Be it enacted by the Senate and House of Representatives
in General Court assembled, and by the authority of the same,
SECTION 1. Chapter 15C of the General Laws is hereby amended by striking out section 1, as appearing in the 1988 Official Edition, and inserting in place thereof the following section:-
Section 1. It is declared that for the benefit of the people of the commonwealth, the increase of their commerce, welfare and prosperity and the improvement of their health and living conditions, it is essential that this and future generations of youth be given the fullest opportunity to learn and to develop their intellectual capacity and skills. It is declared further that the people of the commonwealth have a direct interest in promoting the education of its citizens and in maintaining and strengthening its system of higher education and that such actions are likely to result in a higher standard of living and higher levels of employment for citizens of the commonwealth. It is recognized that costs connected with undergraduate and graduate higher education are increasingly burdensome and that it is essential that students attending institutions for higher education in the commonwealth and residents of the commonwealth attending institutions for higher education outside the commonwealth, as well as parents and others responsible for paying the costs thereof, be provided with lower cost financial assistance and with convenient and effective savings programs in order to provide for such costs. It is also recognized that educational institutions for higher education within the commonwealth should be provided with appropriate additional means to provide financial assistance to qualified students and to parents and others responsible for paying the costs of education. It is also recognized that, in order to achieve these objectives, it is desirable for the commonwealth to make such financial assistance and savings programs available on a reciprocal basis to students in and residents of other states. Accordingly, it is the purpose of this chapter and the policy of the commonwealth to provide financial assistance, including loans and savings programs, for the benefit of residents of and students in the commonwealth, their parents and others responsible for the costs of their education and alternative methods to enable institutions for higher education in the commonwealth to assist qualified students, and to make such benefits available on a reciprocal basis to students and institutions in and residents of other states, all to the public benefit and good, to the extent and in the manner provided herein.
SECTION 2. Said chapter 15C is hereby further amended by striking out section 2, as so appearing, and inserting in place thereof the following section:-
Section 2. This chapter may be referred to and cited as the "Massachusetts Educational Financing Authority Act".
SECTION 3. Said chapter 15C, as so appearing, is hereby further amended by striking out section 3 and inserting in place thereof the following section:-
Section 3. As used in this chapter, the following words shall, unless the context otherwise requires, have the following meanings:-
"Authority", the Educational Financing Authority established by section four.
"Authority loans", loans made by the Authority to other parties from the proceeds of its bonds or from other sources for the purpose of funding education loans.
"Bonds" or "revenue bonds", revenue bonds or notes of the Authority issued under the provisions of this chapter, including refunding bonds or notes.
"Bond resolution", the resolution or resolutions of the Authority and the trust agreement or trust agreements, if any, authorizing the issuance of and providing for the terms and conditions applicable to bonds.
"Borrower", a student or any person who has received or agreed to pay an education loan on behalf of a student.
"Commonwealth bonds", any evidence of general obligation indebtedness issued by the commonwealth.
"Default insurance", insurance, letters of credit, standby credit agreements, take-out commitments, agreements or other forms of credit insuring against default or guaranteeing timely payment with respect to education loans, Authority loans or bonds.
"Default reserve fund", a fund established pursuant to a bond resolution for the purpose of securing education loans, Authority loans or bonds.
"Education loan", a loan to a borrower to finance or refinance a student's attendance at an institution for higher education made by or on behalf of such an institution or by a financial institution, which loan is made from or in anticipation of an Authority loan or is purchased by the Authority, or such a loan made directly by the Authority.
"Education loan series portfolio", all education loans made by or on behalf of a specific institution for higher education or participations therein by the Authority and one or more financial institutions which are funded in whole or in part from the proceeds of an Authority loan to such institution out of the proceeds of a related specific bond issue through the Authority.
"Financial index", a number or percentage compiled or reported periodically by an independent party used to indicate change in cost, price or other magnitude at a specified time, or a rate of interest charged by a particular lender or type of lender from time to time for loans of a particular kind.
"Loan funding deposit", monies or other property deposited by or on behalf of an institution for higher education with the Authority or its bond trustee or other agent for the purpose of (i) providing security for bonds, (ii) funding a default reserve fund, (iii) acquiring default insurance, or (iv) defraying costs of the Authority, such monies or properties to be in such amounts as deemed necessary by the Authority as a condition for such institution's participation in the Authority's programs.
