1.1                          A bill for an act
  1.2             relating to education; establishing a college savings 
  1.3             bond program; authorizing the sale of general 
  1.4             obligation bonds in zero coupon form and in small 
  1.5             denominations; amending Minnesota Statutes 1996, 
  1.6             section 181.06, subdivision 2; proposing coding for 
  1.7             new law in Minnesota Statutes, chapter 16A. 
  1.8   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.9      Section 1.  [16A.645] [GOPHER STATE BONDS FOR THE 21ST 
  1.10  CENTURY.] 
  1.11     Subdivision 1.  [ESTABLISHMENT OF PROGRAM.] The 
  1.12  commissioner of finance, in consultation with the University of 
  1.13  Minnesota, the Minnesota state colleges and universities, and 
  1.14  the private college council, shall establish a college savings 
  1.15  bond program, to be known as "gopher state bonds" to encourage 
  1.16  individuals to save for higher education costs by investing in 
  1.17  state general obligation bonds.  The program consists of:  (1) 
  1.18  issuing a portion of the state general obligation bonds in zero 
  1.19  coupon form and in denominations and maturities that will be 
  1.20  attractive to individuals saving to pay for higher education 
  1.21  costs; and (2) developing a program for marketing the bonds to 
  1.22  investors who are saving to pay for higher education costs.  The 
  1.23  commissioner of finance may designate all or a portion of each 
  1.24  state general obligation bond sale as "gopher state bonds." 
  1.25     Subd. 2.  [DENOMINATIONS; MATURITIES.] The commissioner 
  1.26  shall determine the appropriate denominations and maturities for 
  2.1   gopher state bonds.  It is the intent of the legislature to make 
  2.2   bonds available in as small denominations as is feasible given 
  2.3   the costs of marketing and administering the bond issue.  
  2.4   Minimum denominations of $500 must be made available.  The 
  2.5   minimum denomination bonds need not be made available for bonds 
  2.6   of all maturities.  For purposes of this section, "denomination" 
  2.7   means the compounded maturity amount of the bond. 
  2.8      Subd. 3.  [DIRECT SALE PERMITTED.] Notwithstanding the 
  2.9   provisions of section 2, subdivision 5, the commissioner may 
  2.10  sell any series of gopher state bonds directly to the public or 
  2.11  to financial institutions for prompt resale to the public upon 
  2.12  the terms and conditions and the restrictions the commissioner 
  2.13  prescribes.  The commissioner may enter into all contracts 
  2.14  deemed necessary or desirable to accomplish the sale in a 
  2.15  cost-effective manner, but the commissioner may contract for 
  2.16  investment banking and banking services only after receiving 
  2.17  competitive proposals for the services. 
  2.18     Subd. 4.  [MARKETING PLAN.] The commissioner and the higher 
  2.19  education advisory council shall develop a plan for marketing 
  2.20  gopher state bonds. 
  2.21     The plan must include strategies to: 
  2.22     (1) inform parents and relatives about the availability of 
  2.23  the bonds; 
  2.24     (2) take orders for the bonds; 
  2.25     (3) target the sale of the bonds to Minnesota residents, 
  2.26  especially parents and relatives of children who are likely to 
  2.27  seek higher education; 
  2.28     (4) ensure that purchase of the bonds by corporations will 
  2.29  not prevent individuals and relatives of future students from 
  2.30  buying them; and 
  2.31     (5) market the bonds at the lowest cost to the state. 
  2.32     Subd. 5.  [EFFECT ON STUDENT GRANTS.] The first $25,000 of 
  2.33  gopher state bonds purchased for the benefit of a student must 
  2.34  not be considered in determining the financial need of an 
  2.35  applicant for the state grant program under section 136A.121. 
  2.36     Sec. 2.  [16A.646] [ZERO COUPON BONDS.] 
  3.1      Subdivision 1.  [AUTHORITY TO ISSUE.] When authorized by 
  3.2   law to issue state general obligation bonds, the commissioner 
  3.3   may issue all or part of the bonds as serial maturity bonds or 
  3.4   as zero coupon bonds or a combination of the two. 
  3.5      Subd. 2.  [DEFINITIONS.] For purposes of this section and 
  3.6   section 1, the following terms have the meanings given them. 
