BILL NUMBER: SB 89 CHAPTERED 08/24/07 CHAPTER 182 FILED WITH SECRETARY OF STATE AUGUST 24, 2007 APPROVED BY GOVERNOR AUGUST 24, 2007 PASSED THE ASSEMBLY JULY 20, 2007 PASSED THE SENATE AUGUST 21, 2007 AMENDED IN ASSEMBLY JULY 20, 2007 AMENDED IN ASSEMBLY JULY 16, 2007 INTRODUCED BY Committee on Budget and Fiscal Review JANUARY 17, 2007 An act to amend Sections 69522, 69526, and 69766 of, and to add Article 2.4 (commencing with Section 69521) to Chapter 2 of Part 42 of Division 5 of Title 3 of, the Education Code, relating to student financial aid, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 89, Committee on Budget and Fiscal Review. Student Financial aid: state student loan guarantee program: assets and liabilities: sale. 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. Under existing law, the operations of the auxiliary organization are required to be conducted in conformity with an operating agreement approved, for a period not to exceed 5 years, by the commission. This bill would authorize the Director of Finance to act as agent for the state in the sale of the student loan guarantee portfolio and certain related assets and liabilities of the student loan guarantee program not retained by the commission to an entity approved by the United States Secretary of Education to act as a state student loan guarantee agency for the Federal Family Education Loan Program, and selected by the director, in consultation with the Treasurer, pursuant to a prescribed procedure. The bill would also authorize the Director of Finance to consummate other transactions to maximize the value of the state student loan guarantee program to the state. The bill would require the director to deposit the net proceeds of any sale of state student loan guarantee program assets and liabilities, or any funds achieved through any other arrangement to maximize the value of the program to the state, into the General Fund. The bill would appropriate $300,000 from the General Fund to the Director of Finance for the purposes of obtaining professional advice and counsel related to the sale of the state student loan guarantee program assets and liabilities under the bill. This bill would declare that it is to take effect immediately as an urgency statute. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Article 2.4 (commencing with Section 69521) is added to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, to read: Article 2.4. Maximizing the Value of the State Student Loan Guarantee Program Assets and Liabilities 69521. (a) The Legislature finds and declares both of the following: (1) The student loan guarantee business is not a core mission of government. Recognition of this fact led, in 1996, to the approval of the establishment of an auxiliary organization for the purpose of providing operational and administrative services for the Student Aid Commission's participation in the Federal Family Education Loan Program. (2) Pursuant to that authority, an auxiliary organization was established to provide, pursuant to contract, certain services to the Student Aid Commission. (b) It is the intent of the Legislature that the value of the auxiliary organization's arrangement with the Student Aid Commission and the Student Aid Commission's participation in the Federal Family Education Loan Program be maximized through either of the following: (1) The sale of the state's interest in the student loan guarantee portfolio of the Student Aid Commission and certain related assets and liabilities of the student loan guarantee program operated by the Student Aid Commission, to a firm approved to act as a state student loan guarantee agency for the Federal Family Education Loan Program by the Secretary of Education. (2) The entry into an arrangement for the operation of the state student loan guarantee program by an entity meeting the financial and compliance standards established for the Federal Family Education Loan Program. 69521.2. For the purposes of this article, all of the following definitions apply: (a) "Auxiliary organization" means the organization established pursuant to Article 2.5 (commencing with Section 69522). (b) "Director" means the Director of Finance. (c) "Federal Family Education Loan Program" means the program established pursuant to Part B (commencing with Section 1071) of Subchapter IV of Chapter 28 of Title 20 of the United States Code, and includes, but is not necessarily limited to, the Stafford and PLUS loan programs. (d) "Federal Student Loan Reserve Fund" means the fund of that name established pursuant to Section 69766. (e) "Operating agreement" means the agreement entered into between the Student Aid Commission and the auxiliary organization pursuant to Section 69522. (f) "Secretary of Education" means the United States Secretary of Education and the Secretary of Education acting through the United States Department of Education. (g) "State student loan guarantee program" means the activities performed by the Student Aid Commission as a state student loan guarantee agency pursuant to Public Law 94-482, and subsequent federal regulations, as authorized pursuant to Article 13 (commencing with Section 69760) or on behalf of the Student Aid Commission by the auxiliary organization. (h) "State student loan guarantee program assets" means all of the assets of the state student loan guarantee