GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

S	1 

SENATE BILL 977

Short Title:  Postsecondary Education Program.	(Public)

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Sponsors: Senators Hartsell, Shaw, and Plexico.

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Referred to:  Education/Higher Education

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May 3, 1995

A BILL TO BE ENTITLED
AN ACT TO ESTABLISH THE PREPAID POSTSECONDARY EDUCATION EXPENSE PROGRAM, THE PREPAID POSTSECONDARY EDUCATION EXPENSE TRUST FUND, THE NORTH CAROLINA PREPAID POSTSECONDARY EDUCATION EXPENSE BOARD, AND THE NORTH CAROLINA PREPAID TUITION SCHOLARSHIP PROGRAM.
The General Assembly of North Carolina enacts:
Section 1.  Chapter 116 of the General Statutes is amended by adding a new Article to read:
"ARTICLE 32.
"North Carolina Prepaid Postsecondary Education Expense Program.
"§ 116-260.  Purpose.
The General Assembly recognizes that educational opportunity at the postsecondary level is a critical State interest.  It further recognizes that educational opportunity is best ensured through the provision of postsecondary institutions that are geographically and financially accessible.  Accordingly, it is the intent of the General Assembly that a program be established through which many of the costs associated with postsecondary attendance may be paid in advance and fixed at a guaranteed level for the duration of undergraduate enrollment.  It is similarly the intent of the General Assembly to provide a program that fosters timely financial planning for postsecondary attendance and to encourage employer participation in such planning through program contributions on behalf of employees and the dependents of employees.
"§ 116-261.  Definitions.
The following definitions apply in this Article:
(1)	Advance payment contract. – A contract entered into by the Board and a purchaser pursuant to this Article.
(2)	Board. – The Prepaid Postsecondary Education Expense Board.
(3)	Fund. – The Prepaid Postsecondary Education Expense Trust Fund.
(4)	Purchaser. – A person who makes or is obligated to make advance registration or dormitory residence payments in accordance with an advance payment contract.
(5)	Qualified beneficiary. – A resident of this State at the time a purchaser enters into an advance payment contract on behalf of the resident.  The term includes the following:
a.	A resident of this State at the time a purchaser enters into an advance payment contract on behalf of the resident.
b.	A nonresident who is the child of a noncustodial parent who is a resident of this State at the time that the parent enters into an advance contract on behalf of the child.
c.	For purposes of advance payment contracts entered into pursuant to this Article, a graduate of an accredited high school in this State who is a resident of this State at the time the graduate is designated to receive the benefits of the advance payment contract.
(6)	State postsecondary institution. – Any community college identified in G.S. 115D-2 or university identified in G.S. 116-2.
(7)	Program. – The North Carolina Prepaid Postsecondary Education Expense Program.
(8)	Registration fee. – Matriculation fee, financial aid fee, building fee, and Capital Improvement Trust Fund fee.
"§ 116-262. North Carolina Prepaid Postsecondary Education Expense Program.
There is created a North Carolina Prepaid Postsecondary Education Expense Program to provide a medium through which the cost of registration and dormitory residence may be paid in advance of enrollment in a State postsecondary institution at a rate lower than the projected corresponding cost at the time of actual enrollment.  Such payments shall be combined and invested in a manner that yields, at a minimum, sufficient interest to generate the difference between the prepaid amount and the cost of registration and dormitory residence at the time of actual enrollment.  Students who enroll in a State postsecondary institution pursuant to this Article shall be charged no fees in excess of the terms delineated in the advance payment contract.
"§ 116-263.  Prepaid Postsecondary Education Expense Trust Fund.
(a)	There is created within the Department of the State Treasurer the Prepaid Postsecondary Education Expense Trust Fund.  The Fund shall consist of State appropriations, moneys acquired from other governmental or private sources, and moneys remitted in accordance with advance payment contract.  All funds deposited into the Fund may be invested pursuant to this Article; however, such investment shall not be mandatory.  Dividends, interest, and gains accruing to the Fund shall increase the total funds available for the Program.  Any balance contained within the Fund at the end of a fiscal year shall remain therein and shall be available for carrying out the purposes of the Program.  In the event that dividends, interest, and gains exceed the amount necessary for program administration and disbursements, the Board may designate an additional percentage of the Fund to serve as a contingency fund.  Moneys contained within the Fund shall be exempt from the investment requirements of this Article.  Any funds of a direct support organization created pursuant to G.S. 116-267 shall be exempt from the provisions of this section.
