BILL NUMBER: AB 2122 CHAPTERED 09/21/04 CHAPTER 657 FILED WITH SECRETARY OF STATE SEPTEMBER 21, 2004 APPROVED BY GOVERNOR SEPTEMBER 21, 2004 PASSED THE ASSEMBLY AUGUST 28, 2004 PASSED THE SENATE AUGUST 27, 2004 AMENDED IN SENATE AUGUST 26, 2004 AMENDED IN SENATE JULY 27, 2004 INTRODUCED BY Committee on Budget (Steinberg (Chair), Bermudez, Chan, Diaz, Dymally, Goldberg, Hancock, Jackson, Levine, Liu, Montanez, Nakano, Pavley, Reyes, Simitian, and Wolk) FEBRUARY 18, 2004 An act to amend Sections 69522 and 69529.5 of the Education Code, relating to student financial aid, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 2122, Committee on Budget. Student financial aid: Student Aid Commission: auxiliary organization. (1) Existing law establishes the Student Aid Commission as the primary state agency for the administration of state-authorized student financial aid programs available to students attending all segments of postsecondary education. Existing law authorizes the commission to carry out prescribed tasks, and authorizes the commission to establish an auxiliary organization for the purpose of providing operational and administrative services for the commission' s participation in the Federal Family Education Loan Program. Existing law authorizes the auxiliary organization to participate in activities approved by the commission and determined by the commission to be related to student financial aid, consistent with the general mission of the commission, and consistent with the purposes of prescribed provisions of federal law that are related to student financial aid. Existing law requires, commencing on April 1, 2005, and on April 1 of each year, ending on April 1, 2010, that the commission describe the actions taken, and report the costs incurred and the revenues realized, by the auxiliary organization in loan origination, disbursement services, loan servicing and repayment, secondary market, and private lender activities that the auxiliary organization undertakes. This bill would prohibit the commission from authorizing the auxiliary to participate in the issuance of bonds or in loan origination or loan capitalization activities. This bill would specify that its provisions would not preclude the commission or the auxiliary organization from undertaking other permitted activities that are related to student financial aid in partnership with institutions that conduct loan origination or loan capitalization activities. This bill would also make a conforming change to delete loan origination from the activities to be described in the annual report that would be due on April 1 of each year between 2005 and 2010. (2) This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 69522 of the Education Code, as amended by Chapter 216 of the Statutes of 2004, is amended to read: 69522. (a) (1) The commission may establish an auxiliary organization for the purpose of providing operational and administrative services for the commission's participation in the Federal Family Education Loan Program, or for other activities approved by the commission and determined by the commission to be all of the following: (A) Related to student financial aid. (B) Consistent with the general mission of the commission. (C) Consistent with the purposes of the federal Higher Education Act of 1965 (Public Law 89-329) and amendments thereto. (2) The activities approved by the commission under this subdivision shall not include either of the following: (A) The issuance of bonds. (B) Loan origination or loan capitalization activities. This paragraph shall not preclude the commission or the auxiliary organization from undertaking other permitted activities that are related to student financial aid in partnership with institutions that conduct loan origination or loan capitalization activities. (b) The auxiliary organization shall be established and maintained as a nonprofit public benefit corporation subject to the Nonprofit Public Benefit Corporation Law in Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code, except that, if there is a conflict between this article and the Nonprofit Public Benefit Corporation Law, this article shall prevail. (c) (1) The commission shall maintain its responsibility for financial aid program administration, policy leadership program evaluation, and information development and coordination. The auxiliary organization shall provide operational and support services essential to the administration of the Federal Family Education Loan Program and other permitted activities that are related to student financial aid, if those services are determined by the commission to be consistent with the overall mission of the commission. (2) The implementation and effectuation of the auxiliary organization shall be carried out so as to enhance the administration and delivery of commission programs and services. The commission shall conduct regular performance evaluations of the operation of auxiliary organizations in furtherance of its fiscal and fiduciary responsibilities for approved programs. (d) (1) The operations of the auxiliary organization shall be conducted in conformity with an operating agreement approved annually by the commission. On and after January 1, 2002, the commission may approve an operating agreement for a period not to exceed five years. Prior to approval, the commission shall provide the proposed operating agreement to the Department of Finance for its review and comment. The operations of the auxiliary organization shall be limited to services prescribed in that agreement. (2) Prior to approval of any amendment to an existing operating agreement or any new operating agreement with an auxiliary organization or subsidiary auxiliary organization for the purpose of delineating new services or activities authorized pursuant to subdivision (a), the commission shall provide the Director of Finance and the Joint Legislative Budget Committee with at least 45 days advance notice in writing that includes a description of the proposed operating agreement. If the Director of Finance or the Joint Legislative Budget Committee notifies the commission regarding issues of concern with the proposed operating agreement, the commission shall convene a meeting of appropriate representatives from the commission, the Department of Finance, and the Legislature to resolve those issues. (e) The commission shall oversee the development and operations of the auxiliary organization in a manner that ensures broad public input and consultation with representatives of the financial aid community, colleges and universities, and state agencies. SEC. 2. Section 69529.5 of the Education Code, as amended by Chapter 216 of the Statutes of 2004, is amended to read: 69529.5. (a) The commission shall report the following information to the Legislature on April 1 of each year, with respect to the operation of the auxiliary organization: (1) A description of the services provided by the auxiliary organization. (2) The auxiliary organization's annual budget, funded activities, and personnel, including the sources of revenue available to fund its operations. (3) Descriptions of changes made in the delivery of loans to California students and enhancements to programs and activities administered by the commission. The descriptions shall reflect all changes, both positive and negative. (4) The level of compensation of managers and executives of the auxiliary organization. (b) Commencing on April 1, 2005, and on April 1 of each year, ending on April 1, 2010, the commission shall specifically describe the actions taken, and report the costs incurred and the revenues realized, by the auxiliary organization in disbursement services, loan servicing and repayment, secondary market, and private lender activities that the auxiliary organization undertakes pursuant to subdivision (a) of Section 69522. SEC. 3. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to implement the provisions of the Budget Act of 2004 in a timely manner, it is necessary that this act take effect immediately.