Makes a $150,000 appropriation to the college savings account for payment of services and expenses related to the administration of the college choice savings program.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10833
SPONSOR: Weinstein TITLE OF BILL:
An act making an appropriation to the college savings account for
payment of services and expanses related to the administration of the
college choice tuition savings program
PURPOSE:
This bill makes an appropriation to the college savings account for
payment of services and expenses related to the administration of the
college choice tuition savings program
SUMMARY OF PROVISIONS:
Section one of this bill appropriates the sum of one hundred fifty thou-
sand dollars ($150,000) is hereby appropriated out of any moneys in the
general fund of the state treasury to the Higher Education Services
Corporation for suballocation to the credit of the College Savings
Account -22022 not otherwise appropriated, as follows: for Personal
Service - regular sixty-three thousand dollars ($63,000) and for Fringe
Benefits eighty seven thousand dollars ($87,000).
Section 2 of this bill states that this act would take effect immediate-
ly.
PRIOR LEGISLATIVE HISTORY:
New Bill.
JUSTIFICATION:
The Office of the State Comptroller (OSC) requests a sub-allocation from
the Higher Education Services Corporation for the NY 529 College Savings
Program of $150,000, representing an increase to the current sub-alloca-
tion. Several factors contribute to the need for additional funding,
including the growth of the NY 529 program in size, scope, and oversight
requirements over the last several years, and the addition of a new
program category in the last year. New York's 529 College Savings
Program's Direct Plan is the largest in the nation with over $23.7
billion in assets under management, and an additional $5.1 billion in
assets in its Advisor Plan. It consists of approximately one million
accounts. Due to its size and broad appeal, the program has grown
significantly in terms of the number of accounts and the volume of
assets it manages. Regulations have expanded as the program has matured,
requiring program administrators to spend more time reviewing financial
data, regulatory oversight, and investment policy compliance.
In addition to the growth of the existing program, a new 529 program
category, Child Development Account (CDA), was launched in 2017. Other
CDAs are in development. This new category opens the program to a more
culturally diverse and financially disadvantaged population than the
program has historically served. To support this new option, OSC staff
is providing structural, regulatory, and legal support to philanthropic
organizations, agencies, and community groups as they establish NY 529
accounts and oversight, and direct assistance for these accounts. OSC
and outside contractors have also spent significant time and effort on
system and program development over the past several months.
Lastly, the Tax Cuts and Jobs Act of 2017, included new provisions that
impacted the 529 Program and created an apparent discrepancy between
federal and state tax statutes. These differences needed to be communi-
cated to affected parties. Systems and transaction adjustments are still
being made to accommodate the required changes.
Despite increased responsibilities, the sub-allocation from HESC has
funded only one full-time Director and small number of staff who provide
less than half time support for the program. This minimalist approach is
no longer acceptable given the volume of assets being managed and the
increasing technical complexity of the program. Staffing levels for the
NY 529 program at OSC have not kept pace with its growth and are not
comparable to other 529 programs across the country, even when measured
against those with far fewer assets. OSC must increase staffing to prop-
erly exercise its fiduciary, sole trustee and oversight role.
Accordingly, the Comptroller urges passage of this legislation.
BUDGET IMPLICATIONS:
The NY 529 program is self-sustained from administrative funds that the
program's investments generate and does not rely on New York State for
funding. The administrative funds are designated for program management,
oversight, and improvement. The available funds can support the
increased budget request with sufficient reserves remaining.
EFFECTIVE DATE:
This bill would take effect immediately.