"Institution for higher education", a nonprofit degree-granting educational institution within the commonwealth, whether public or private, authorized by law to provide a program of education beyond the secondary school level or any like institution located in a state other than the commonwealth if, in the judgment of the Authority, participation of institutions in such state in one or more programs of the Authority will be beneficial to citizens of the commonwealth and if, to the Authority's satisfaction, such state has agreed to provide reciprocal opportunities to institutions located in the commonwealth.
"Participating institution for higher education", an institution for higher education which, pursuant to the provisions of this chapter, undertakes or agrees to participate in an education loan program or a savings program of the Authority as provided in this chapter.
"Parent", any parent, legal guardian or sponsor of a student at an institution for higher education.
"Savings program", a program approved and administered by the Authority designed to facilitate and encourage savings by or on behalf of students, future students, and parents for the purpose of paying for the costs of attendance at institutions of higher education.
"Tuition agreement", a contractual arrangement between the Authority and an institution of higher education fixing all or a portion of the direct cost of attendance at such institution in one or more future years at a specified amount subject to adjustment in accordance with one or more financial indices.
SECTION 4. Section 4 of said chapter 15C, as so appearing, is hereby amended by striking out paragraph (a) and inserting in place thereof the following paragraph:-
(a) There is hereby established a body politic and corporate to be known as the Massachusetts Educational Financing Authority, herein called the Authority. The Authority is constituted a public instrumentality and the exercise by the Authority of the powers granted by this chapter shall be deemed and held to be the performance of an essential public function. The Authority shall consist of nine members who shall be residents of the commonwealth, not more than five of whom shall be members of the same political party. Seven members shall be appointed by the governor. At least four of the members shall be trustees, directors, officers or employees of public or private institutions for higher education in the commonwealth. At least three of the members shall be persons having a favorable reputation for skill, knowledge and experience in the fields of state and municipal finance, banking, law or investment advice or management. The other two members of the Authority shall be the secretary for economic affairs ex officio and the commissioner of administration ex officio, or their designees. The members of the Authority first appointed shall serve for terms expiring on July first in the years nineteen hundred and eighty-three, nineteen hundred and eighty-four, nineteen hundred and eighty-five, nineteen hundred and eighty-six, nineteen hundred and eighty-seven, and nineteen hundred and eighty-eight, respectively, the term of each such member to be designated by the governor. The term of each ex officio member shall be concurrent with his of her tenure in that office. Upon the expiration of the term of any originally appointed member his successor shall be appointed for a term of six years. The governor shall fill any vacancy for the remainder of the unexpired term. Any member of the Authority may be removed by the governor for misfeasance, malfeasance or wilful neglect of duty or other cause after notice and a public hearing unless such notice and hearing shall be expressly waived in writing. Members of the Authority may serve for successive terms of office.
SECTION 5. Paragraph (d) of said section 4 of said chapter 15C, as so appearing, is hereby amended by striking out, in line 51, the word "Four" and inserting in place thereof the word:- Five.
SECTION 6. Section 5 of said chapter 15C, as so appearing, is hereby amended by striking out, in line 3, the words "for this purpose" and inserting in place thereof the words:- to provide students and parents with convenient and effective savings programs, and for these purposes.
SECTION 7. Said section 5 of said chapter 15C, as so appearing, is hereby further amended by inserting after paragraph (f) the following paragraph:-
(f 1/2) to develop and administer one or more savings programs and to enter into tuition agreements on behalf of itself, the commonwealth, students, parents or any other private parties, all in cooperation with such other public and private parties and in accordance with such criteria or guidelines as the Authority shall deem appropriate to effectuate the purposes of this chapter. To the extent practicable, such savings program or programs shall provide students or parents an opportunity to participate conveniently and shall enable them to set aside relatively small amounts of money at a time and shall incorporate or be available in conjunction with, directly or indirectly, tuition agreements from as many institutions of higher education as feasible. To the extent practicable, and subject to the approval of the state treasurer, at least one such savings program shall include a college opportunity program, as described in section five A. In connection with any savings program or tuition agreement the Authority may accept and hold funds of students, parents, institutions of higher education or others, establish special accounts for such purposes and invest such funds in such manner as is authorized for Authority funds under section eighteen.