program held by the Student Aid Commission and all assets of the auxiliary organization, tangible and intangible, including, without limitation, the state's interest in all loan guarantee contracts and agreements, the funds deposited in the Student Loan Operating Fund other than federal funds, all funds held by the auxiliary organization other than federal funds, and the state's interest in any leases of real property or equipment entered into by the auxiliary organization. These assets shall not include any property of the United States held by the Student Aid Commission or the auxiliary organization, as determined pursuant to Public Law 94-482, or subsequent federal regulations. (i) "State student loan guarantee program liabilities" means all of the liabilities of the state student loan guarantee program as determined by the Director of Finance. (j) "Student Loan Operating Fund" means the fund of that name established by Section 69766. (k) "Transferee guarantee agency" means an alternative student loan guarantee agency for the Federal Family Education Loan Program that is the purchaser of the state student loan guarantee program assets and liabilities. (l) "Transferee guaranty program operator" means the entity with which the state enters into an arrangement for the operation of the state student loan guarantee program pursuant to this article. (m) "Treasurer" means the State Treasurer. 69521.3. (a) The Director of Finance is hereby authorized to act as agent for the state and, in that capacity, to sell the state student loan guarantee program assets and liabilities not retained by the Student Aid Commission to an entity that the director, in consultation with the Treasurer, determines will provide the best combination of each of the following: (1) The highest price for those state student loan guarantee program assets and liabilities. (2) The greatest security for the payment of the purchase price. (3) Demonstrated competence and professional qualifications necessary for the continued satisfactory performance of student loan guarantee services. (4) The approval of the Secretary of Education. (5) The quality of student services offered, including, but not necessarily limited to, borrower training in budgeting and financial management, including debt management and other forms of financial literacy. (6) Borrower transparency or disclosure policies for products or services, or both, offered to students outside of the federal student loan programs. (b) Notwithstanding any other provision of law, the sale process shall include the steps the director, in consultation with the Treasurer, deems necessary or convenient to achieve the ends set forth in this section. The process shall include, but not necessarily be limited to, all of the following: (1) The satisfaction of criteria established by the director, in consultation with the Treasurer, consistent with achieving a combination of the best price for those state student loan guarantee program assets and liabilities and the continued operation of student loan guarantee services for California under the Federal Family Education Loan Program. These criteria shall include any pertinent requirements of the Secretary of Education. (2) A Notice of Request for Qualifications sent by the Director of Finance to each firm currently acting as a state student loan guarantee agency under the Federal Family Education Loan Program and any entity proposed by the Secretary of Education, and advertised in the State Contracts Register pursuant to Sections 14827.1 and 14827.2 of the Government Code. This notice shall include a description of the state student loan guarantee program, a summary description of the state student loan guarantee program assets and liabilities offered for sale, and a description of the due diligence review process to provide potential purchasers with further information regarding the state student loan guarantee program assets and liabilities offered for sale, the selection criteria on which the transaction will be based, the submission requirements and deadlines, and a Department of Finance contact name and telephone number for more information. (3) The evaluation by the director, in consultation with the Treasurer, of all statements timely submitted in response to the Notice of Request for Qualifications sent pursuant to paragraph (2), using the criteria contained in the notice, and, based on those statements, the establishment of a qualified purchasers list. 69521.4. (a) If, after seeking the advice of, and in active participation with, the Treasurer, the Director of Finance determines that an alternative arrangement to the sale of the state student loan guarantee program assets and liabilities may be financially beneficial to the state, the Director of Finance is also hereby authorized to enter into an arrangement other than that authorized in Section 69521.3, for the purpose of maximizing the value of the state student loan guarantee program assets and liabilities. This arrangement may take any form the director, in consultation with the Treasurer, deems advisable to provide the best combination of each of the following: (1) The greatest value to the General Fund. (2) The greatest financial security for achieving value to the General Fund. (3) The continued satisfactory performance of student loan guarantee services. (4) The