(b)	The Board shall administer the Fund in a manner that is sufficiently actuarially sound to defray the obligations of the Program.  The Board shall annually evaluate or cause to be evaluated the actuarial soundness of the Fund.  If the Board perceives a need for additional assets in order to preserve actuarial soundness, the Board may adjust the terms of subsequent advance payment contracts to ensure such soundness.
(c)	The Board, acting with the approval of the Board of Governors of The University of North Carolina, shall establish a comprehensive investment plan for the purposes of this section.  The comprehensive investment plan shall specify the investment policies to be utilized by the Board in its administration of the Fund.  The Board may place assets of the Fund in savings accounts or use the same to purchase fixed or variable life insurance or annuity contracts, securities, evidence of indebtedness, or other investment products pursuant to the comprehensive investment plan and in such proportions as may be designated or approved under that plan.  The insurance, annuity, savings or investment products shall be underwritten and offered in compliance with the applicable federal and State laws, regulations, and rules by persons who are duly authorized by applicable federal and State authorities.  Within the comprehensive investment plan, the Board may authorize investment vehicles, or products incident thereto, as may be available or offered by qualified companies or persons.
(d)	The Board may delegate responsibility for administration of the comprehensive investment plan to a person the Board determines to be qualified.  The person shall be compensated by the Board.  Directly or through the person, the Board may contract with a private corporation or institution to provide such services as may be a part of the comprehensive investment plan or as may be deemed necessary or proper by the Board or the person, including, but not limited to, providing consolidated billing, individual and collective recordkeeping and accountings, and asset purchase, control, and safekeeping.
(e)	The Board shall annually prepare or cause to be prepared a report setting forth in appropriate detail an accounting of the Fund and a description of the financial condition of the Program at the close of each fiscal year.  The report shall be submitted to the President of the Senate, Speaker of the House of Representatives, and members of the Board of Governors of The University of North Carolina on or before November 15 of each year.  In addition, the Board shall make the report available to purchasers of advance payment contracts.  The accounts of the Fund shall be subject to annual audits by the State Auditor or the Auditor's designee.
(f)	The Board shall solicit answers to applicable ruling requests from the Internal Revenue Service regarding the tax status of fees paid pursuant to an advance payment contract to the purchaser or qualified beneficiary and from the Securities and Exchange Commission regarding the application of federal securities laws to the Fund.  The Board shall make the status of such requests known before entering into an advance payment contract.
"§ 116-264. North Carolina Prepaid Postsecondary Education Expense Board.
(a)	The North Carolina Prepaid Postsecondary Education Expense Program shall be administered by the Prepaid Postsecondary Education Expense Board as an agency of the State.  The Prepaid Postsecondary Education Expense Board is created as a body corporate with all the powers of a body corporate for the purposes delineated in this section.  For the purposes of Section 11 of Article III of the North Carolina State Constitution, the Board shall be assigned to and administratively housed within the Department of the State Treasurer, but it shall independently exercise the powers and duties specified in this section.
(b)	The Board shall consist of seven members to be composed of the President of The University of North Carolina, the State Treasurer, the Controller, the President of the Community College System, and three members appointed by the Governor and subject to confirmation by the Senate.  Each member appointed by the Governor shall possess the knowledge, skill, and experience in the areas of accounting, actuary, risk management, or investment management.  Each member of the Board not appointed by the Governor may name a designee to serve the Board on behalf of the member; however, any designee so named shall meet the qualifications required of gubernatorial appointees to the Board.
(c)	Members appointed by the Governor shall serve terms of three years except that, in making the initial appointments, the Governor shall appoint one member to serve for one year, one member to serve for two years, and one member to serve for three years.  Any person appointed to fill a vacancy on the Board shall be appointed in a like manner and shall serve for only the unexpired term.  Any member shall be eligible for reappointment and shall serve until a successor qualifies.
(d)	Members of the Board shall serve without compensation, but shall be reimbursed for per diem and travel in accordance with G.S. 138-6 and G.S. 138-7.  Each member of the Board shall file a full and public disclosure of the member's financial interests.