SECTION 8. Said section 5 of said chapter 15C, as so appearing, is hereby further amended by striking out paragraph (g) and inserting in place thereof the following paragraph:-
(g) to establish rules and regulations with respect to Authority loans, educational loans, savings programs and tuition agreements.
SECTION 9. Paragraph (h) of said section 5 of said chapter 15C, as so appearing, is hereby amended by inserting after the word "program", in line 43, the words:- or savings program.
SECTION 10. Said chapter 15C, as so appearing, is hereby further amended by inserting after section 5 the following two sections:-
Section 5A. The Authority shall, subject to paragraph (f 1/2) of section five, establish a college opportunity program, which shall, to the extent feasible, include the following elements:-
(a) In cooperation with the state treasurer, the Authority shall make available commonwealth bonds, including bonds in small denominations or units of participation in commonwealth bonds, for purchase on behalf of named beneficiaries who are anticipated to use the payments on said bonds to provide for costs of attendance at institutions of higher education. Said bonds or units of participation, either or both of which shall be referred to for purposes of this section as college opportunity bonds, shall bear interest at a variable rate determined by reference to a financial index reflecting inflation in costs of attendance at such institutions. No payments of interest or principal on said bonds shall be made except upon maturity or earlier redemption. Said bonds shall be made available with varied and flexible redemption and maturity dates, as required to accommodate the savings requirements for beneficiaries who intend to use the principal and interest on said bonds to provide for costs of higher education. The Authority shall make the arrangements necessary to enable purchasers of college opportunity bonds to make purchases by convenient means, including but not limited to the use of payroll savings plans or other recurrent payments of relatively small amounts. Purchasers of college opportunity bonds may be required to pay fees or to buy said bonds at a premium to cover all or part of the costs of issuance, of administration of the college opportunity program, and of the cost to the commonwealth of associated financial arrangements to limit or control the commonwealth's interest costs for college opportunity bonds.
(b) The Authority shall enter into tuition agreements with public and private institutions of higher education to ensure that tuitions charged to college opportunity bond beneficiaries do not rise at a rate greater than the return on college opportunity bonds. Under such agreements, such institutions will agree, as a condition of being accepted as participating institutions in the college opportunity program, that the tuition charged to a student who pays for said tuition with the proceeds from principal and interest payments from college opportunity bonds will not increase over the tuition at the time of original issuance and sale of said bonds at a rate greater than the interest rate on said bonds and to such other terms as the Authority may require.
(c) The Authority shall, in consultation with the state treasurer, establish rules and regulations for the redemption of college opportunity bonds. Such rules shall provide that such bonds, when redeemed for use in meeting costs of the named beneficiary's higher education at a participating institution or for purchase of additional college opportunity bonds, shall be redeemed for the full value provided for pursuant to paragraph (a). Such rules shall further provide for one or more penalties that reduce such redemption value when college opportunity bonds are redeemed for use in meeting costs of the named beneficiary's higher education at an institution other than a participating institution or when they are redeemed for use for other purposes. Such rules shall further allow for the substitution, in appropriate circumstances, of a sibling or other close relative in place of the named beneficiary, for the purposes of the restrictions imposed by this paragraph and may allow for early redemption in cases of extreme hardship.
(d) The Authority shall study, and shall consult with the state treasurer and the secretary of administration and finance concerning, the practicability and the desirability of the commonwealth entering into financial arrangements, pursuant to section thirty-eight C of chapter twenty-nine, to limit or control the potential costs to the commonwealth of meeting its interest obligations on college opportunity bonds.
(e) The Authority shall investigate the possibility of, and, if feasible, shall negotiate, reciprocal agreements with other governmental entities offering similar college savings plans. Such agreements shall be designed to allow named beneficiaries of college opportunity bonds to use such bonds for educational costs, and to receive the benefits of tuition agreements, at the widest possible range of institutions of higher education, and to allow institutions of higher education in the commonwealth to receive the benefits of participation in college savings programs established by other governmental entities.