approval of the United States Secretary of Education, to the extent required by Public Law 94-482, or subsequent federal regulations. (5) The quality of student services offered, including, but not necessarily limited to, borrower training in budgeting and financial management, including debt management and other forms of financial literacy. (6) Borrower transparency or disclosure policies for products or services, or both, offered to students outside of the federal student loan programs. (b) Notwithstanding any other provision of law, this process shall include the steps the Director of Finance, in consultation with the Treasurer, deems necessary or convenient to achieve the ends set forth in this section. The process shall include, but not necessarily be limited to, all of the following: (1) The satisfaction of the established criteria consistent with achieving a combination of the greatest value to the General Fund and the continued operation of student loan guarantee services for California under the Federal Family Education Loan Program. The criteria shall include any pertinent requirements of the Secretary of Education. (2) A Notice of Request for Qualifications sent by the director to each nonprofit entity currently acting as a state student loan guaranty agency under the Federal Family Education Loan Program, any entity known to the director to be acting as a servicing agent for a state student loan guaranty agency, and any nonprofit entity proposed by the Secretary of Education, and advertised in the State Contracts Register pursuant to Sections 14827.1 and 14827.2 of the Government Code. The notice shall include a description of the state student loan guarantee program, a summary description of the state student loan guarantee program assets and liabilities, and a description of the due diligence review process to provide further information regarding the state student loan guarantee program assets and liabilities, the selection criteria on which the transaction will be based, submission requirements and date, and a Department of Finance contact name and phone number for more information. (3) The evaluation by the director, in consultation with the Treasurer, of all statements timely submitted in response to the Notice of Request for Qualifications, using the criteria contained in the notice, and, based on the statements, the establishment of a qualified purchasers list. 69521.5. (a) The Director of Finance is authorized to take all actions that he or she deems to be necessary or convenient to accomplish any of the following: (1) To preserve the state student loan guarantee program assets, pending consummation of their sale or the consummation of any other transaction, to maximize the value of the state student loan guarantee program to the state, including, without limitation, as authorized in Sections 69522, 69526, and 69766. (2) To engage in negotiations with, and provide sufficient information regarding the state student loan guarantee assets and liabilities to, potential purchasers or any potential transferee guaranty program operator. (3) To either consummate the sale of, and transfer, the state student loan guarantee program assets and liabilities not retained to the Student Aid Commission to the transferee guarantee agency, or to consummate the agreement with the transferee guaranty program operator. (4) To seek and negotiate with the United States Secretary of Education the designation of any alternative state student loan guarantee agency for California under the Federal Family Education Loan Program or the approval of the Secretary of Education of any transferee guaranty program operator to the extent required by Public Law 94-82, or subsequent federal regulations. (5) To transfer the Federal Student Loan Reserve Fund to any transferee guaranty agency in a manner that is consistent with the intentions of the United States Secretary of Education. (6) To transfer any of the state student loan guarantee program assets in the form of cash or investments not transferred to any transferee guaranty agency or transferee guarantee program operator directly to the General Fund. (7) To retain any state student loan guarantee program assets determined by the director to be necessary or appropriate for the purposes of the Student Aid Commission. (b) In order to accomplish the purposes of this article, the Director of Finance shall do all of the following: (1) Notify the Chairperson of the Joint Legislative Budget Committee and the chairpersons of the Senate and Assembly Budget Committees of the director's determination to proceed with a transaction other than the sale of the state student loan guarantee program assets and liabilities pursuant to Section 69521.3, providing that notice no less than 30 days prior to the consummation of the transaction with the transferee guarantee program operator, or at a later date that the director determines to be most beneficial to the negotiations of the transaction. (2) Upon the consummation of the sale of the state student loan guarantee program assets to a transferee guaranty agency, the Director of Finance shall notify the Secretary of State and the Chairperson of the Joint Legislative Budget Committee. (3) Upon the consummation of a transaction authorized by this article with a transferee guarantee program operator, the Director of