HCS HB 73 -- HIGHER EDUCATION SAVINGS PROGRAM

SPONSOR:  Luetkemeyer

COMMITTEE ACTION:  Voted "do pass" by the Committee on Financial
Services by a vote of 18 to 1.

This substitute creates the Missouri Higher Education Deposit
Program.  The new program will provide an additional method in
which a person can invest savings for college on a tax-free basis
("529 Plan").  The program will be administered by a seven member
board.  The board will consist of the Director of the Division of
Finance, the Director of the Department of Higher Education, the
Commissioner of the Office of Administration, and four private
members appointed by the Governor who have expertise in finance.
The board may enter into deposit program participation agreements
with financial institutions in the state.  These institutions
would be allowed to set up 529 Plans for their customers,
allowing citizens of the state to invest their savings for
college in a financial institution within the state.

FISCAL NOTE:  Total Estimated Net Cost to General Revenue of
$59,283 to Unknown in FY 2004, $56,399 to Unknown in FY 2005, and
$57,814 to Unknown in FY 2006.  Expected to exceed $100,000
annually.

PROPONENTS:  Supporters say that currently more than $250 million
are invested in the Missouri Saving for Tuition (MO$T) Program,
and it is all going out of state, because the company that
handles it is out of state.  The purpose of the bill is two-fold:
(1) to keep more money in the state (which will help local
businesses get access to capital and allow them to expand their
businesses; and (2) to allow banks across the state to market the
program to their customers, thus greatly increasing the exposure
of this tax-free college savings program.  The investment
approach for many people should include safe investments in
certificates of deposit and other interest-bearing deposit
programs, which Missouri banks can offer.  That money does not
need to go out of the state.  The bill doesn't change the MO$T
Program.  It merely offers an additional way to save for college.

Testifying for the bill were Representative Engler; Missouri
Bankers Association; Missouri Independent Bankers Association;
Edward Jones, Inc.; Securities Industry Association; Central
Bank; and Missouri Chamber of Commerce.

OPPONENTS:  Those who oppose the bill say that TIAA-CREF bid on
this contract five years ago when only two other companies were
interested enough to put in a bid.  Now that the program is
successful, other companies want to jump on board.  TIAA-CREF
markets the program throughout the state, and the company is
ranked among the best in the country, according to Money
magazine.  When the program was being started, the Governor
begged banks to submit bids, and none of them would.  Now they
want in, after it's established.

Testifying against the bill was TIAA-CREF (administrator of the
MO$T Program).

OTHERS:  Others testifying on the bill were Russell Gunn, Board
Member, Missouri Higher Education Savings Program; and Chuck
Miller, Office of the Treasurer.

Richard Smreker, Senior Legislative Analyst

Missouri House of Representatives
Last Updated July 25, 2003 at 10:10 am