PA 08-117—sSB 25

Finance, Revenue and Bonding Committee

AN ACT CONCERNING A REPORT ON BOND ALLOCATIONS AND BOND AUTHORIZATIONS FOR THE CONNECTICUT HIGHER EDUCATION SUPPLEMENTAL LOAN AUTHORITY

SUMMARY: This act increases, from $170 million to $300 million, the aggregate amount of outstanding Connecticut Higher Education Supplemental Loan Authority (CHESLA) bonds that may be secured by special capital reserve funds. CHESLA makes loans to college students and their parents to help them finance the cost of undergraduate and graduate education.

The act also eliminates an annual report from the Office of Policy and Management secretary to the Finance, Revenue and Bonding Committee that updates, for all outstanding bond allocations, (1) the full completed cost of the project or purpose that received the allocation and (2) the estimated operating costs of any structure, facility, or equipment being built or acquired. The report was due by January 1 each year starting in 2007.

EFFECTIVE DATE: July 1, 2008

BACKGROUND

Special Capital Reserve Funds

Although bonds secured by special capital reserve funds are not backed by the state's full faith and credit, the state undertakes a contingent liability for the bonds by authorizing an issuing entity to establish such funds. Subject to any exceptions in the law authorizing establishment of a particular fund, money credited to and held in a special capital reserve fund must be used solely to buy, or pay interest or principal on, the bonds the fund secures or to pay redemption premiums on them if they are redeemed before maturity.

The minimum capital reserve amount is usually the maximum principal and interest payments due on the bonds for a single year. The state's liability is to maintain the minimum reserve on an annual basis and restore it to the minimum if it falls below the required amount in any particular year.

OLR Tracking: JSL: SP: PF: ts