(e)	The Governor shall appoint a member of the Board to serve as the initial chair of the Board.  Thereafter, the Board shall elect a chair annually.  The Board shall annually elect a Board member to serve as vice-chair and shall designate a secretary-treasurer who need not be a member of the Board.  The secretary-treasurer shall keep a record of the proceedings of the Board and shall be the custodian of all printed material filed with or by the Board and of its official seal.
(f)	Notwithstanding the existence of vacancies on the Board, a majority of the members shall constitute a quorum.  The Board shall take no official action in the absence of a quorum.  The Board shall meet, at a minimum, on a quarterly basis at the call of the chair.
(g)	The Board shall appoint an executive director to serve as the chief administrative and operational officer of the Board and to perform other duties assigned to the executive director by the Board.
"§ 116-265.  Powers and duties of the Board.
(a)	The Board shall have the powers necessary or proper to carry out the provisions of this Article, including the power to:
(1)	Adopt an official seal and rules.
(2)	Sue or be sued.
(3)	Make and execute contracts and other necessary instruments.
(4)	Establish agreements or other transactions with federal, State, and local agencies, including State universities and community colleges.
(5)	Invest funds not required for immediate disbursement.
(6)	Appear in its own behalf before boards, commissions, or other governmental agencies.
(7)	Hold, buy, and sell any instruments, obligations, securities, and property determined appropriate by the Board.
(8)	Require a reasonable length of State residence for qualified beneficiaries.
(9)	Restrict the number of participants in the community college plan, university plan, and dormitory residence plan, respectively.  However, any person denied participation solely on the basis of such restriction shall be granted priority for participation during the succeeding year.
(10)	Segregate contributions and payments to the Fund into various accounts and funds.
(11)	Contract for necessary goods and services, employ necessary personnel, and engage the services of private consultants, actuaries, managers, legal counsel, and auditors for administrative or technical assistance.
(12)	Solicit and accept gifts, grants, loans, and other aids from any source or participate in any other way in any government program to carry out the purposes of this Article.
(13)	Require and collect administrative fees and charges in connection with any transaction and impose reasonable penalties, including default, for delinquent payments or for entering into an advance payment contract on a fraudulent basis.
(14)	Procure insurance against any loss in connection with the property, assets, and activities of the Fund or the Board.
(15)	Impose reasonable time limits on use of the tuition benefits provided by the Program.  However, any such limitation shall be specified within the advance payment contract.
(16)	Delineate the terms and conditions under which payments may be withdrawn from the Fund and impose reasonable fees and charges for the withdrawal.  The terms and conditions shall be specified within the advance payment contract.
(17)	Provide for the receipt of contributions in lump sums or installment payments.
(18)	Establish other policies, procedures, and criteria to implement and administer the provisions of this Article.
"§ 116-266.  North Carolina Prepaid Postsecondary Education Expense Program; marketing.
The Board shall solicit proposals for the marketing of the Program pursuant to G.S. 143-52.  The entity designated pursuant to this section shall serve as a centralized marketing agent for the Program and shall be solely responsible for the marketing of the Program.  Any materials produced for the purpose of marketing the Program shall be submitted to the Board for review.  No such materials shall be made available to the public before the materials are approved by the Board.  Any educational institution may distribute marketing materials produced for the Program; however, all the materials shall have been approved by the Board prior to distribution.  Neither the State nor the Board shall be liable for misrepresentation of the Program by a marketing agent.
"§ 116-267.  North Carolina Prepaid Postsecondary Education Expense Program; direct-support organization.
The Board may establish a direct-support organization that is:
(1)	A North Carolina corporation, not-for-profit, incorporated under the provisions of Chapter 55A of the General Statutes.
(2)	Organized and operated exclusively to receive, hold, invest, and administer property and to make expenditures to or for the benefit of the Program.
(3)	An organization that the Board, after review, has certified to be operating in a manner consistent with the goals of the Program and in the best interests of the State.  Unless so certified, the organization may not use the name of the Program.
(4)	Subject to an annual postaudit by an independent certified public accountant in accordance with rules adopted by the Board, the annual audit shall be submitted to the State Treasurer and the State Auditor for review.  The State Treasurer and State Auditor shall have the authority to require and receive from the organization or its independent auditor any detail or supplemental data relative to the operation of the organization.  The identity of donors who desire to remain anonymous shall be confidential and are not public records within the meaning of G.S. 132-1 and such anonymity shall be maintained in the auditor's report.  All records of the organization other than the auditor's report and the supplemental data requested by the State Treasurer or the State Auditor shall be confidential and are not public records within the meaning of G.S. 132-1.  The Chair of the Board and the executive director shall be directors of the direct support organization and shall jointly name three other individuals to serve as directors of the organization.