Finance shall notify the Secretary of State and the Chairperson of the Joint Legislative Budget Committee. (c) In order to accomplish the purposes of this article: (1) The Student Aid Commission shall cooperate fully with the Director of Finance and, in particular, take all steps to preserve the state student loan guarantee program assets deemed necessary or convenient by the Director of Finance, including, without limitation, as set forth in Sections 69522, 69526, and 69766. (2) The Student Aid Commission shall direct the auxiliary organization to cooperate fully with the director. (3) Until the consummation of the sale or other transaction to maximize the value of the state student loan guarantee program to the state, all of the actions, approvals, and directions of the Student Aid Commission affecting the state student loan guarantee program shall be effective only upon the approval of the Director of Finance. (4) Notwithstanding any provision of the Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code), the auxiliary organization shall, as directed by the commission under paragraph (2), cooperate fully with the Director of Finance. 69521.6. Notwithstanding any other provision of law, neither the approval of the Attorney General nor of the Director of General Services is required for the execution and implementation of the sale, lease, conveyance, exchange, transfer, or other disposition of the auxiliary organization, any state student loan guarantee program assets or liabilities held by the auxiliary organization, or any sale or other arrangement authorized by this article. 69521.7. The state student loan guarantee program assets and liabilities shall be transferred to the transferee guarantee agency upon the completion of any sale pursuant to this article, and may be transferred to the transferee guaranty program operator if contemplated by the transaction entered into pursuant to Section 69521.4. 69521.8. (a) The Director of Finance shall deposit all proceeds of any sale of, or any funds achieved through any other arrangement to maximize the value of, the state student loan guarantee program assets and liabilities under this article, net of any costs related to that transaction, into the General Fund. (b) The proceeds of any sale of, or any funds achieved through any other arrangement to maximize the value of, the state student loan guarantee program assets and liabilities are not "proceeds of taxes" as that term is used in subdivision (c) of Section 8 of Article XIII B of the California Constitution. The disbursement of these proceeds is not subject to the limitations imposed by that article. 69521.9. (a) Notwithstanding any other provision of law, the Director of Finance is authorized to enter into an agreement with a firm or individual to act as an advisor to the state in the transactions contemplated by this article. Section 14838 of the Government Code and Article 4 (commencing with Section 10335) of Chapter 2 of Part 2 of Division 2 of the Public Contract Code does not apply to any agreement entered into by the director with an advisor pursuant to this section. (b) Notwithstanding any other provision of law, the Director of Finance is also authorized to enter into a legal services agreement to obtain specialized legal advice related to the transactions contemplated by this article. Section 11040 of the Government Code and Section 6072 of the Business and Professions Code shall not apply to the legal services agreement entered into by the director pursuant to this section. 69521.10. (a) The Director of Finance, in consultation with the Treasurer, shall select a firm or individual to provide advisory services based on demonstrated competence and professional qualifications necessary for the satisfactory performance of the services required, in the manner described in this section. (b) The Director of Finance and the Treasurer shall establish selection criteria for selecting an advisor. The criteria may include, but are not necessarily limited to, factors such as professional excellence, demonstrated competence, specialized experience in performing similar services, education and experience of key personnel to be assigned, staff capability, ability to meet schedules, nature and quality of similar completed work of the firm or individual, reliability and continuity of the firm or individual, and other considerations deemed by the director and the Treasurer to be relevant and necessary to the performance of advisory services. (c) The Director of Finance shall, for the purposes of obtaining services under this section, send a Notice of Request for Qualifications to firms and individuals in the Treasurer's underwriter and financial advisor pools. The director shall publish this notice in the State Contracts Register pursuant to Sections 14827.1 and 14827.2 of the Government Code. The notice shall include a description of the advisory services required, the selection criteria based on which the contract award will be made, submission requirements and deadlines, and a Department of Finance contact name and telephone number for more information. (d) (1) After the final response date stated in the Notice of Request for Qualifications, the Director of Finance and the Treasurer shall review the responses submitted, and shall evaluate them using the criteria contained in the notice. The