Janssen, 071318 NEAGO, AGO 18-3

Docket Nº:AGO 18-3
Case Date:July 13, 2018
Court:Nebraska
 
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Charlie Janssen, Auditor of Public Accounts
AGO 18-3
No. 18-003
Nebraska Attorney General Opinion
State of Nebraska Office of the Attorney General
July 13, 2018
         SUBJECT: Whether the State Treasurer may maintain a trust account which is not specifically provided for by statute for the purpose of paying administrative costs associated with the Nebraska Educational Savings Plan Trust, and whether the funds in that trust account, which are derived from fees charged to plan participants, are state funds.          REQUESTED BY: Charlie Janssen, Auditor of Public Accounts Don Stenberg, Nebraska State Treasurer          WRITTEN BY: Douglas J. Peterson, Attorney General, Natalee J. Hart, Assistant Attorney General          INTRODUCTION          You have jointly requested our opinion on two questions relating to the authority of the Nebraska State Treasurer to maintain an account, which you call the Tee Account," for the purpose of paying administrative costs related to the Nebraska Educational Savings Plan Trust (NESPT). The funds in the Fee Account come from fees charged of investors in the NESPT plans. The Fee Account established and maintained by the State Treasurer since 2010 has not been specifically provided for by statute, and prior to April 2018 was unknown to the Auditor.          You have posed the following questions:
(1) Are the funds in the Fee Account public funds (sometimes referred to as money of the state)? and
(2) Does the State Treasurer have the legal authority to use the Fee Account outside of State Accounting and Depository financial records?
         BACKGROUND          In 2000, the Nebraska Legislature granted the State Treasurer duties and responsibilities to implement and administer NESPT, a public trust established for investment by individuals for future educational use. Neb. Rev. Stat. §§ 84-1801 through 85-1814 (2014). The primary duties and responsibilities of the State Treasurer relating to NESPT are found in Neb. Rev. Stat. § 85-1804 (2014), which states, in pertinent part:
The Nebraska educational savings plan trust is created. The State Treasurer is the trustee of the trust and as such is responsible for the administration, operation, and maintenance of the program and has all powers necessary to carry out and effectuate the purposes, objectives, and provisions of sections 85-1801 to 85-1814 pertaining to the administration, operation, and maintenance of the trust and program, except that the state investment officer shall have fiduciary responsibility to make all decisions regarding the investment of the money in the administrative fund, expense fund, and program fund, including the selection of all investment options and the approval of all fees and other costs charged to trust assets except costs for administration, operation, and maintenance of the trust as appropriated by the Legislature, pursuant to the directions, guidelines, and policies established by the Nebraska Investment Council. . . . The State Treasurer or his or her designee shall have the power to:
(1) Enter into agreements with any eligible educational institution, the state, any federal or other state agency, or any other entity to implement sections 85-1801 to 85-1814, except agreements which pertain to the investment of money in the administrative fund, expense fund, or program fund;
(2) Carry out the duties and obligations of the trust;
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(9) Contract for goods and services and engage personnel as necessary, including consultants, actuaries, managers, legal counsels, and auditors for the purpose of rendering professional, managerial, and technical assistance and advice regarding trust administration and operation, except contracts which pertain to the investment of the administrative, expense, or program funds; and
(10) Establish, impose, and collect administrative fees and charges in connection with transactions of the trust, and provide for reasonable service charges, including penalties for cancellations and late payments with respect to participation agreements.
         The Legislature established three separate funds for the State Treasurer to administer in relation to NESPT: (1) The College Savings Plan Program Fund ("Program Fund"), (2) the College Savings Plan Expense Fund ("Expense Fund"), and (3) the College Savings Plan Administrative Fund ("Administrative Fund"). Neb. Rev. Stat. § 85-1807.          Program Fund          The Program Fund receives and keeps all cash contributions from participants who wish to invest in one of the plans under NESPT, and all investment income earned on those investments. Neb. Rev. Stat. § 85-1807(2). This fund is held in trust by the State Treasurer for the participants and beneficiaries and the State has no property rights in the money held in the Program Fund. Neb. Rev. Stat. §§ 85-1804, 85-1813. NESPT participants retain ownership of the contributions made to the Program Fund "up to the date of utilization for payment of qualified higher education expenses for the beneficiary." Neb. Rev. Stat. § 85-1809(1). All investment income derived from investment of contributions is held in trust for the benefit of the beneficiary. Id. In addition, "the Program Fund is the source of any administrative fees charged by the State Treasurer pursuant to § 85-1804(10)." Auditor of Public Accounts ["APA"] Request Letter to Attorney Genera! dated June 1, 2018 at 3 [hereinafter "APA Letter"].          Expense Fund          With respect to the Expense Fund, Neb. Rev. Stat. § 85-1807(4) expressly provides that
[t]he expense fund shall be used to pay costs associated with the Nebraska educational savings plan trust and shall be funded with fees assessed to the program fund. The State Treasurer shall transfer from the expense fund to the State Investment Officer's Cash Fund an amount equal to the pro rata share of the budget appropriated to the Nebraska Investment Council as permitted in section 72-1249.02, to cover reasonable expenses incurred for investment management of the Nebraska educational savings plan trust. Annually and prior to such transfer to the State Investment Officer's
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