An Act To Facilitate the Provision of Educational Loans for Maine Students and Families
Maine Legislature, Session 123, LD 2300
Committee: Business, Research and Economic Development
Sponsors: BOWMAN, NORTON
Amends: 20-A MRSA §11496-A

Legislative Document 
No. 2300 
S.P.918 
April 2, 2008 
An Act To Facilitate the Provision of Educational Loans for Maine 
Students and Families 
(EMERGENCY) 
Reference to the Committee on Business, Research and Economic Development suggested 
and ordered printed. 
Presented by Senator BOWMAN of York. (GOVERNOR'S BILL) 
Cosponsored by Representative NORTON of Bangor. 
Printed on recycled paper 
JOY J. O'BRIEN 
Secretary of the Senate 
Emergency preamble. Whereas, acts and resolves of the Legislature do not 
become effective until 90 days after adjournment unless enacted as emergencies; and 
Whereas, there has been unprecedented turbulence in the capital markets that has 
made it necessary to replace existing auction rate bond financing for federally guaranteed 
student loans with financing supported by a capital reserve fund; and 
Whereas, if financing supported by a capital reserve fund cannot be made available, 
the availability, rates and terms of federally guaranteed student loans to Maine borrowers 
may be adversely affected, resulting in increased costs to students and families or even 
unavailability offederally guaranteed student loans; and 
Whereas, in the judgment of the Legislature, these facts create an emergency within 
the meaning of the Constitution of Maine and require the following legislation as 
immediately necessary for the preservation of the public peace, health and safety; now, 
therefore, 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 20-A MRSA §11496-A is enacted to read: 
§11496-A. Capital reserve funds; obligation ofthe State 
1. Capital reserve fund. The authority may create and establish one or more capital 
reserve funds and may pay into any capital reserve fund any money appropriated and 
made available by the State for the purposes of any such fund, any proceeds of the sale by 
the authority of bonds to the extent determined by the authority and any other money 
available to the authority. 
2. Application. Money held in any capital reserve fund established pursuant to 
subsection 1, except as provided in this subsection, must be used solely with respect to 
bonds, the repayment of which is secured by any such fund, and solely for the payment of 
principal of the securities, the purchase or redemption of the securities, including any fees 
or premiums, or the payment of interest on the securities. In addition, if the authority 
obtains a letter of credit, insurance contract, surety bond or similar financial undertaking 
to establish and fund a capital reserve fund under subsection 1, money in that capital 
reserve fund may be used to pay, as and when due, all reimbursement obligations of the 
authority established in connection with that letter of credit, insurance contract, surety 
bond or similar financial undertaking, including, but not limited to, all fees, expenses, 
inderrmities and commissions. Money in excess of the reserve requirement established 
pursuant to subsection 3 may be transferred to other funds and accounts of the authority. 
3. Capital reserve requirement. For purposes of this section, the capital reserve 
requirement applicable to a capital reserve fund established pursuant to subsection 1 is: 
A. The amount stated in the applicable trust agreement or other document used to 
establish the capital reserve fund, with respect to any capital reserve fund established 
before December 31, 2009; or 
B. If paragraph A does not apply, the amount of principal of the bonds directly 
secured by that capital reserve fund becoming due by reason of maturity or a required 
sinking fund payment, and interest on bonds directly secured by that capital reserve 
fund, in any succeeding 12-month period. 
4. Withdrawals from capital reserve fund. Money in any capital reserve fund may 
not be withdrawn at any time in an amount that would reduce the amount of that capital 
reserve fund to less than the applicable capital reserve requirement under subsection 3, 
except for the purposes of: 
A. Paying the amounts of principal and interest due on bonds directly secured by that 
capital reserve fund: 
(1) At a maturity or sinking fund payment date of those bonds; 
(2) On any date on which accelerated principal payment is required pursuant to a 
credit facility or liquidity facility applicable to those bonds; or 
(3) On any interest payment date with respect to those bonds; or 
B. Paying any other amount expressly permitted by subsection 2. 
5. Issuance limit. The authority may provide in the applicable trust agreement or 
other document used to establish a capital reserve fund pursuant to subsection 1 th'!.t it 
may not issue bonds directly secured by the capital reserve requirement under subsectior} 
with respect to bonds outstanding and then to be issued that are or will be directly 
secured by that capital reserve fund that will exceed the amount of that fund at the time of 
issuance, unless the authority, at the time of issuance of the bonds, deposits in that fund 
from proceeds of the bonds to be issued, or from other sources, an amount that, together 
with the amount then in that fund, is not less than the capital reserve requirement. 
6. Appropriation. On or before December 1st, annually, the authority shall certify 
to the Governor the amount, if any, necessary to restore the amount in any capital reserve 
fund established pursuant to subsection 1, in accordance with the trust agreement or other 
document pursuant to which bonds secured by the capital reserve fund were issued, to the 
capital reserve requirement under subsection 3. The Governor shall pay directly from the 
State Contingent Account to any such capital reserve fund as much of the amount as is 
available in the State Contingent Account and shall transmit directly to the Legislature 
that certification and a statement of the amount, if any, remaining to be paid. The amount 
certified must be appropriated and paid to the authority during that state fiscal year. 
7. Maturity of bonds. Notwithstanding Title 10, section 1044, subsection 5, a series 
of bonds that is directly secured by a capital reserve fund described in this section must 
mature no more than 50 years from its issue date. 
Emergency clause. 
In view of the emergency cited in the preamble, this 
legislation takes effect when approved. 
SUMMARY 
This bill allows the Finance Authority of Maine to issue student loan bonds for the 
origination or purchase of federally guaranteed student loans secured by a capital reserve 
fund.