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PA Bulletin, Doc. No. 96-830

NOTICES

INDEPENDENT REGULATORY REVIEW COMMISSION

Actions Taken by the Commission

[26 Pa.B. 2369]

   The Independent Regulatory Review Commission met publicly at 11 a.m., Thursday, May 2, 1996, and took the following actions:

Regulations Approved:

   Department of Commerce #4-58--Private Activity Bonds: Allocation (amends Chapter 57 of 13 Pa. Code)

   Pennsylvania Higher Education Assistance Agency #58-22--Loan Program Amendments (amends 22 Pa. Code Chapter 121)

Commissioners Present: John R. McGinley, Jr., Chairperson; Robert J. Harbison, III, Vice Chairperson; Arthur Coccodrilli; John F. Mizner; Irvin G. Zimmerman

Public meeting held
May 2, 1996

Department of Commerce--Private Activity Bonds: Allocation; Doc. No. 4-58

Order

   On April 15, 1996, the Independent Regulatory Review Commission (Commission) received this regulation from the Department of Commerce (Department). This rulemaking would amend Chapter 57 of 13 Pa. Code relating to the allocation amounts for private activity bonds in Pennsylvania. This regulation is required by section 146 of the Federal Internal Revenue Code of 1986 (IRC) (26 U.S.C.A. § 146) and section 7(4) of the (Pennsylvania) Tax-Exempt Bond Allocation Act (act) (73 P. S. § 397.7(4)). Notice of proposed rulemaking was omitted for this regulation; it will become effective upon publication in the Pennsylvania Bulletin.

   The Department seeks approval of this rulemaking as soon as possible because failure to have the 1996 allocations in place could result in delays in the issuance of private activity bonds in the Commonwealth this year. As a consequence, the Department has omitted Notice of Proposed Rulemaking under section 204 of the Commonwealth Documents Law (45 P. S. § 1204). It has done so because this rulemaking, as similar rulemakings have done in previous years, only revises the allocation amounts for private activity bonds, and does so in accordance with the IRC and the nondiscretionary requirements of the act.

   The IRC imposes a ceiling on the aggregate amount of private activity bonds that may be issued in any calendar year by or on behalf of the Commonwealth and its political subdivisions. Pennsylvania adopted the act in 1985 to provide for the allocation of private activity bond amounts in the Commonwealth. Section 7(4) of the act authorizes the Secretary of Commerce to promulgate regulations necessary to carry out the purposes of the act. These amendments are necessary because the existing regulation provides only the allocations for calendar year 1995, which are no longer current.

   Section 57.1 is the only section being amended to incorporate these changes. In addition to the amendment of the calendar year from 1995 to 1996 in section 57.1(a), there are several other minor amendments, including shifting $50 million in allocations to housing related bonds from qualified private activity bonds. Specifically, the allocation for housing related bonds is being increased from $125 million to $175 million and the allocation for qualified private activity bonds is being reduced from $275 million to $225 million.

   The amount of each county's bond allocation is based on the population and the bond issuance activity of the county in the previous calendar year. Therefore, the Department is also amending the years upon which the Secretary will determine the ratio of the county's total allocation usage from 1993 and 1994 to 1994 and 1995.

   Lastly, the Department is amending the regulation to provide that applications for the allocations should be directed to the Bonds Office within the Department as opposed to the Office of Program Management/Bureau of Bonds.

   These amendments will not affect the total dollar amount allocated for private activity bonds because such ceilings are determined by Federal law under the IRC. No Commonwealth funds are involved in the issuance of private activity bonds. In addition, all issuance costs for bonds are paid for out of bond proceeds, or through funds of the issuer or the borrower. These amendments will update the regulation and allow full utilization of the current allocation available to issuers of private activity bonds.