Section 5B. For the purposes of implementing and administering savings programs, pursuant to paragraph (f 1/2) of section five, the Authority shall have, in addition to all other powers and duties provided by this chapter, the following additional powers and duties:
(a) To create and supervise a marketing and distribution system for bonds or other units of participation in savings programs, either or both of which shall be referred to for purposes of this section as "units", and to establish proper books of record and account to record the identity of the purchasers and the named beneficiaries, the amounts payable as principal and interest, the receipts and expenses of the Authority with respect to the program and other matters necessary to the administration of the program.
(b) To establish minimum and maximum unit amounts with respect to the savings programs, procedures for the crediting of interest accrued with respect to the units, procedures with respect to payment of the balance due on the final maturity date of a unit or otherwise, procedures with respect to the determinations of eligible beneficiaries, and procedures to accommodate the acquisition of units through payroll savings plans and other similar programs.
(c) To employ financial, marketing, legal and other consultants and advisors for the purpose of consulting with the Authority on the implementation and ongoing administration of the savings programs and to enter into contracts and agreements necessary in connection therewith.
(d) To provide for the terms and conditions of participation in savings programs by participating institutions and to prescribe the form of, from time to time, and to execute such contracts and agreements with the participating institutions as shall be appropriate to reflect such terms and conditions.
(e) To enter into one or more contracts and agreements for marketing, distribution and administration services in connection with savings programs.
(f) To obtain by purchase, lease or license such equipment and facilities, including computer software and hardware, and to employ staff necessary or convenient to carry out the savings programs.
(g) To establish a schedule of fees and charges, including premiums in connection with the sale of units of savings, sufficient to provide for the estimated costs of the program incurred by the Authority.
(h) To take such further actions and establish such further procedures as shall be appropriate to carry out the purposes of the savings programs.
SECTION 11. Section 7 of said chapter 15C, as appearing in the 1988 Official Edition, is hereby amended by inserting after the word "loans", in line 6, the words:- , tuition agreements.
SECTION 12. Section 14 of said chapter 15C, as so appearing, is hereby amended by inserting after the word "notes", in line 2, the words:- , in connection with any savings program.
SECTION 13. Section 14A of said chapter 15C, as so appearing, is hereby amended by striking out, in line 5, the words "the education loan" and inserting in place thereof the word:- any.
SECTION 14. Said chapter 15C is hereby further amended by inserting after section 14A the following section:-
Section 14B. The Authority shall establish, in such form as it deems appropriate, a college opportunity fund, hereinafter referred to as the fund, to which shall be credited all state appropriations and other monies made available to the fund and all income earned on amounts in the fund. Monies in the fund, together with earnings thereon, may be used solely for the purpose of developing, promoting, administering or supporting savings programs and tuition agreements established under this chapter. Monies therein may be held in custody by one or more banks or trust companies having a principal place of business in the commonwealth or may be invested in the manner set forth in section eighteen, as the Authority shall determine. The Authority may pledge all or a portion of the monies or investments which are to be deposited in the fund, or any income therefrom, in furtherance of the purpose for which such fund is created. Such pledge shall be valid and binding as against all parties having claims of any kind against such fund from the time such pledge is made, irrespective of whether such parties have notice thereof.
SECTION 15. Section 18 of said chapter 15C, as appearing in the 1988 Official Edition, is hereby amended by striking out, in line 49, the word "and (viii)" and inserting in place thereof the following:- , (viii)- and by inserting after the word "dollars", in line 52, the following:- , and (ix) in any other manner specifically approved for the purpose of the particular investment by resolution of the Authority.
SECTION 16. Section 21 of said chapter 15C, as so appearing, is hereby amended by inserting after the word "loans", in line 3, the words:- , enter into tuition agreements, participate in savings programs.
SECTION 17. Section 1 of chapter 29 of the General Laws, as so appearing, is hereby amended by striking out in lines 14 to 16, inclusive, the definition of "Bonds".