"§ 116-268.  Insurance coverage.
The Board may endorse insurance coverage written exclusively for the purpose of protecting advance payment contracts, and the purchasers or beneficiaries thereof, which may be issued in the form of a group life policy.
"§ 116-269.  Advance payment contracts and contract plans.
(a)	The Board shall prepare advance payment contracts for registration and advance payment contracts for dormitory residence in accordance with the provisions of this section.  Advance payment contracts prepared for the purposes of this Article shall be exempt from the provisions of the North Carolina Insurance Code.  The Board may request assistance from the Attorney General in the development of the advance payment contracts.  The contents of both contracts shall include the following:
(1)	The amount of the payment and the number of payments required from a purchaser on behalf of a qualified beneficiary.
(2)	The terms and conditions under which purchasers shall remit payments, including the date upon which each payment shall be due.
(3)	Provisions for late payment charges and for default.
(4)	Provisions for penalty fees for withdrawals from the Fund.
(5)	The name and date of birth of the qualified beneficiary on whose behalf the contract is drawn and the terms and conditions under which another person may be substituted as the qualified beneficiary.
(6)	The name of any person who may terminate the contract.  The terms of the contract shall specify whether the contract may be terminated by the purchaser, the qualified beneficiary, a specific designated person, or any combination of these persons.
(7)	The terms and conditions under which a contract may be terminated, the name of the person entitled to any refund due as a result of termination of the contract pursuant to the terms and conditions, and the amount of refund, if any, due to the person so named.
(8)	The time limitations, if any, within which the qualified beneficiary must claim his or her benefits through the Program.
(9)	Other terms and conditions deemed by the Board to be necessary or proper.
(b)	In addition to the provisions of subsection (a) of this section, an advance payment contract for registration shall include the following:
(1)	The number of semester credit hours contracted by the purchaser.
(2)	The State postsecondary system toward which the contracted credit hours will be applied.
(3)	The assumption of a contractual obligation by the Board to the qualified beneficiary to provide for a specified number of semester credit hours of undergraduate instruction at a State postsecondary institution, not to exceed the average number of credit hours required for the conference of the degree that corresponds to the plan purchased on behalf of the qualified beneficiary.
(c)	In addition to the provisions of subsection (a) of this section, an advance payment contract for dormitory residence shall include the following:
(1)	The number of semesters of dormitory residence contracted by the purchaser.
(2)	The assumption of a contractual obligation by the Board to the qualified beneficiary to provide for a specified number of semesters of dormitory residence at a State university, not to exceed the maximum number of semesters of full-time enrollment required for the conference of a baccalaureate degree.
(d)	An advance payment contract may provide that contracts that have not been terminated or the benefits exercised within a specified period of time shall be considered terminated.  Time expended by a qualified beneficiary as an active duty member of any of the armed services of the United States shall be added to the period of time specified pursuant to this section.  No purchaser or qualified beneficiary whose advance payment contract is terminated pursuant to this section shall be entitled to a refund.  The Board shall retain any moneys paid by the purchaser for an advance payment contract that has been terminated in accordance with this section.  Such moneys retained by the Board are exempt from Chapter 116B of the General Statutes, and the retained moneys must be used by the board to further the purposes of this Article.
(e)	No refund provided pursuant to subsection (a)(7) of this section shall exceed the amount paid into the Fund by the purchaser.  In the event that an advance payment contract is converted from a university to a community college registration plan, the refund amount shall be reduced by the amount transferred to a community college on behalf of the qualified beneficiary.  However, refunds may exceed the amount paid into the Fund in the following circumstances:
(1)	If the beneficiary is awarded a scholarship, the terms of which cover the benefits included in the advance payment contracts, then moneys paid for the purchase of the advance payment contracts shall be returned to the purchaser in semester installments coinciding with the matriculation by the beneficiary in amounts of either the original purchase price plus five percent (5%) compounded interest, or the current rates at State postsecondary institutions, whichever is less.
