SB 852 — AN ACT CONCERNING THE CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY AND THE CONNECTICUT HIGHER EDUCATION SUPPLEMENTAL LOAN AUTHORITY.

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2851281 10construed ofas 14regulations Raisedwithin Billthe No.852scope Sec.of chapter 54.

Sec.

(b) Notwithstanding the foregoing, (1) the constituent units of the state system of higher education may participate in one or more education loan programs with the authority and may incur indebtedness pursuant to authority loans, and (2) the authority may create and establish one or more reserve funds to be known as special capital reserve funds and may pay into such special capital reserve funds (A) any moneys appropriated and made available by the state for the purposes of such funds, (B) any proceeds of sale of notes or bonds, to the extent provided in the resolution of the authority authorizing the issuance thereof, [and] (C) any other moneys which may be made available to the authority for the purpose of such funds from any other source or sources, and (D) any surety policy or other similar instrument, in a form prescribed by the State Treasurer, valued at par and payable or available to be drawn upon on or before any date by which debt servicesSB852 on/ theFile bonds secured thereby is required to be paid and issued LCO No.

2851281 11 ofsSB852 14File RaisedNo. Bill No.852 by a financial institution that is rated "AA" or better by any nationally recognized statistical rating organization and approved by the State Treasurer.

281 service on the bonds secured thereby is required to be paid and issued by a financial institution that is rated "AA" or better by any nationally recognized statistical rating organization and approved by the State Treasurer.

The authority may, as part of the contract of the authority with the owners of such bonds, provide that on or before DecembersSB852 first,/ annually,File there is deemed to be appropriated from the LCO No.

2851281 12 ofsSB852 14File RaisedNo. Bill No.852 state General Fund such sums, if any, as shall be certified by the chairman of the authority to the Secretary of the Office of Policy and Management and the Treasurer of the state, as necessary to restore each such special capital reserve fund to the amount equal to the required minimum capital reserve of such fund, and such amounts shall be allotted and paid to the authority.

281 December first, annually, there is deemed to be appropriated from the state General Fund such sums, if any, as shall be certified by the chairman of the authority to the Secretary of the Office of Policy and Management and the Treasurer of the state, as necessary to restore each such special capital reserve fund to the amount equal to the required minimum capital reserve of such fund, and such amounts shall be allotted and paid to the authority.

(c) Notwithstanding any other provisions contained in this chapter, the aggregate amount of bonds outstanding at any time secured by such special capital reserve fundsauthorizedto becreatedandestablished by this section shall not exceed [three] five hundred million dollars and no such bonds shall be issued to pay program costs unless the authority is of the opinion and determines that the revenues to be derived from the program shall be sufficient (1) to pay the principal of and interest on the bonds issued to finance the program, (2) to establish, increase and maintain any reservesdeemed by the authority to be advisable to secure the payment of the principal of and interest on such bonds, (3) to pay the cost of maintaining and servicing the program and keeping it properly insured, and (4) to pay such other costs of the program as may LCOsSB852 / File No.

2851281 13 ofsSB852 14File Raised Bill No.

852281 be required.

10 October 1, 2021 10a-232(b) StatementHED ofJoint Purpose:Favorable Subst.

To(1)allowtheConnecticutHealthandEducationalFacilitiesAuthoritysSB852 to/ (A)File financeNo. projects for any purpose approved by the authority, (B) issue bonds for out-of-state health care institutions, and (C) make loans and transfer funds to its subsidiaries, and (2) allow the Connecticut Higher Education Supplemental Loan Authority to (A) fund the Special Capital Reserve Fund with a surety policy, (B) increase its Special CapitalReserve Fundbackedbondlimit to five hundredmilliondollars, (C) provide education financial assistance other than loans and grants, and (D) add the state pledge for its bond holders.

[Proposed281 deletions14 aresSB852 enclosedFile inNo. brackets.

Proposed281 additionsThe following Fiscal Impact Statement and Bill Analysis are indicatedprepared byfor underline,the exceptbenefit thatof whenthe members of the entireGeneral textAssembly, solely for purposes of ainformation, billsummarization orand resolutionexplanation orand ado sectionnot ofrepresent athe billintent orof resolutionthe isGeneral new,Assembly itor iseither notchamber underlined.]thereof LCOfor No.any purpose.

2851In 14general, fiscal impacts are based upon a variety of 14informational sources, including the analyst’s professional knowledge.

Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

OFA Fiscal Note State Impact:

Agency Affected Fund-Effect FY 22 $ FY 23 $ Treasurer, Debt Serv.