SECTION 18. Said chapter 29, as so appearing, is hereby further amended by inserting after section 38B the following section:-
Section 38C. In connection with or incidental to the acquisition or carrying of any investment or program of investment or carrying of bonds or notes, the state treasurer, after consultation with the finance advisory board, may enter into such contracts as he may determine to be necessary or appropriate to place the investment or obligation of the commonwealth, as represented by the bonds or notes, investment or program of investment and the contract or contracts, in whole or in part, on such interest rate or cash flow basis as he may desire, including without limitation interest rate swap agreements, insurance agreements, forward payment conversion agreements, futures, contracts, contracts providing for payments based on levels of, or changes in, interest rates or stock or other indices, contracts to exchange cash flows or a series of payments and contracts to hedge payment, rate, spread or similar exposure, including without limitation interest rate floors or caps, options, puts and calls. Such contracts shall contain such payment, security, default, remedy and other terms and conditions as the state treasurer, after consultation with the finance advisory board, may deem appropriate and shall be entered into with such party or parties as the state treasurer, after consultation with the finance advisory board, may select, after giving due consideration, where applicable, for the creditworthiness of the counterparty or counterparties, including any rating by a nationally recognized rating agency or any other criteria as may be appropriate.
SECTION 19. The second paragraph of section 49 of said chapter 29, as so appearing, is hereby amended by inserting after the word "rates", in line 68, the words:- , including rates variable from time to time according to an index, banker's loan rate or otherwise,.
SECTION 20. Said section 49 of said chapter 29, as so appearing, is hereby further amended by inserting after the second paragraph the following paragraph:-
Registered bonds may be uncertificated. Books shall be maintained by or on behalf of the state treasurer specifying the persons entitled to uncertificated bonds, and the rights represented thereby shall be registered upon such books. A true copy of the official actions of the commonwealth relating to such bonds shall be kept by or on behalf of the state treasurer, a copy of which, verified to be such by an authorized officer, shall be admissible before any court of record, administrative body or arbitration panel without further authentication.
SECTION 21. Said section 49 of said chapter 29, as so appearing, is hereby further amended by striking out the last paragraph and inserting in place thereof the following two paragraphs:-
Bonds or notes of the commonwealth may be sold at par, premium or discount and may be sold as instruments the principal amount of which either remains constant or increases during the life of the instrument. Whenever bonds or notes are issued under a statute to which the provisions of this paragraph apply, the amount issued shall be deemed to be the net proceeds of the issue, less any premium. The provisions of this paragraph shall apply to any bonds or notes issued after January first, nineteen hundred and eighty-eight unless the act authorizing such issue expressly states that the provisions of this paragraph shall not apply.
In connection with the issuance of bonds and notes of the commonwealth which are intended to qualify for tax exemption under the Internal Revenue Code of 1986, and to induce the purchase of such bonds and notes, the state treasurer may covenant on behalf of the commonwealth with the purchasers or with the holders from time to time of such bonds or notes or with a trustee or trustees for the benefit of such holders with respect to compliance with the requirements of said Internal Revenue Code relative to such tax exemption, including without limitation compliance with provisions relating to the use of proceeds by private parties, the investment of proceeds and the payment of rebate, so-called, to the federal government. Any such covenant may appear on the bonds or notes or may be included in a separate contract or trust indenture, a copy of which shall be available for public inspection at the office of the state treasurer. Any right of a holder of a bond or note in respect of any such covenant may be enforced as a claim against the commonwealth.
SECTION 22. Said chapter 29, as so appearing, is hereby further amended by inserting after section 49B the following section:-
Section 49C. (a) In issuing bonds of the commonwealth, pursuant to the provisions of law applicable thereto, the state treasurer is authorized, pursuant to the conditions set forth in this section, to set aside and issue portions of said bonds in such form as shall be appropriate for the purposes of the college opportunity program, as defined in section five A of chapter fifteen C, or for the purposes of such other college savings programs as may be established pursuant to paragraph (f 1/2) of section five of said chapter fifteen C.
(b) Before issuing any bonds in a fiscal year for the use of a college savings program, the state treasurer shall prepare a report establishing the maximum amount of bonds to be issued in that year for use of such programs. Said report, and any subsequent amendment thereto which revises said maximum amount, shall include the state treasurer's reasons for determining that it is prudent for the commonwealth to authorize use of such bonds to the stated extent, in light of the anticipated future interest and principal payments on such bonds, as compared to the anticipated interest and principal payments on commonwealth bonds not issued in connection with such programs, and in light of available financial arrangements to limit or control the commonwealth's potential costs of meeting its obligations on such bonds, and in light of such other considerations as the state treasurer shall deem relevant. The state treasurer shall file copies of said report, and of any amendments thereto, with the Educational Financing Authority, the secretary of administration and finance, and the house and senate ways and means committees.