(2)	In the event of the death or total disability of the beneficiary, moneys paid for the purchase of advance payment contracts shall be returned to the purchaser together with five percent (5%) compounded interest, or the current rates at State postsecondary institutions, whichever is less.
(3)	If an advance payment contract is converted from a university plan to a community college plan or a community college plus university plan, the amount refunded shall be the value of the original advance payment contract minus the value of the contract after the conversion.
(4)	No refund shall be authorized through an advance payment contract for any school year partially attended but not completed.  For purposes of this section, a school year partially attended but not completed shall mean any one semester whereby the student is still enrolled at the conclusion of the official drop-add period, but withdraws before the end of the semester.  If a beneficiary does not complete a community college plan or university plan for reasons other than that the advance contract is converted into a different plan, the purchaser shall receive a refund of the amount paid into the Fund for the remaining unattended years of the advance payment contract pursuant to rules adopted by the Board.
"§ 116-270.  Advance payment contract plans.
(a)	At a minimum, the Board shall make advance payment contracts available for the independent plans to be known as the community college plan, the university plan, and the dormitory residence plan, respectively.
(b)	Through the community college plan, the advance payment contract shall provide prepaid registration fees for a specified number of undergraduate semester credit hours not to exceed the average number of hours required for the conference of an associate degree.  The cost of participation in the community college plan shall be based primarily on the average current and projected registration fees within the State Community College System and the number of years expected to elapse between the purchase of the plan on behalf of a qualified beneficiary and the exercise of the benefits provided in the plan by the beneficiary.  Qualified beneficiaries shall bear the cost of any laboratory fees associated with enrollment in specific courses.  Each qualified beneficiary shall be classified as a resident for tuition purposes pursuant to G.S. 116-143.1 regardless of the qualified beneficiary's actual legal residence.
(c)	Through the university plan, the advance payment contract shall provide prepaid registration fees for a specified number of undergraduate semester credit hours not to exceed the average number of hours required for the conference of a baccalaureate degree.  The cost of participation in the university plan shall be based primarily on the current and projected registration fees within the State University System and the number of years expected to elapse between the purchase of the plan on behalf of a qualified beneficiary and the exercise of the benefits provided in the plan by such beneficiary.  Qualified beneficiaries shall bear the cost of any laboratory fees associated with enrollment in specific courses.  In the event that a qualified beneficiary fails to be admitted to a State university or chooses to attend a community college, the qualified beneficiary may convert the average number of semester credit hours required for the conference of an associate degree from a university plan to a community college plan and may retain the remaining semester credit hours in the university plan or may request a refund for prepaid credit hours in excess of the average number of semester credit hours required for the conference of an associate degree pursuant to G.S. 116-269(a)(7).  Each qualified beneficiary shall be classified as a resident for tuition purposes pursuant to G.S. 116-143.1 regardless of the qualified beneficiary's actual legal residence.
(d)	Through the dormitory residence plan, the advance payment contract shall provide prepaid housing fees for a maximum of 10 semesters of full-time undergraduate enrollment in a State university.  Dormitory residence plans are optional and may be purchased only in conjunction with a university plan.  Dormitory residence plans shall be purchased in increments of two semesters.  The cost of participation in the dormitory residence plan shall be based primarily on the average current and projected housing fees within the State University System and the number of years expected to elapse between the purchase of the plan by the beneficiary.  Qualified beneficiaries shall bear the cost of any additional elective charges such as laundry service or long-distance telephone service.  Each State university may specify the residence halls eligible for inclusion in the plan.  In addition, any State university may request immediate termination of a dormitory residence contract based on a violation or multiple violations of rules of the residence hall.  Qualified beneficiaries shall have the highest priority in the assignment of housing within the university residence halls.  In the event that sufficient housing is not available for all qualified beneficiaries, the Board shall refund the purchaser or qualified beneficiary an amount equal to the fees charged for dormitory residence during that semester.
