BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 791 (Hertzberg) - Student financial aid: Golden State
Scholarshare Trust Act.
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|Version: April 20, 2015 |Policy Vote: ED. 8 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: May 11, 2015 |Consultant: Jillian Kissee |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: This bill requires the Scholarshare Investment Board
(Board) to consider entering into an agreement with a card
issuer for the purposes of accumulating awards that are
automatically deposited into the designated Scholarshare trust
account.
Fiscal
Impact:
Reporting requirement: Minor costs to the Board to complete
the report required by this bill.
Cost Pressures: To the extent the Board decides to enter into
an agreement with a card issuer for this program, there would
be a cost pressure to develop the contract, go to bid,
identify a contractor, and oversee the implementation of the
agreement. If at least one position was hired to develop and
monitor the contract, it could drive costs in the high tens of
thousands, to low hundreds of thousands, including benefits.
SB 791 (Hertzberg) Page 1 of
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There would be an additional, unknown cost pressure for the
Board to fund the contract for the program. (Scholarshare
Administrative Fund)
Background: Existing law establishes the Golden State ScholarShare Trust
Program, administered by the State Treasurer's Office, offers
California families a tax-advantaged college tuition savings
plan that allows them to invest and save for a college education
with state tax-deferred and federal tax-free benefits. Under
this program, a participant opens an account on behalf of a
designated named beneficiary. The money contributed by the
participant to the account is placed in a trust, and invested in
special investment portfolios designed to meet the needs of
differently aged beneficiaries, and different kinds of
investors. The program offers federal and California income
tax-free treatment for qualified withdrawals from a ScholarShare
account. A qualified withdrawal is one that is used to pay for
qualified higher education expenses at any eligible
postsecondary educational institution throughout the U.S. (and
even some outside the U.S.) including many vocational schools.
(Education Code § 69980 et. seq.)
To oversee the trust program, existing law establishes the
Scholarshare Investment Board, comprised of seven members
including the Treasurer, the Director of Finance, executive
director of the State Board of Education and representative from
postsecondary institutions, as specified. Among other things,
the Board is required to aggressively market the trust program
and develop strategies designed to educate California residents
about the benefits of saving for higher education and
information to help them decide the level of Scholarshare
participation and savings strategies that may be appropriate for
them. Under its current powers, the Board is also authorized to
enter into an agreement with participants including an
individual, trust estate, partnership association, company or
corporation and several other entities on behalf of
beneficiaries. (EC § 69980 et. seq.)
Proposed Law:
This bill requires the board to consider entering into an
agreement with a card issuer for the purposes of accumulating
awards that are automatically deposited into the designated
SB 791 (Hertzberg) Page 2 of
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Scholarshare trust account. The board must consider entering
into an agreement that includes, but is not limited to, a
provision requiring the credit card issuer to provide a
reasonable award that would be automatically deposited into a
Scholarshare trust account. The board is required to report its
decision and its rationale at a regularly scheduled public
meeting of the Board by June 30, 2016 and in writing to the
Legislature in a timely manner.
Staff
Comments: The Board already has the authority to enter into
agreements for similar programs. The Board offered a program
similar to that described in the bill under its previous
investment management entity, Fidelity Investments. The Board
has since contracted with a new management company and according
to the Executive Director, the credit card program has not been
reinstated due to a lack of consumer demand.
This bill would instead require the Board to consider entering
into an agreement with the card issuer directly.
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