   The members of the House Commerce and Economic Development Committee, in a letter dated May 1, 1996, advised the Commission that the Committee unanimously approved this regulation. In addition, Senators Tim Shaffer and Gerald Lavalle, Majority and Minority Chairperson of the Community and Economic Development Committee, wrote a letter to the Commission on April 29, 1996, indicating that the regulation is ''acceptable as submitted.''

   We have reviewed this regulation and find it to be in the public interest. The revisions to the bond allocation amounts contained in this rulemaking are based on the same standards and procedures as those used in similar rulemakings approved in previous years by this Commission.

Therefore, It Is Ordered That:

   1.  Regulation No. 4-58 from the Department of Commerce, as submitted to the Commission on April 15, 1996, is approved; and

   2.  The Commission will transmit a copy of this Order to the Legislative Reference Bureau.

Commissioners Present: John R. McGinley, Jr., Chairperson; Robert J. Harbison, III, Vice Chairperson; Arthur Coccodrilli; John F. Mizner; Irvin G. Zimmerman

Public meeting held
May 2, 1996

Pennsylvania Higher Education Assistance Agency--Loan Program Amendments; Doc. No. 58-22

Order

   On May 2, 1995, the Independent Regulatory Review Commission (Commission) received this proposed regulation from the Pennsylvania Higher Education Assistance Agency (Agency). This rulemaking would amend 22 Pa. Code Chapter 121. The authority for this regulation is Act 290 of 1963 (24 P. S. § 5104), Act 541 of 1996 (24 P. S. §§ 5181--5189), Act 155 of 1988 (24 P. S. §§ 5191--5197), and Act 64 of 1992 (24 P. S. §§ 5198.1--5198.7). The proposed regulation was published in the May 13, 1996 edition of the Pennsylvania Bulletin with a 30-day public comment period. The final-form regulation was submitted to the Commission on April 9, 1996.

   The proposal contains comprehensive changes to the provisions which implement Federal loan programs administered by the Agency which are consistent with Federal statutory and regulatory changes. Requirements for recently established State loan forgiveness programs and revisions necessitated by changes to State statute are included in the proposal as well.

   Amendments to section 121.31 (Educational Institutions) and section 121.191 (Lending Institutions) bring the Agency's regulations into compliance with Federal regulations at 34 CFR § 668.81 et seq. Approved educational institutions in the Federal Stafford Loan and Federal PLUS Loan Programs and approved lending institutions in the Federal Stafford Loan, Federal PLUS Loan, and Federal Consolidation Loan Programs must comply with established requirements. The proposal adds actions the Agency may take against institutions through new procedures which include suspension, limitation or termination and emergency action. At the request of the House Education Committee and the Commission, the Agency added a definition for ''emergency action'' in the final-form rulemaking.

   Emergency action can be taken against institutions when the Agency receives information it determines to be reliable that an institution is violating laws, regulations or other agreements; that immediate action is necessary to prevent misuse of funds; and the likelihood of loss of funds outweighs the importance of awaiting completion of review procedures.

   Suspensions may be issued for up to 60 days. Limitations may include limiting the percentage of an institution's receipts from tuition and fees derived from loan guaranties, requiring the institution to obtain a bond, or imposition of other conditions for a stated period of time. Institutions may apply for removal of a limitation 12 months after the effective date of the limitation. A termination would prohibit the future guaranty of Federal Stafford Loans and Federal PLUS loans to borrowers. Institutions terminated may apply for reinstatement 18 months after the effective date of the termination.

   An appeal process for each of the above actions is included in the proposal. The final-form rulemaking incorporated recommendations from our Comments to provide greater specificity in administrative requirements, and to adopt the General Rules of Administrative Practice and Procedures found at 1 Pa. Code.

   Changes necessary for submission and processing of applications because of mandated common loan applications for Federal loan programs are reflected in the proposal. Other revisions which reflect Federal changes include payments of interest on Federal Stafford Loans and Federal PLUS Loans, limits on Federal Stafford Loan guaranties, canceled debt, default and repayment. Notification of transfer provisions have been deleted.

