An Act To Update the Process for the Allocation of the State Ceiling on Tax-exempt Bonds
Maine Legislature, Session 121, LD 1409
Committee: Business, Research and Economic Development
Sponsors: DAGGETT, COLWELL, BROMLEY, DA VIS, HALL, TURNER, BOWLES, MILLS, RICHARDSON, SULLIVAN
Amends: 10 MRSA §363

Legislative Document 
No. 1409 
S.P.465 
In Senate, March 20, 2003 
An Act To Update the Process for the Allocation of the State Ceiling 
on Tax-exempt Bonds 
Reference to the Committee on Business, Research and Economic Development suggested 
and ordered printed. 
JOY J. O'BRIEN 
Secretary of the Senate 
Presented by President DAGGETT of Kennebec. (GOVERNOR'S BILL) 
Cosponsored by Speaker COLWELL of Gardiner and 
Senators: BROMLEY of Cumberland, DA VIS of Piscataquis, HALL of Lincoln, TURNER of 
Cumberland, Representatives: BOWLES of Sanford, MILLS of Fannington, RICHARDSON 
of Brunswick, SULLIVAN of Biddeford. 
Printed on recycled raper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 10 MRSA §363, sub-§I-A, as amended by PL 1999, c. 72 8, 
§l, is further amended to read: 
1-A. 
Procedure. 
For each calendar year, the Legislature 
may establish a procedure for allocation of the entire amount of 
the state ceiling by allocating an amount of the state ceiling to 
the specific issuers designated in this section for 
further 
allocation by each specific issuer to itself or to other issuers 
for specific bond issues requiring an allocation of the state 
ceiling or 
for 
carryforward. 
This 
procedure 
supersedes 
the 
federal formula to the full extent that the United States Code, 
Title 
26, 
authorizes 
the 
Legislature 
to 
vary 
the 
federal 
formula. 
Allocations 
may 
be 
reviewed 
by 
the 
Legislature 
periodically and unused allocations may be 
reallocat~ed to other 
issuers; however, 
notwithstanding the existence of legislation 
allocating or reallocating all or 
any portion of the state 
ceiling, at any time during the period from September 1st to and 
including December 31st of any calendar year, and at any other 
time that the Legislature is not in session, a group consisting 
of 
a 
representative 
of 
each 
of 
the 
issuers 
specifically 
identified 
in 
subsections 
4, 
aBeL 
7, 
and 
8-A; 
a 
FepFeseB~a~~ve-~--a-~~~~~-eFea~ee-~~-~e-~~-~eFffieF 
~~~*e--~r-~-~-~~~~--aBe--~~~~-~--6ee~J~-*14g+f and a 
representative of 
the 
Governor 
designated each year 
by 
the 
Governor may, by written agreement executed by no fewer than 4 of 
the 
§ 
Q voting representatives, allocate amounts not previously 
allocated and reallocate unused allocations 
from 
one of the 
specific issuers designated in this section to another specific 
issuer for further allocation or carryforward, with respect to 
the state ceiling for that calendar year only. 
In no event may 
any issuer have more than one vote. 
If an issuer is allocated a 
portion of the state ceiling in more than one category, 
the 
written agreement must be executed by no fewer than 4 of the 6 
voting representatives. 
The issuer specifically identified in 
subsection 5 and a representative of the Department of Economic 
and 
Community 
Development 
designated 
each 
year 
by 
the 
Commissioner 
of 
Economic 
and 
Community 
Development 
shall 
participate as nonvoting members of the group of representatives 
described in this 
subsection with 
respect 
to 
agreements 
or 
recommendations 
for 
allocation or 
reallocation of 
the 
state 
ceiling. 
Except for records containing specific and identifiable 
personal information acquired from applicants for or recipients 
of 
financial 
assistance, 
the 
records 
of 
the 
group 
of 
representatives described in this subsection are public records 
and the meetings of the group of representatives described in 
this subsection are public proceedings within the meaning of 
Title 1, chapter 13, subchapter * ~. 
Page l-LR2020(1) 
Sec. 2. 10 MRSA §363, sub-§8, as amended by PL 1999, c. 728, 
§6 and affected by §20 and amended by PL 2001, c. 44, §11 and 
affected by §14, is further amended to read: 
8. 