(e)	A qualified beneficiary may apply a community college plan, university plan, or dormitory residence plan toward any eligible independent college or university.  An independent college or university which is located and chartered in North Carolina, is  not-for-profit, is accredited by the Commission on Colleges of the Southern Association of Colleges and Schools or the Accrediting Commission of the Association of Independent Colleges and Schools, and which confers postsecondary degrees as defined in G.S. 116-15 shall be eligible for such application.  In order to be eligible for participation in the dormitory residence plan, an eligible independent college or university shall provide written certification to the Board that it complies with the provisions of this section.  The Board shall transfer or cause to have transferred to the eligible independent college or university designated by the qualified beneficiary an amount not to exceed the redemption value of the plan within a State postsecondary institution.  In the event that the cost of registration or housing fees at the independent college or university is less than the corresponding fees at a State postsecondary institution, the amount transferred shall not exceed the actual cost of registration or housing fees.  No transfer authorized pursuant to this section shall exceed the number of semester credit hours or semesters of dormitory residence contracted on behalf of a qualified beneficiary.
"§ 116-271.  North Carolina Prepaid Postsecondary Education Expense Program; operations.
(a)	The Board shall solicit proposals for the operations of the Program pursuant to G.S. 143-52, through which the Board shall contract for the services of a records administrator, a trustee services firm, and one or more product providers.
(b)	The records administrator shall be the entity designated by the Board to conduct the daily operations of the Program on behalf of the Board.  The goals of the Board in selecting a records administrator shall be to provide all purchasers with the most secure, well-diversified, and beneficially administered postsecondary education expense plan possible, to allow all qualified firms interested in providing such services equal consideration, and to provide the services to the State at no cost and to the purchasers at the lowest cost possible.  Evaluations of proposals submitted pursuant to this section shall include the following criteria:
(1)	Fees and other costs charged to purchasers that affect account values or operational costs related to the Program.
(2)	Past experience in records administration and current ability to provide timely and accurate service in the areas of records administration, audit and reconciliation, plan communication, participant service, and complaint resolution.
(3)	Sufficient staff and computer capability for the scope and level of service expected by the Board.
(4)	Financial history and current financial strength and capital adequacy to provide administrative services required by the Board.
(c)	The trustee services firm shall be the entity designated by the Board to select and supervise investment programs on behalf of the Board.  The goals of the Board in selecting a trustee services firm shall be to obtain the highest standards of professional trustee services, to allow all qualified firms interested in providing such services equal consideration, and to provide the services to the State at no cost and to the purchasers at the lowest cost possible.  The trustee services firm shall agree to meet the obligations of the Board to qualified beneficiaries if moneys in the Fund fail to offset the obligations of the Board as a result of imprudent selection or supervision of investment programs by the firm.  Evaluations of proposals submitted pursuant to this section shall include the following criteria:
(1)	Adequacy of trustee services for supervision and management of the Program, including current operations and staff organization and commitment of management to the proposal.
(2)	Capability to execute Program responsibilities within time and regulatory constraints.
(3)	Past experience in trustee services and current ability to maintain regular and continuous interactions with the Board, records administrator, and product provider.
(4)	The minimum purchaser participation assumed within the proposal and any additional requirements of purchasers.
(5)	Adequacy of technical assistance and services proposed for staff.
(6)	Adequacy of a management system for evaluating and improving overall trustee services to the Program.
(7)	Adequacy of facilities, equipment, and electronic data processing services.
(8)	Detailed projections of administrative costs, including the amount and type of insurance coverage, and detailed projections of total costs.
(d)	The product providers shall be the entities designated by the Board to develop investment portfolios on behalf of the Board to achieve the purposes of this section.  Product providers shall be limited to insurers who have a certificate of authority issued by the Commissioner of Insurance, as defined in G.S. 53-1, savings and loan associations as defined in Chapter 54B of the General Statutes, authorized Securities and Exchange Commission investment advisers, and investment companies.  All product providers shall have their principal place of business and corporate charter located and registered in the United States.  In addition, each product provider shall agree to meet the obligations of the Board to qualified beneficiaries if moneys in the Fund fail to offset the obligations of the Board as a result of imprudent investing by such provider.  Each authorized insurer shall evidence superior performance overall on an acceptable level of surety in meeting its obligations to its policyholders and other contractual obligations.  Only qualified public depositories approved by the State Treasurer shall provide investment plans as specified within the request for proposals.
The goals of the Board in selecting a product provider company shall be to provide all purchasers with the most secure, well-diversified, and beneficially administered postsecondary education expense plan possible, to allow all qualified firms interested in providing such services equal consideration, and to provide the services to the State at no cost and to the purchasers at the lowest cost possible.  Evaluations of proposals submitted pursuant to this section shall include the following criteria:
(1)	Fees and other costs charged to purchasers that affect account values or operation costs related to the Program.