   Subchapter L is included in the proposal to promulgate regulations for the Urban and Rural Teacher Loan Forgiveness Program established by Act 155 of 1988 (24 P. S. §§ 5191--5197). Applicants certified by the Department of Education who are in their first year of teaching in a Commonwealth-designated urban or rural area who borrowed through the Federal Family Education Loan Program may apply for forgiveness of a portion of the debt incurred.

   Subchapter M adds requirements for the Agricultural Education Loan Forgiveness Program established by Act 64 of 1992 (24 P. S. §§ 5198.1--5198.7). An applicant who holds a degree in a field related to production of agricultural products or in the field of veterinary medicine from an institution of higher education located in the Commonwealth, is in the first year of full-time employment on a family farm or in the practice of veterinary medicine, and has borrowed through the Federal Family Education Loan Program, may apply for forgiveness of a portion of the debt incurred.

   Other changes included in this comprehensive proposal include deletion of references in section 121.124, to the Veterans Education Program, which was previously eliminated from the Agency's regulations and modification of section 121.32. Approved Institutions in Higher Education Grant Program, to allow eligibility to students attending a 2-year public, lower-division institution located outside the Commonwealth. The eligibility change incorporates a policy adopted by the Agency in 1992. The House Education Committee took action on April 29, 1996, to approve the regulation.

   We have reviewed this regulation and find it to be in the public interest. The Agency adopted a number of additional recommendations made by the House Education Committee and our Commission. For example, the term ''executive director'' is deleted from section 121.1, Definitions, and the term ''President and Chief Executive Officer'' is added and defined. Also in our Comments, we recommended the Agency revise its final-form regulation to include changes contained in Act 83 of 1994 (24 P. S. §§ 5153 and 5154) which changed the definitions of ''full-time student'' and ''half-time student'' and includes a provision to allow for 5-year undergraduate programs when considering the maximum amount of State scholarships in determining financial need. The Agency adopted our recommendations through changes to sections 121.5, 121.6 and 121.49. A number of other recommendations to improve clarity were also adopted.

   We continue to have some reservations about a provision in the proposal pertaining to the Higher Education Grant Program (Program). To be eligible for the Program, an applicant must enroll in an approved institution. The existing regulation at section 121.32(b)(1) requires that colleges and universities outside the Commonwealth be operated not for profit. Subsection (b)(3) requires that trade, technical or business schools located outside the Commonwealth also be operated not for profit. However, the proposal does not impose the same not for profit requirements for colleges and universities within the Commonwealth, hospital schools of nursing within the Commonwealth and outside the Commonwealth, and for trade or business schools located within the Commonwealth.

   Our Comments questioned why the not for profit requirement is not consistently applied to educational institutions. The Agency explained that the rationale for the distinction is based on the Agency's historic concern with the absence of adequate oversight of profit out-of-State institutions on a National basis. Within Pennsylvania, oversight is provided by the State Board of Private Licensed Schools. They also cite the Agency's interest in encouraging residents to elect enrollment in a Pennsylvania post-secondary institution. They further note this is a policy decision within the Agency's authority.

   Although we agree with the policy of encouraging enrollment in Pennsylvania institutions, we continue to question the rationale for the distinction based on an historic concern which may or may not be valid today. Many out-of-State for profit institutions have National accreditation or are regulated by the state they are located in. Additionally, while this policy may benefit the Commonwealth, it may have a negative impact on students who elect or desire to attend an out-of-State institution. However, we also agree that the decision is within the agency's policymaking authority.

Therefore, It Is Ordered That:

   1.  Regulation No. 58-22 from the Pennsylvania Higher Education Assistance Agency, as submitted to the Commission on April 9, 1996, is approved; and

   2.  The Commission will transmit a copy of this Order to the Legislative Reference Bureau.

JOHN R. MCGINLEY, Jr.,   
Chairperson

[Pa.B. Doc. No. 96-830. Filed for public inspection May 17, 1996, 9:00 a.m.]



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