Allocations to the Maine Educational Loan Authority. 
That portion of the state ceiling allocated to the ea~e~9Fie&-e~ 
be REl s - -pr-e-v-i-di ~ 
-:€-un4&- - ~9 F - -t..,be- -p-lH'-po-&eS--e ~ - -a- -G<H'-p<H"-aA::-iGn-- e Fe a ~e El 
pYFSyaR~-~~-~a&-~e~me~--~~~-aQT-~-i~-bb~~r-~RQ--~~~-aQ-AT 
see~ieR--l-l4Q 
.. :7-... --G-F--e~ iSsuance of bonds by the Maine Educational 
Loan Authority pursuant to Title 20-A, 
chapter 417-A must be 
allocated to 
~aa~--€-E>-£~~-t.-ieR--<H"--~e the Maine Educational Loan 
AuthoritYT-e~-~-~-&aGh-ffiay-~~~-t.ae~-~~~~~~-~F~~&-e~ 
Eae--£-t.~-t.e--~~-i~-~~~~--~9--i~---t.~-~--~~~F-~~--aR 
alleea~ieR--~-G---~~~Ji~y---a&--~~~~--beREls. 
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alleea~ieR-~--Fea~~ea~i&&-~--a&y-pe~-t.-ieR--G-~-~ae-~~~-eeiliR~ 
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eFea~eEl-pYF6yaa~--t.e-~-E>-£me£-~-i~~~~,-~iGn--~~~~-a&G-~i~~e-aQ-AT 
seeEieR--~*4Q1--te--eaea--etaeF--eF--te--aRetaeF--speei~ie--issyeF 
Elesi~Ra~eEl--i~-~h~&-£ee-t.ieR-~-be-~-~&-~eee~Q~Ree-~it~-tae 
Fe~yiFeffieRts-iR-SybseetieR-*-AT 
A. 
Prior to issuing loans funded through an allocation of 
the state ceiling for the issuance of education loans, an 
issuer or lender must provide to the appropriate agency 
within 
the 
Department 
of 
Professional 
and 
Financial 
Regulation examples of the disclosures to be made to loan 
recipients or obligors. The information must be provided to 
the Bureau of Financial Institutions if the issuer or lender 
is 
a 
financial 
institution or 
credit union established 
pursuant to state or 
federal 
law or 
to 
the Office of 
Consumer 
Credit 
Regulation 
for 
all 
other 
issuers 
or 
lenders. 
This 
information 
must 
be 
provided 
to 
the 
appropriate agency within the Department of Professional and 
Financial Regulation upon request, or in the course of an 
examination of the issuer or lender by the agency, and must 
include 
a 
description 
of 
any 
interest 
rate 
or 
other 
discounts offered that clearly identifies all of the terms 
and conditions of obtaining any discount, 
a proj ection of 
the approximate number or percentage of loan obligors who 
are likely to benefit from the discounts 
and any other 
disclosures pursuant to guidelines established by the Bureau 
of Financial Institutions and the Office of Consumer Credit 
Regulation for the issuance of education loans that would 
benefit from an allocation of the state ceiling. 
The Bureau 
of Financial Institutions and the Office of Consumer Credit 
Regulation shall jointly adopt, to the extent allowed by 
law, rules to carry out the provisions of this paragraph by 
establishing uniform disclosure requirements and sanctions 
for noncompliance. 
Rules adopted pursuant to this paragraph 
are routine technical rules, as defined in Title 5, chapter 
375, subchapter ;U-A 2-A. 
All information provided to the 
appropriate agencies within the Department of Professional 
and Financial Regulation must include the source of the 
information and the basis for any projections. 
B-1. 
All education loans made 
under the federal Higher 
Education Act of 1965, 
United States Code, Chapter 28 
that are purchased or originated with proceeds of tax-exempt 
bonds 
using 
a 
portion of the state ceiling on private 
activity bonds 
must 
be 
guaranteed 
by 
the state 
agency 
designated as administrator of federal guaranteed student 
loan 
programs 
pursuant 
to 
Title 
20-A, 
chapter 
417, 
subchapter 
I 1, provided that this requirement does not 
apply to serial loans of a borrower that are guaranteed by a 
different guarantee agency and acquired or financed with 
tax-exempt bond proceeds prior to the effective date of this 
paragraph. 
