.
29 The term does not include any educational institution engaged in
30 sectarian instruction, or any place of religious teaching or
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1 worship.
2 "Issuing officials." The Governor, the Auditor General and
3 the State Treasurer.
4 "Zero coupon bond." A bond sold at an initial purchase price
5 below its maturity value which does not entitle its holder to
6 receive periodic payments of interest but whose maturity value
7 is payable in one payment on a fixed date.
8 Section 3. Issuance and sale of college savings bonds.
9 (a) General rule.--In order to provide investors with
10 investment alternatives to enhance their financial access to
11 institutions of higher education located within this
12 Commonwealth, and in furtherance of the public policy of this
13 act, a portion of the bonds issued should be designated as
14 college savings bonds. Where feasible, the issuing officials
15 shall follow the recommendation of the agency and designate the
16 issue, in whole or in part, as college savings bonds.
17 (b) Annual recommendation.--The agency shall annually
18 recommend the amount needed to carry out this act and shall so
19 notify the issuing officials.
20 Section 4. Nature of bonds.
21 Bonds to be issued and sold as college savings bonds shall be
22 designated by the issuing officials as college savings bonds in
23 the proceedings authorizing the issuance of such bonds. College
24 savings bonds may be sold at such prices and in such manner as
25 may be determined by the issuing officials.
26 Section 5. Sale of college savings bonds.
27 (a) General rule.--College savings bonds may be sold at
28 competitive or negotiated sale, as directed by the issuing
29 officials, for prices as the issuing officials shall determine.
30 However, a negotiated sale shall be authorized only upon a
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1 determination by the issuing officials that a negotiated sale
2 will result in either a more efficient sale of college savings
3 bonds or greater access to the bonds by investors who are
4 residents of this Commonwealth. Prior to the initial sale of the
5 college savings bonds, the issuing officials shall develop a
6 plan that will insure purchasing access to the individual
7 investor as well as equitable geographic availability to all
8 citizens of this Commonwealth.
9 (b) Subscriptions.--Whether college savings bonds are sold
10 by competitive or negotiated sale, the issuing officials may
11 direct the State Treasurer, the agency, a department or agency
12 under the jurisdiction of the Governor, or may enter into any
13 agreement or agreements with banks, trust companies or other
14 firms capable of performing such duties, to accept subscriptions
15 and payments for the purchase of college savings bonds. At the
16 option of the issuing officials, the subscriptions shall be
17 filled by the college savings bond underwriters; or the issuing
18 officials shall sell bonds to subscribers residing in this
19 Commonwealth at market prices and rates of accretion as the
20 issuing officials shall establish.
21 (c) Accretion rates.--College savings bonds may bear a fixed
22 or variable accretion rate. To the extent variable rate debt is
23 issued, the issuing officials are empowered to enter into
24 contractual arrangements with third parties, whereby such
25 parties agree to absorb accretion rate risk in exchange for
26 assuming a fixed-rate payment schedule or other consideration
27 pursuant to accretion rate swaps, hedges and other financial
28 devices, in order to reduce accretion rate risk to the
29 Commonwealth. No agreement or arrangement with third parties to
30 absorb accretion rate risk as described in this subsection shall
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1 be entered into unless, in the judgment of the State Treasurer,
2 adequate provision has been made to collateralize or otherwise
3 protect the ability of the Commonwealth to realize its interests
4 under the agreement or arrangement consistent with the
5 provisions of the act of April 9, 1929 (P.L.343, No.176), known
6 as The Fiscal Code.
7 Section 6. Maximum bonds to be issued.
8 College savings bonds shall not be issued in any given fiscal
9 year in an aggregate principal amount greater than 1/3 of the
10 total aggregate principal amount of general obligation bonds
11 projected to be issued by the Commonwealth during that fiscal
12 year or $100,000,000, whichever is greater. For purposes of
13 calculating the aggregate principal amount of college savings
14 bonds for purposes of this act or for calculating debt within
15 the meaning of any constitutional or statutory limitation on the
16 incurring of debt, the aggregate principal amount of any
17 discount bond shall be the aggregate of the initial offering
18 prices at which such bonds are offered for sale to the public,
19 without reduction for underwriter's discount or other expenses.
20 Section 7. Bond amortization and maturity.
21 The issuing officials shall provide for the amortization of
22 debt represented by college savings bonds over the term of the
23 bonds as prescribed by the Constitution for debt to be amortized
24 in substantial and regular amounts. The first amortization shall
25 be due prior to the expiration of a period equal to 1/10 of the
26 term of the debt. For the purposes of this act, bonds are
27 amortized in substantial and regular amounts if they mature
28 annually or semiannually and the largest initial principal
29 amount scheduled to mature in any one bond year does not exceed
30 an amount equal to three times the average of the annual initial
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1 principal amounts for all other bond years of the college
2 savings bond issue. Within the limits imposed by the
3 Constitution and this act, the issuing officials shall establish
4 periodic maturity amounts so as to reasonably meet anticipated
5 demand by individual investors for the various maturities; but
6 in no case shall a college savings bond have a maturity date
7 greater than 20 years following the date of original issue.
8 Section 8. Financial aid.
9 No contributions toward the purchase of the first $25,000 in
10 maturity value of college savings bonds shall be considered in
11 evaluating the financial situation of a student, or be deemed a
12 financial resource of, or a form of financial aid or assistance
13 to, the student for purposes of determining the eligibility of
14 the student for any scholarship, grant or monetary assistance
15 awarded by the agency, the Commonwealth or any agency thereof;
16 nor shall the first $25,000 in maturity value of college savings
17 bonds provided for a qualified student under this act reduce the
18 amount of any scholarship, grant or monetary assistance which
19 the student is entitled to be awarded by the agency, the
20 Commonwealth or any agency thereof as provided by law.
21 Section 9. Additional financial incentives. <--
22 The Governor and the agency shall also provide for additional
23 financial incentives to be provided to holders of bonds to
24 encourage the enrollment of students at institutions of higher
25 education in this Commonwealth. These financial incentives shall
26 be in such forms as determined by the agency at the time of the
27 authorization of such college savings bonds and may include,
28 among others, supplemental payments to the holders of such bonds
29 at maturity to be applied to tuition costs at institutions of
30 higher education. These financial incentives shall be provided
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1 only if, in the sole judgment of the Governor and the agency,
2 the cost of such incentives shall not cause the cost to the
3 Commonwealth of the proceeds of the college savings bonds being
4 sold to be increased by more than 0.05%.
5 Section 10 9. Other law. <--
6 Except as inconsistent with this act, all other provisions of
7 law relating to debt authorization apply to bonds issued under
8 this act.
9 Section 11 10. Effective date. <--
10 This act shall take effect immediately.
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