(c) For the purposes of issuing bonds to support college savings programs, the state treasurer shall have, in addition to his other powers and duties, the following additional powers and duties:
(i) To employ financial, marketing, legal and other consultants and advisors for the purpose of consulting with the commonwealth on the implementation and ongoing administration of the savings programs and to enter into contracts and agreements necessary in connection therewith.
(ii) To enter into appropriate agreements or arrangements with banks or other financial institutions or with other departments or agencies of the commonwealth or other public entities to provide protection for the commonwealth from risks associated with the variable interest rate on such bonds, and to provide liquidity for purchasers of such bonds in the event of extraordinary circumstances which require them to have access to their capital, including but not limited to interest rate swap agreements, interest rate caps, liquidity facilities, futures agreements, letters of credit and similar arrangements, including provisions regarding the custody of commonwealth funds and the maintenance of collateral and other security for the commonwealth's obligations thereunder.
(iii) To establish procedures to ensure that interest on such bonds is and remains excludable from the gross income of the owners thereof for federal income tax purposes.
(iv) To establish a schedule of fees and charges, including premiums in connection with the sale of such bonds, sufficient to provide for the estimated costs of the program incurred by the commonwealth, including the costs of any agreements or arrangements entered into pursuant to paragraph (ii) and reasonable amounts to allow the commonwealth to self-insure against possible variations in interest rates on such bonds; provided that the difference in anticipated future interest and principal payments on such bonds as compared to the anticipated interest and principal payments on commonwealth bonds not issued in connection with such programs shall not exceed five million dollars per year. Any such fees or charges shall be received by the state treasurer impressed with a trust on behalf of the participants in such college savings programs and shall be deposited in a separate fund. The amounts in said fund, including any income earned on amounts therein, shall be expended by the state treasurer, without appropriation, solely for the commonwealth's cost of operating such college savings programs, including without limitation the costs of agreements or arrangements entered into pursuant to paragraph (ii) and the costs of self-insuring against variations in interest rates on such bonds.
(v) To take such further actions and establish such further procedures as shall be appropriate to carry out the purposes of the savings programs.
(d) All bonds, or units of participation therein, issued pursuant to this section shall be subject to the following provisions:
(i) Any payment received by a purchaser of such bonds or units of participation in accordance with the provisions of this section and chapter fifteen C and the interest or other income earned in connection therewith shall be exempt from all taxation by the commonwealth and any of its political subdivisions, including income, commonwealth, transfer, inheritance, death and personal property taxes.
(ii) The bonds and units of participation are hereby made securities in which administrators, guardians, executors, trustees, fiduciaries, and others authorized to invest in bonds of the commonwealth may properly and legally invest funds and shall be exempt from qualification and registration under the securities laws of the commonwealth.
(iii) The commonwealth hereby covenants and agrees to take all steps reasonably necessary to provide that interest on said bonds and units of participation whenever paid or accrued shall be excluded from the gross income of any person having an interest therein under the Internal Revenue Code of 1986 as amended from time to time.
(e) The provisions of section fifty-three shall not apply to the sale of any bonds issued in connection with college savings programs.
SECTION 23. Said chapter 29 is hereby further amended by striking out section 52, as appearing in the 1988 Official Edition, and inserting in place thereof the following section:-
Section 52. Any premium received on the sale of notes shall be applied to the costs of issuance thereof and other financing costs related thereto or, without appropriation, to the payment of the principal of such notes, and any premium received on the sale of bonds shall be applied to the costs of issuance thereof and other financing costs related thereto or, without appropriation, to the payment of the principal of or sinking fund installments with respect to such bonds.
SECTION 24. The additional member to be appointed by the governor to the Educational Financing Authority, pursuant to section four of this act shall serve for a term expiring on July first, nineteen hundred and ninety-four.