The state agency designated as administrator of 
federal guaranteed student loan programs pursuant to Title 
20-A, chapter 417, subchapter I 1 shall use its best efforts 
to provide competitive rates for the guarantee function. 
Sec.3. 10 MRSA §363, sub-§8-A is enacted to read: 
8-A. 
Allocations 
to issuer of 
bonds 
for 
purchase of 
education lOans. 
That portion of the state ceiling allocated to 
the categories of bonds providing funds for the purposes of an 
entity designated pursuant to Title 20-A, section 11407, must be 
allocated to 
the entity designated pursuant 
to Title 
20-A, 
section 11407. 
A. 
Prior to issuing loans funded through an allocation of 
the state ceiling for the issuance of education loans, an 
issuer or lender must provide to the appropriate agency 
within 
the 
Department 
of 
Professional 
and 
Financial 
Regulation examples of the disclosures to be made to loan 
recipients or obligors. 
The information must be provided to 
the 
Bureau 
of 
Financial 
Institutions, 
Department 
of 
Professional 
and 
Finanical 
Regulation if the 
issuer or 
lender 
is 
a 
financial 
institution 
or 
credit 
union 
established pursuant to state or federal 
law or to the 
Office 
of 
Consumer 
Credit 
Regulation, 
Department 
of 
Professional and Finanical Regulation for all other issuers 
or 
lenders. 
This 
information must 
be 
provided 
to 
the 
appropriate agency within the Department of Professional and 
Financial Regulation upon request, or in the course of an 
examination of the issuer or lender by the agency, and must 
include 
a 
description 
of 
any 
interest 
rate 
or 
other 
discounts offered that clearly identifies all of the terms 
and conditions of obtaining any discount. a projection of 
the approximate number or percentage of loan obligors who 
are likely to benefit from the discounts 
and any other 
disclosures pursuant to guidelines established by the Bureau 
of Financial Institutions and the Office of Consumer Credit 
Regulation for the issuance of education loans that would 
benefit from an allocation of the state ceiling. 
The Bureau 
of Financial Institutions and the Office of Consumer Credit 
Regulation shall jointly adopt, to the extent allowed by 
law, rules to carry out the provisions of this paragraph by 
establishing uniform disclosure reguirements and sanctions 
for noncompliance. 
Rules adopted pursuant to this paragraph 
are routine technical rules, as defined in Title 5, chapter 
375, 
subchapter 
2-A. 
All 
information 
provided 
to 
the 
appropriate agencies within the Department of Professional 
and Financial Regulation must include the source of the 
information and the basis for any projections. 
B. 
All 
education 
loans 
made 
under 
the 
federal 
Higher 
Education Act of 1965, 
United States Code, Chapter 28 
that are purchased with proceeds of tax-exempt bonds using a 
portion of the state ceiling on private activity bonds must 
be 
guaranteed 
by 
the 
state 
agency 
designated 
as 
administrator of federal guaranteed student loan programs 
pursuant to Title 20-A, chapter 417, subchapter 1; however, 
this 
reguirement 
does 
not 
apply 
to 
serial 
loans 
of 
a 
borrower that are guaranteed by a different guarantee agency 
and acguired or financed with tax-exempt bond proceeds prior 
to the effective date of this paragraph. 
The state agency 
designated as administrator of federal guaranteed student 
loan 
programs 
pursuant 
to 
Title 
20-A, 
chapter 
417, 
subchapter 
I 
shall 
use 
its 
best 
efforts 
to 
provide 
competitive rates for the guarantee function. 
