Act No. 2

(H.166)

Education; grants, scholarship, and loan programs; Vermont Student Assistance Corporation; reserve and pledged equity funds

This act provides moral obligation backing of the state of Vermont to the Vermont Student Assistance Corporation (VSAC) up to a total of $50 million. VSAC is a public, nonprofit corporation created by the general assembly in 1965 with the mission to ensure that all Vermonters have access to the information and financial resources they need to achieve their education and training goals beyond high school. VSAC provides financial aid services, grants, scholarships, loans, and outreach services. A moral obligation is a term of art in the finance world. The moral obligation of the state can only be created through specific legislation, and it is not a legally binding obligation. Instead, it is a statutory provision that permits a bond issuer to request an appropriation from the general assembly for certain limited purposes such as to replenish an account held by the issuer for the benefit of the bond owners and bond guarantors. The general assembly may choose to make the appr opriation or may choose not to make the appropriation. By leveraging the state's favorable bond rating, providing moral obligation backing can be expected to improve VSAC's ability to access the capital markets and allow VSAC to borrow money at more favorable rates than would otherwise be available. Other state instrumentalities that receive moral obligation support include the Vermont Municipal Bond Bank, the Vermont Housing Finance Agency, the Vermont Economic Development Authority, the Vermont Telecommunications Authority, the University of Vermont, and the Vermont State Colleges.

Date Signed by the Governor: March 31, 2009

Effective Date: On passage (March 31, 2009, the date on which the governor signed the bill)