Finance Committee passes family savings plan

The Family College Saving Program, Senate Bill 1055, would allow people to open a savings account at a selected bank specifically for post-secondary education. The interest earned on the account would be exempt from state income tax but would not establish state residency for a student nor make the state guarantee that school costs would be covered.

The bill also includes a 10 percent penalty for "non-qualified withdrawal," which would be used to help the Commission for Post-secondary Education with operations and marketing.

Christine Thompson, executive director of the Arizona Students' Association, said the association had been working with the state treasurer, the post-secondary commission and the state banking association to create a better way for people to prepare for the expense of college.

Previous bills have failed because they hinged on a pre-payment system which gave legislators misgivings, Thompson said.

"In the event that there was a difference (between the prepay tuition and the actual tuition) that needs to be paid, who's going to pay it?" was one of the legislators' chief concerns, Thompson said.

Sen. John Wettaw, R-Flagstaff, told the Finance Committee that changes in federal legislation made the new program possible, but that interest earned on an account would still face federal taxes for the time being. He told the committee that this year's bill was the result of work done this summer.

"I think it's a good, long-term bill for the state of Arizona," Wettaw said.

Thompson said, "Hopefully, it will help families get their children into higher education."

The committee passed the bill by an 8-0 vote. Wettaw said it passed the Senate Government Committee earlier by a 7-0 vote.

The bill has 40 co-sponsors in the House and Senate from both parties.