GF - Potential Potential Potential Cost Minimal Minimal Note:

GF=General Fund Municipal Impact:

None Explanation Connecticut Higher Education Supplemental Loan Authority The bill increases the Connecticut Higher Education Supplemental Loan Authority's (CHESLA) special capital reserve fund (SCRF) bond authorization from $300 million to $500 million.

To the extent the additional bonds are issued, there is a potential minimal impact to the state’s debt service going forward through the life of any bonds issued.

In order to issue SCRF-backed bonds, CHESLA must get approval from the State Treasurer.

The State Treasurer is not expected to approve the issuance of SCRF-backed bonds unless CHESLA can show that it will be able to generate sufficient revenue from its activities to pay the debt service on the bonds.

As of November 2020, CHESLA had outstanding SCRF-backed debt of $163.9 million.

1 Connecticut Health and Educational Facilities Authority The bill expands the list of projects for which the Connecticut Health and Educational Facilities Authority (CHEFA) can provide financial 1Source:

January 2021 General Obligation Bonds Official Statement sSB852 / File No.

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281 assistance through the issuance of bonds.

Dependent on the manner in which bonds are issued, there is expected to be either no, or minimal, fiscal impact, as differentiated below.

The bill allows CHEFA to issue bonds for newly eligible projects on behalf of eligible organizations.

In this case, the debt and all related repayment requirements are held by the eligible organizations, not by CHEFA.

This does not result in a fiscal impact to the state.

The bill also would allow CHEFA to issue and hold its own debt backed by a special capital reserve fund (SCRF) in support of the newly eligible projects.

To the extent this authority is exercised, there is a potential minimal impact to the state’s debt service.

In order to issue SCRF-backed bonds, CHEFA must get approval from the State Treasurer.

The State Treasurer is not expected to approve the issuance of SCRF-backed bonds unless CHEFA can show that it will be able to generate sufficient revenue from its activities to pay the debt service on the bonds.

Likewise, CHEFA has indicated it would not pursue SCRF- backed bond issuance for the newly eligible projects.

Background SCRF-backed bonds are a contingent liability of the state.

The SCRF provides a higher level of repayment security, which results in a lower rate of interest onthe bond issuance than the relevant market rate.

Inthe event that the SCRF is drawn down in part or completely, a draw on the General Fund is authorized and the SCRF is fully restored.

The draw on the General Fund is deemed to be appropriated and is not subject to the constitutional or statutory appropriations cap.

If draws on a SCRF continue, the annual draws on the General Fund required to refill it also continue until the fund is replenished by the bond issuer or the underlying debt is repaid.

The Out Years 2Contingent liabilities do not count against the state’s statutory limits on General Obligation bonding.

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281 The annualized ongoing fiscal impact identified above would continue into the future subject to the terms of any bonds issued by CHESLA using SCRF authority and by CHEFA for the newly-eligible projects.

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281 OLR Bill Analysis sSB 852 AN ACT CONCERNING THE CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY AND THE CONNECTICUT HIGHER EDUCATION SUPPLEMENTAL LOAN AUTHORITY.

SUMMARY This bill makes several changes in the statutes governing the quasi- public Connecticut Health and Educational Facilities Authority (CHEFA) and their subsidiary, the Connecticut Higher Education Supplemental Loan Authority (CHESLA).

CHEFA assists in the financing of capital projects for nonprofit colleges, health care institutions, nursing homes, child care facilities, and other nonprofit organizations.

CHESLA provides higher education financing programs for students and their families.

Principally, the bill:

1.

expands the types of projects that CHEFA can finance and the types of eligible costs for these projects;

2.

allows certain out-of-state “related health care institutions” to qualify for CHEFA assistance;

3.

allows CHEFA to transfer money, real estate, or personal property or make loans to any of its subsidiaries established by the legislature, not just subsidiaries CHEFA itself established, as under current law;

4.

expands the types of education assistance programs CHESLA may offer to include more than just loans or grants;

5.

adds to the CHESLA statutes a pledge to CHESLA’s bond holders and contracting parties;

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281 6.

allows CHESLA to pay into its special capital reserve fund (SCRF) using any surety policy or similar instrument issued by a financial institution rated "AA" or better;

and 7.

increases the aggregate amount of bonds that may be secured by CHESLA’s SCRF.

The bill also makes minor, technical, and conforming changes.

EFFECTIVE DATE:

October 1, 2021 § 1 — GENERAL CHEFA PROJECT SCOPE Existing law lists several types of projects eligible for CHEFA financial assistance.