Sec. 4. 20·A MRSA §11407, as amended by PL 1999, c. 728, §1l 
and affected by §§20 and 21, is further amended to read: 
§11407. Authorization for Governor to request organizations to 
acquire loan notes 
To 
the extent and for 
the purposes contemplated by the 
federal 
Internal 
Revenue 
Code 
of 
1954, 
Section 
103(e), 
as 
amended, 
and 
successor provisions 
thereto, 
including without 
limitation the federal Internal Revenue Code of 1986, Section 
(d), 
as 
amended, 
the Governor may on behalf of the State 
request the organization of one or more nonprofit corporations to 
operate exclusively for the purpose of acquiring student loan 
notes incurred under the federal Higher Education Act of 1965, 20 
Uni ted States Code, Chapter 28, Title IV, Part B, 
as amended. 
NetwitHstaRaiR~-~h~~~~~~~~-tHis-£e£~J~~-~~-~-ReRp~eEi~ 
ee~pe~atieR-~~~-~&Qe~-~~~-&eG&~&-Q~-~-€em~ly-~it~-~He 
~e~ai!OemeRts--o-t--tHis--se-c-t.~-()n-,--tHe The Governor may request on 
behalf of the State that one or more state 
student loan notes incurred under the federal 
Act of 1965, 20 United States Code, Chapter 28, 
agencies acquire 
Higher Education 
Title IV, Part B, 
as amended. 
1. 
Origination of loans. 
A-~FG-E-.i-t=--~-p&£-a-t-i~-feFHlea 
tl:aaeF--t-h-i-s--seetie:a Any entity acguir ing student loan notes may 
not originate federally guaranteed loans 
eF--9taeF-wise--eHte:aa 
eFeait---t~--~---peFse:a. 
The 
eeFpeFatie:a 
entity 
may 
not 
discriminate against any financial institution or credit union 
authorized to do business in this State or any other entity with 
respect to the acquisition of loans. 
The 
eeFpeFatie:a entity 
shall adopt policies regarding conflict of interest. 
2. Loan guarantee. 
All education loan notes incurred under 
the federal Higher Education Act of 1965, 20 United States Code, 
Chapter 28 
sy-~~~-.i-t=--e9Fp9Fat~a-~e~mea-~--~~~~-seetieB 
that are acquired with proceeds of tax-exempt bonds 
using 
a 
portion of the state ceiling on private activity bonds must be 
guaranteed by the state agency designated as administrator of 
federal guaranteed student loan programs pursuant to chapter 417, 
subchapter I 
~, provided that this requirement does not apply to 
serial loans of a borrower that are guaranteed by a different 
guarantee agency and acquired or financed with tax--exempt bond 
proceeds prior to the effective date of this paragraph. 
The 
state agency designated as administrator of federaJ. guaranteed 
student loan programs pursuant to chapter 417, 
subchapter ± 1 
shall use its best efforts to provide competitive rates for the 
guarantee function. 
3. 
Board of directors. 
The 
board 
of 
directors 
of 
a 
nonprofit corporation formed under this section consists of 7 
members. 
Four members representing the public with full voting 
rights must be appointed by the Governor, subject to review and 
approval 
by 
the 
joint standing committee 
of 
the Legislature 
having 
jurisdiction 
over 
business 
and 
economic 
development 
matters and confirmation by the Legislature. 
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fiFSt... 
The terms of the initial members must be staggered: 
members must be appointed to 2-year terms and 2 members must be 
appointed to 3-year terms. 
On the expiration of a term of any 
member, a successor must be appointed to a 3-year term. 
A member 
serves until a successor is appointed and qualified. 
A member is 
eligible for reappointment. 
If a member is appointed to fill a 
vacancy in an unexpired term, that member may serve only for the 
remainder 
of that term until 
a 
successor is appointed. 
An 
officer, director or employee of a nonprofit corporation formed 
under this section may not at the same time serve as an officer, 
director or employee of the Maine Educational Loan Authority, of 
the 
state 
agency 
designated 
as 
administrator 
of 
federal 
guaranteed 
student 
loan 
programs 
pursuant 
to 
chapter 
417, 
subchapter ± ~ or of any entity that has a contract to provide a 
significant level 
of 
administrative 
services 
to 
a 
nonprofit 
corporation formed under this section, to the Maine Educational 
Loan Authority or to the state agency designated as administrator 
of federal guaranteed student loan programs pursuant to chapter 
417, subchapter ± ~. 
4. 
Public 
meetiuqs 
and 
records. 