director and the Treasurer shall rank, in order of preference based on the criteria contained in the notice, the firm or individuals determined to be qualified to perform the required services. (2) The Director of Finance and the Treasurer, or their designees, may interview any of the qualified firms or individuals regarding the experience and qualifications of those firms or individuals, as well as anticipated concepts and the benefits of alternative methods of furnishing the required services. (e) (1) Following the interviews, if any, held pursuant to subdivision (d), the Director of Finance and the Treasurer shall adjust the ranking of the qualified individuals or firms to reflect those firms or individuals deemed to be the most highly qualified to perform the required services. (2) The Director of Finance, in consultation with the Treasurer, shall enter into negotiations with the firm or individual most highly ranked pursuant to paragraph (1). If negotiations are concluded successfully, the director shall enter into a contract. If the director, in his sole discretion, concludes that the negotiations are unsuccessful, the director shall terminate the negotiations, and begin new negotiations, in consultation with the Treasurer, with the other firms or individuals ranked pursuant to paragraph (1) in order of their ranking, and either contract with or terminate negotiations with each next most highly ranked firm or individual. (3) If, after pursuing the negotiation process set forth in paragraph (2), the Director of Finance has been unable to negotiate a satisfactory contract at fair and reasonable compensation, the director may reinstitute the selection process prescribed in this section, commencing with the issuance of a new Notice of Request for Qualifications. 69521.11. (a) The Director of Finance shall notify the Joint Legislative Budget Committee in writing upon his or her determination that neither the sale nor any other transaction authorized by this article is anticipated to achieve the purposes of this article. (b) The Director of Finance shall cease those activities he or she is authorized or directed to undertake pursuant to this article and Sections 69522, 69526, and 69766 upon the earlier of: (1) The 30th day following written notice by the director to the Chairperson of the Joint Legislative Budget Committee pursuant to subdivision (a) of this section. (2) January 10, 2009. SEC. 2. Section 69522 of the Education Code 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) On or after the operative date of Article 2.4 (commencing with Section 69521), the commission shall not authorize the auxiliary organization to perform any new or additional services except those deemed by the Director of Finance to be necessary or convenient either for the operation of the state student loan guarantee program, as defined in Section 69521.2, or to accomplish the goal of maximizing the value of the state student loan guarantee program assets and liabilities pursuant to Article 2.4 (commencing with Section 69521). (3) 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) (A) 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 a copy of the proposed operating agreement to the Department of Finance and the Joint Legislative Budget Committee for their review and comment. The operations of the auxiliary organization shall be limited to services prescribed in that agreement. (B) On or after the operative date of Article 2.4 (commencing with Section 69521), the commission shall not approve any operating agreement that permits the auxiliary organization to perform any new or additional services, except those deemed by the Director of Finance to be necessary or convenient either for the operation of the state student loan guarantee program, as defined in Section 69521.2, or to accomplish the goal of maximizing the value of the state student loan guarantee program assets and liabilities pursuant to Article 2.4 (commencing with Section 69521). (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. 3. Section 69526 of the Education Code is amended to read: 69526. (a) The board of directors shall approve all expenditures and fund authorizations of the auxiliary organization. Authorizations of expenditure of funds for use outside of the normal business operations of the auxiliary organization shall be approved by an officer of the commission and in accordance with commission policy. (b) On or after the operative date of Article 2.4 (commencing with Section 69521), and, notwithstanding any approval by the commission or any of its officers or employees or by the board of directors made after August 1, 2007, any expenditure of funds held by the auxiliary organization for the following purposes shall be subject to the prior approval of the Director of Finance: (1) Increases in compensation or benefits for officers of the auxiliary organization, including discretionary bonuses and retention bonuses. (2) Outreach programs, public awareness campaigns, or diversification of the auxiliary organization's business or data processing systems that are not deemed by the Director of Finance to be necessary or convenient either for the operation of the state student loan guarantee program, as defined in Section 69521.2, or to accomplish the purposes of Article 2.4 (commencing with Section 69521). (3) Activities