(2)	Past and current investment performance, including investment and interest rate history, guaranteed minimum rates of interest, consistency of investment performance, and any terms and conditions under which moneys are held.
(3)	Past experience and ability to provide timely and accurate service in the areas of records administration, benefit payments investment management, and complaint resolution.
(4)	Financial history and current financial strength and capital adequacy to provide products, including operating procedures and other methods of protecting Program assets.
"§ 116-272.  State liable for Fund obligations.
The State shall agree to meet the obligations of the Board to qualified beneficiaries if moneys in the Fund fail to offset the obligations of the Board.  The General Assembly shall appropriate to the Fund the amount necessary to meet the obligations of the Board to qualified beneficiaries.
"§ 116-273.  Investment of Fund assets.
The assets of the Fund shall be maintained, invested, and expended solely for the purposes of this Article and shall not be loaned, transferred, or otherwise used by the State for any purpose other than the purposes of this Article.  This section shall not be construed to prohibit the Board from investing in, by purchase or otherwise, bonds, notes, or other obligations of the State or an agency or instrumentality of the State.  Unless otherwise specified by the Board, assets of the Fund shall be expended in the following order of priority:
(1)	To make payments to State postsecondary institutions on behalf of qualified beneficiaries.
(2)	To make refunds upon termination of advance payment contracts.
(3)	To pay the costs of Program administration and operations.
"§ 116-274.  Fund exempt from creditor claims of purchaser or beneficiary.
Moneys paid into or out of the Fund by or on behalf of a purchaser or qualified beneficiary of an advance payment contract made under this Article, which contract has not been terminated, are exempt from all claims of creditors of the purchaser or the beneficiary.
"§ 116-275.  Payroll deductions.
The State or any State agency, county, municipality, or other political subdivision may, by contract, agree with any employee to remit payments toward advance payment contracts through payroll deductions made by the appropriate officer of the State, State agency, county, municipality, or political subdivision.  Such payments shall be held and administered in accordance with this Article.
"§ 116-276.  Admission to State postsecondary institution not guaranteed.
Nothing in this Article shall be construed as a promise or guarantee that a qualified beneficiary: (i)	will be admitted to a State postsecondary institution, (ii) will be admitted to a particular State postsecondary institution, (iii) will be allowed to continue enrollment at a State postsecondary institution after admission, or (iv) will be graduated from a State postsecondary institution.
"§ 116-277.  Discontinuance of Fund.
In the event that the State determines the Program to be financially infeasible, the State may discontinue the provision of the Program.  Any qualified beneficiary who has been accepted by and is enrolled or is within five years of enrollment in an eligible independent college or university or State postsecondary institution shall be entitled to exercise the complete benefits for which the qualified beneficiary has contracted.  All other contract holders shall receive a refund, pursuant to G.S. 116-269(a)(7), of the amount paid in and an additional amount in the nature of interest at a rate that corresponds, at a minimum, to the prevailing interest rates for savings accounts provided by banks and savings and loan associations.
"§ 116-278.  North Carolina Prepaid Tuition Scholarship Program.
The North Carolina Prepaid Tuition Scholarship Program is established with the intent to provide economically disadvantaged youth with prepaid postsecondary tuition scholarships.  The direct-support organization established pursuant to G.S. 116-267 shall administer the program with the assistance and cooperation of the school districts to achieve the following objectives:
(1)	Provide an incentive for economically disadvantaged youth to improve school attendance and academic performance in order to graduate and pursue a postsecondary education.
(2)	Obtain the commitment and involvement of private sector entities by virtue of funding matches with a ratio of fifty percent (50%) provided by the private sector and fifty percent (50%) provided by the State.
(3)	Purchase prepaid tuition scholarships for students designated and certified by the school districts to the direct-support organization who meet minimum economic and school requirements and remain drug free and crime free.  For the purpose of this subdivision, 'drug free' means not being convicted of, or adjudicated delinquent for, any violation of Chapter 90 of the General Statutes after being designated a recipient of a North Carolina prepaid tuition scholarship; and 'crime free' means not being convicted of, or adjudicated delinquent for, any felony or Class 1 misdemeanor after being designated a recipient of a North Carolina prepaid tuition scholarship."
Sec. 2.  This act becomes effective July 1, 1995.