Except 
for 
records 
containing 
specific 
and 
identifiable 
personal 
information 
acquired 
from 
applicants 
for 
or 
recipients 
of 
financial 
assistance, 
the books and records of 
a nonprofit corporation 
formed under this section are public records and the meetings of 
such a corporation are public proceedings within the meaning of 
Title 1, chapter 13, subchapter ± ~. 
5. 
Use of competitive bidding. 
A---n<mpr-o-f-i-t:--€~£pe£a£:ieB 
feFfRea An entity designated under this section may enter into 
contracts 
for 
loan 
administration, 
loan 
servicing 
and 
other 
substantial 
operating 
contracts 
related 
to 
loan 
purchase 
activities 
through 
an 
open 
competitive 
bidding 
process 
in 
accordance with this subsection. 
The eeFpeFat::ieB entity shall 
adopt 
rules 
requiring that 
loan 
administration or 
servicing 
contracts may not be entered into without prior public notice and 
opportuni ty for interested persons to make proposals, 
and the 
eeFpeFat::ieB entity may not adopt the rules until after providing 
public notice and opportunity for public comment on the proposed 
rules. 
In adopting those rules, the eeFpeFat::ieB entity shall 
consider to the extent possible the rules and procedures with 
respect to the competitive bidding process set forth in Title 5, 
chapter 155, 
subchapter 
±-A I-A. 
Any loan administration or 
servicing contract must be approved by the board after review of 
the contract and an accompanying fairness opinion prepared by an 
independent 3rd party. 
6. 
Annual report. 
A-BeBpFef:it:-€eFpeFat:ieB-feFfRea An entity 
designated 
under 
this 
section shall 
report 
annually 
on its 
activities during the previous fiscal year to the joint standing 
committees of the Legislature having jurisdiction over business 
and 
economic 
development matters, 
appropriations matters 
and 
education matters. 
The report must include a listing of the 
current directors and officers ef--t.-he--eG-F-peF-at:ieB; a summary of 
the 
eeFpeFat::ieB~s purchases of loans in the secondary market 
during the previous fiscal year; a listing of the institutions 
from which loans were purchased during the previous fiscal year; 
a--&ammaF-Y-~~-~~-~~~~~'~-~£~~--5£~aeB£--±eaBsf and 
a 
complete 
financial 
statement 
of 
the 
eeFpeFat::ieB~s 
entity's 
operations related to loan purchases during the previous fiscal 
year, 
including 
a 
breakdown 
of 
income 
and 
costs, 
the 
administrative and operating costs 9~-~he-€9~p9~a~i9R, the assets 
and liabilities 
9~--t-be--€9£p9i'a~i9R, the total excess revenues 
over expenditures for the previous fiscal year and the total 
accumulation of these revenues, the total income derived from 
investments during the previous fiscal year, the disposition and 
use of excess revenues, the proceeds from investments and the 
geographic distribution and distribution between institutions of 
higher learning of its student loans among residents of this 
State. 
The report must demonstrate that all revenues, including 
reserves, that are acquired with proceeds of tax-·exempt bonds 
using a portion of the state ceiling on private activity bonds 
are being used in a manner consistent with the public purpose for 
which the bonds are issued. 
The report must include similar 
information on all affiliated entities and must 
be provided 
annually in writing to the joint standing committees of the 
Legislature 
having 
jurisdiction 
over 
business 
and 
economic 
development matters, appropriations matters and education matters 
by 
December 
1st. 
A--R9RPi'9~i~--e9i'p9i'a~i9R--~9i'ffied An 
entity 
designated under this section shall also file copies of the 
e9i'p9i'ati9R~6 entity Internal Revenue Code forms and returns with 
the Attorney General and the joint standing committee of the 
Legislature 
having 
jurisdiction 
over 
business 
and 
economic 
development matters. 
SUMMARY 
This bill updates provisions for the allocation of the state 
ceiling for tax-exempt bonds to allow the Governor to name 
a 
nonprofi t 
corporation or state agency to serve as a secondary 
market 
for 
student 
loans 
that 
are 
eligible 
to 
receive 
an 
allocation of a portion of the state ceiling and to vote on the 
overall allocation of the state ceiling for tax-exempt bonds.