  3.7      (a) "Compounded maturity" means the amount of principal and 
  3.8   interest payable at maturity on zero coupon bonds. 
  3.9      (b) "Serial maturity bonds" means bonds maturing on a 
  3.10  specified day in two or more consecutive years and bearing 
  3.11  interest at a specified rate payable periodically to maturity or 
  3.12  prior redemption. 
  3.13     (c) "Zero coupon bonds" means bonds in a stated principal 
  3.14  amount, maturing on a specified date or dates, and bearing 
  3.15  interest that accrues and compounds to and is payable only at 
  3.16  maturity or upon prior redemption of the bonds. 
  3.17     Subd. 3.  [METHOD OF SALE; PRINCIPAL AMOUNT.] Except as 
  3.18  otherwise provided by this section or section 1, any series of 
  3.19  bonds including zero coupon bonds must be issued and sold under 
  3.20  the provisions of section 16A.641.  The stated principal amount 
  3.21  of zero coupon bonds must be used to determine the principal 
  3.22  amount of bonds issued under the laws authorizing issuance of 
  3.23  state general obligation bonds. 
  3.24     Subd. 4.  [SINKING FUND.] The commissioner's order 
  3.25  authorizing the issuance of zero coupon bonds shall establish a 
  3.26  separate sinking fund account for the zero coupon bonds in the 
  3.27  state bond fund.  There is annually appropriated from the 
  3.28  general fund to each zero coupon bond account, beginning in the 
  3.29  year in which the zero coupon bonds are issued, an amount not 
  3.30  less than the sum of: 
  3.31     (1) the total stated principal amount of the zero coupon 
  3.32  bonds that would have matured from their date of issue to and 
  3.33  including the second July 1 following the transfer of 
  3.34  appropriated money, if the bonds matured serially in an equal 
  3.35  principal amount in each year during their term and in the same 
  3.36  month as their stated maturity date; plus 
  4.1      (2) the total amount of interest accruing on the stated 
  4.2   principal amount of the bonds and on interest previously 
  4.3   accrued, from bonds date of issue to and including the second 
  4.4   July 1 following the transfer of appropriated money; less 
  4.5      (3) the amount in the sinking fund account for the payment 
  4.6   of the compounded maturity amount of the bonds, including 
  4.7   interest earnings on amounts in the account.  This appropriation 
  4.8   is in lieu of all other appropriations made with respect to zero 
  4.9   coupon bonds.  The appropriated amounts must be transferred from 
  4.10  the general fund to the sinking fund account in the state bond 
  4.11  fund by December 1 of each year. 
  4.12     Subd. 5.  [SALE.] Except as otherwise provided in section 
  4.13  1, zero coupon bonds, or a series of bonds including zero coupon 
  4.14  bonds, must be sold at public sale at a price not less than 98 
  4.15  percent of their stated principal amount.  No state trunk 
  4.16  highway bond may be sold for a price of less than par and 
  4.17  accrued interest. 
  4.18     Sec. 3.  Minnesota Statutes 1996, section 181.06, 
  4.19  subdivision 2, is amended to read: 
  4.20     Subd. 2.  [PAYROLL DEDUCTIONS.] A written contract may be 
  4.21  entered into between an employer and an employee wherein the 
  4.22  employee authorizes the employer to make payroll deductions for 
  4.23  the purpose of paying union dues, premiums of any life 
  4.24  insurance, hospitalization and surgical insurance, group 
  4.25  accident and health insurance, group term life insurance, group 
  4.26  annuities or contributions to credit unions or a community chest 
  4.27  fund, a local arts council, a local science council or a local 
  4.28  arts and science council, or Minnesota benefit association, a 
  4.29  federally or state registered political action committee, or 
  4.30  participation in any employee stock purchase plan or savings 
  4.31  plan for periods longer than 60 days, including gopher state 
  4.32  bonds established under section 1. 
  4.33     Sec. 4.  [EFFECTIVE DATE.] 
  4.34     Sections 1 to 3 are effective the day following final 
  4.35  enactment and apply to authorizations of state bonds under laws 
  4.36  enacted before or after this effective date.