other than any of the following: (A) Those directly related to providing guarantees under the Federal Family Education Loan Program, which shall not be deemed to include any of the activities set forth in paragraph (2). (B) Those required to provide operational support services to the commission pursuant to the operating agreement between the commission and the auxiliary organization, which shall not be deemed to include any of the activities set forth in paragraph (2). (C) Those deemed by the Director of Finance to be necessary or convenient either for the operation of the state student loan guarantee program, as defined in Section 69521.2, or to accomplish the purposes of Article 2.4 (commencing with Section 69521). (c) The commission, in consultation with the Department of Finance and the board of directors of the auxiliary organization, shall do all of the following: (1) Institute a standard accounting and reporting system for the management and operations of the auxiliary organization. (2) Implement financial standards that will ensure the fiscal viability of the auxiliary organization. The standards shall include proper provision for professional management, adequate working capital, adequate reserve funds for current operations and capital replacements, and adequate provisions for new business requirements. (3) Institute procedures to ensure that transactions of the auxiliary organization are consistent with the mission of the commission. (4) Develop policies for the expenditure of funds derived from indirect cost payments not required to implement paragraph (2). The use of those funds shall be regularly reported to the board of directors. (d) The auxiliary organization shall not accept any grant, contract, bequest, trust, or gift, unless it is so conditioned that it may be used only for purposes consistent with the policies of the commission. SEC. 4. Section 69766 of the Education Code is amended to read: 69766. (a) The Federal Student Loan Reserve Fund and the Student Loan Operating Fund are hereby created in the State Treasury. On January 1, 2000, the State Guaranteed Loan Reserve Fund shall cease to exist, and funds deposited, or required to be deposited in that fund, shall be transferred to the Federal Student Loan Reserve Fund or to the Student Loan Operating Fund and allocated to those funds in accordance with the requirements of federal law. (b) All money received for the purposes of this article from federal, state or local governments, including any money deposited in the State Guaranteed Loan Reserve Fund, or from other private or public sources, shall be deposited in the Federal Student Loan Reserve Fund or the Student Loan Operating Fund and allocated to those funds in accordance with the requirements of federal law. Funds deposited in the Federal Student Loan Reserve Fund or the Student Loan Operating Fund are not part of the General Fund, as defined in Section 16300 of the Government Code. No moneys from the General Fund shall be deposited in the Federal Student Loan Reserve Fund or the Student Loan Operating Fund. (c) The contents of the Federal Student Loan Reserve Fund are federal funds, administered in accordance with federal laws and regulations. The contents of the Student Loan Operating Fund are state funds within the custody and control of the Student Aid Commission. (d) Notwithstanding Section 13340 of the Government Code, all moneys deposited in the Federal Student Loan Reserve Fund and the Student Loan Operating Fund are hereby continuously appropriated, without regard to fiscal years, for purposes of this article. The continuous appropriation made by this section shall be available to assume the obligation under any outstanding budget act appropriation from the State Guaranteed Loan Reserve Fund as it existed prior to January 1, 2000. On or after the operative date of Article 2.4 (commencing with Section 69521), the expenditure of funds from the Student Loan Operating Fund is subject to the limitations set forth in Sections 69522 and 69526. (e) The total amount of all outstanding debts, obligations, and liabilities that may be incurred or created under this article or under Article 2.5 (commencing with Section 69522), including any obligation to repay to the United States any funds provided under Title IV of the "Higher Education Act of 1965," and extensions thereof or amendments thereto, or any similar act of Congress, is limited to the amount contained in the Federal Student Loan Reserve Fund or the Student Loan Operating Fund, and the state shall not be liable to the United States, or to any other person or entity, beyond the amount contained in the Federal Student Loan Reserve Fund or the Student Loan Operating Fund for any debts, obligations, and liabilities. SEC. 5. The sum of three hundred thousand dollars ($300,000) is hereby appropriated from the General Fund to the Director of Finance for the purposes of obtaining professional advice and counsel related to the sale of the state student loan guarantee program assets and liabilities pursuant to Sections 69521.8 and 69521.9 of the Education Code. SEC. 6. 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 provisions of the Budget Act of 2007 relating to the Student Aid Commission and its auxiliary organization at the earliest possible time, it is necessary that this act take effect immediately.