STAND. COM. REP. NO. 291-00

                                 Honolulu, Hawaii
                                                   , 2000

                                 RE: H.B. No. 2760
                                     H.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Higher Education, to which was referred
H.B. No. 2760 entitled: 

     "A BILL FOR AN ACT RELATING TO THE COLLEGE SAVINGS PROGRAM,"

begs leave to report as follows:

     The purpose of this bill is to encourage participation in
the College Savings Program (Program) by:

     (1)  Allowing an income tax deduction for contributions made
          to a Program up to $5,000 for an individual filer and
          up to $10,000 for joint filers for each taxable year;
          and

     (2)  Providing an income tax exemption for qualified
          withdrawals from a Program account.

     The Teachers Insurance and Annuity Association College
Retirement Equities Fund supported the bill.  The University of
Hawaii supported the intent of the bill.  The Tax Foundation of
Hawaii and the Department of Taxation commented on the bill.

     Your Committee finds that state tax incentives are an
effective means by which to encourage participation in the
Program.  The combination allowing contributions to be tax-
deductible exempting qualified withdrawals from income tax
calculations and will make this Program far more attractive, and
result in much higher participation and contributions.


 
 
                                 STAND. COM. REP. NO. 291-00
                                 Page 2

 
     Upon further consideration, your Committee has amended this
bill by incorporating several new provisions.  They are as
follows:

     (1)  Authorizes the Director of Finance (Director) to
          directly enter into tuition savings agreement;

     (2)  Provides flexibility to the Director in choosing the
          most appropriate method for investment services by
          deleting the specification that the financial
          organization chosen to manage the program provide only
          one type of investment instrument;

     (3)  Requires the managing financial organization to
          disclose pertinent information to account owners;

     (4)  Gives the Director the flexibility to conduct
          transition arrangements by deleting the section
          governing the management of accounts when the contract
          with the managing financial organization is terminated;

     (5)  Encourages wider participation in the Program by
          allowing the Director to establish the length of time
          for a participant to be in the Program before making
          withdrawals;

     (6)  Consolidates the provisions regarding costs and
          clarifies that all costs from the Program be paid from
          the assets of the trust fund;

     (7)  Clarifies definitions; and

     (8)  Makes technical, nonsubstantive changes for purposes of
          style and clarity.

     Your Committee finds that these changes will further enhance
the administration and management of the college savings program.
Furthermore, they expand upon the earlier provisions of the bill
which make the program more accessible and attractive.  Taken as
a whole, this bill provides changes that enhance both the
internal workings and the utility of the college savings program
and, accordingly, your Committee urges passage of this measure.

     As affirmed by the record of votes of the members of your
Committee on Higher Education that is attached to this report,
your Committee is in accord with the intent and purpose of H.B.
No. 2760, as amended herein, and recommends that it pass Second
Reading in the form attached hereto as H.B. No. 2760, H.D. 1, and
be referred to the Committee on Finance.

 
                                 STAND. COM. REP. NO. 291-00
                                 Page 3

 

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Higher Education,



                                   ______________________________
                                   DAVID MORIHARA, Chair