For example, eligible higher education projectsmay include, among other things, (1) buildings for employee and student housing, administration, academics, and research;

(2) maintenance and parking facilities;

and (3) equipment and machinery.

The bill expands the definition of “project” for higher education institutions, health care institutions, qualified nonprofit organizations, and nursing homes to allow CHEFA to consider a project for any use or purpose approved by the authority.

The bill also removes the prohibition on higher education and health care institution projects including items such as fuel and supplies (or books for higher education institutions) or other items that typically result in an operating charge.

The bill also expands the definition of “project cost” to include, in addition to the current list of eligible expenses (e.g., construction, property acquisition, machinery, and financing charges), any other expenses necessary to finance a project.

§§ 2-5 — HEALTH CARE INSTITUTIONS UNDER CHEFA LAWS Related Health Care Institutions The bill adds “related health care institution” to the types of health care institutionseligible for CHEFA assistance.

Under thebill, a“related health care institution” is a hospital, health care institution, nonprofit, sSB852 / File No.

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281 nonstock corporation, or nonprofit, nonstock health care center that:

1.

(a) is located in another state;

(b) would qualify as a health care institution under the CHEFA laws if it were located in this state;

and (c) is wholly or partially owned or controlled by a nonprofit, nonstock Connecticut corporation that is or controls a health care institution in Connecticut;

or 2.

(a) is located in New York, Rhode Island, or Massachusetts;

(b) would qualify as a health care institution for CHEFA purposes if it were located here;

(c)iswholly or partiallyownedor controlled by a such a corporation in another state that would qualify as a health care institution if located here or controls a health care institution located here;

and (d) is wholly or partially under common ownership or control as a health care institution located here.

In most respects, the bill grants CHEFA the same authority regarding “related health care institutions” as under existing law for other eligible health care institutions.

For example, the bill allows CHEFA to:

1.

make loans to a related health care institution to cover project costs or to refinance or refund outstanding obligations on a project;

2.

authorize bonds for purposes related to the health care institutions and include certain provisions in its resolutions authorizing or issuing bonds;

and 3.

acquire, directly or through a participating health care institution, property located within or outside of the state as necessary or convenient to construct or operate a project.

Under current law, CHEFA may establish one or more SCRFs in connectionwithfinancingforparticipatinghealthcareinstitutionsatthe Office of Policy and Management secretary’s and the state treasurer’s discretion.

The bill prohibits CHEFA from doing so for related health care institutions.

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281 Bylaw,theCHEFAboardiscomprisedof10members,eightofwhich are governor-appointed.

Two of these eight members must be current or retired trustees, directors, officers, or employees of health care institutions.

The bill prohibits trustees, directors, officers, or employees of related health care institutions from serving on the board.

Health Care Centers (§ 2) Under current law, one type of eligible health care institution under the CHEFA statutes isa nonprofit, nonstock,nonsectarian facility which is a health care center under the insurance statutes.

The bill removes the condition that these entities must be nonsectarian.

§ 6 — CHEFA SUBSIDIARIES The bill allows CHEFA to (1) transfer any money, real estate, or personalproperty or (2)make loansto any of itssubsidiariesestablished by law.

Current law allows the authority to make transfers or loans only to self-formed subsidiaries (e.g., CHESLA).

§§ 7 & 8 — CHESLA EDUCATION ASSISTANCE PROGRAM DEFINITION The bill expands the types of education assistance programs that CHESLA may offer to include any other form of educational assistance in addition to grants and loans.

§ 9 — CHESLA BONDHOLDER PROTECTIONS The bill promises certain actions to assure payments to CHESLA’s bondholders or anyone entering into a contract with the authority or its successor agency.

Under the bill, the state pledges not to limit or alter CHESLA’s rights until (1) the bonds are paid off, (2) contracts are fully performed on the part of the authority, or (3) it makes adequate provisions to protect the bondholders or contracting parties.

The authority may include this pledge in its bonds, notes, or contracts.

§ 10 — CHESLA BONDING AND SCRF Existing law authorizes CHESLA to establish SCRFs.

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281 CHESLA to pay into them using any surety policy or similar instrument meeting specified requirements and issued by a financial institution rated "AA" or better by a nationally recognized organization.

CHESLA may do so in a form prescribed by the state treasurer, and the treasurer must approve the rating organization.

The bill also increases the aggregate amount of bonds that may be secured by the CHESLA SCRFs from a maximum of $300 million to a maximum of $500 million.

COMMITTEE ACTION Higher Education and Employment Advancement Committee Joint Favorable Substitute Yea 22 Nay 0 (03/18/2021) sSB852 / File No.

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