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A10833 Memo:

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.
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