2017-2018 Bill 542: State Institution of Higher Education Enterprise Act - South Carolina

1 South Carolina General Assembly 2 122nd Session, 2017-2018 3 4 S. 542 5 6 STATUS INFORMATION 7 8 General Bill 9 Sponsors: Senator Talley 10 Document Path: l:\s-res\sft\010high.dmr.sft.docx 11 12 Introduced in the Senate on March 14, 2017 13 Currently residing in the Senate Committee on Education 14 15 Summary: State Institution of Higher Education Enterprise Act 16 17 18 HISTORY OF LEGISLATIVE ACTIONS 19 20 Date Body Action Description with journal page number 21 3/14/2017 Senate Introduced and read first time ( Senate Journalpage 7) 22 3/14/2017 Senate Referred to Committee on Education ( Senate Journalpage 7) 23 24 View the latest legislative information at the website 25 26 27 VERSIONS OF THIS BILL 28 29 3/14/2017 30 1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND TITLE 59 OF THE 1976 CODE, RELATING TO 12 EDUCATION, BY ADDING CHAPTER 157, TO ENACT THE 13 “STATE INSTITUTION OF HIGHER EDUCATION 14 ENTERPRISE ACT,” TO ALLOW THE BOARD OF 15 TRUSTEES OF AN INSTITUTION OF HIGHER EDUCATION 16 TO ESTABLISH BY RESOLUTION AN ENTERPRISE 17 DIVISION AS PART OF THE COLLEGE OR UNIVERSITY, 18 TO PROVIDE THAT CERTAIN ASSETS, PROGRAMS, AND 19 OPERATIONS OF THE COLLEGE OR UNIVERSITY MAY BE 20 TRANSFERRED TO THE ENTERPRISE DIVISION, TO 21 PROVIDE THAT THE ENTERPRISE DIVISION IS EXEMPT 22 FROM VARIOUS STATE LAWS GOVERNING 23 PROCUREMENT, HUMAN RESOURCES, PERSONNEL, AND 24 THE DISPOSITION OF REAL AND PERSONAL PROPERTY, 25 WITH SOME SUCH EXEMPTIONS APPLYING 26 AUTOMATICALLY AND OTHERS REQUIRING 27 ADDITIONAL ACTIONS BY THE BOARD OF TRUSTEES, TO 28 PROVIDE THAT BONDS, NOTES, OR OTHER EVIDENCE OF 29 INDEBTEDNESS MAY BE ISSUED FOR THE ENTERPRISE 30 DIVISION, AND TO PROVIDE AUDIT AND REPORTING 31 REQUIREMENTS; AND TO AMEND SECTION 11-35-710, 32 RELATING TO EXEMPTIONS FROM THE SOUTH 33 CAROLINA PROCUREMENT CODE, TO PROVIDE THAT 34 THE STATE FISCAL ACCOUNTABILITY AUTHORITY MAY 35 EXEMPT AN ENTERPRISE DIVISION, IF A DIVISION IS 36 ESTABLISHED PURSUANT TO CHAPTER 157, TITLE 59 37 AND THE BOARD OF TRUSTEES HAS ADOPTED A 38 PROCUREMENT POLICY FOR THE DIVISION THAT WAS 39 APPROVED BY THE STATE FISCAL ACCOUNTABILITY 40 AUTHORITY. 41

[542] 2 1 Be it enacted by the General Assembly of the State of South 2 Carolina: 3 4 SECTION 1. Title 59 of the 1976 Code is amended by adding: 5 6 “CHAPTER 157 7 8 The State Institution of Higher Education Enterprise Act 9 10 Section 59-157-110. This chapter may be cited as the ‘State 11 Institution of Higher Education Enterprise Act of 2017.’ 12 13 Section 59-157-120. As used in this chapter: 14 (1) ‘Board of trustees’ means the boards of trustees of the 15 colleges and universities listed in Section 5910110. 16 (2) ‘Capital improvement’ means the constructing, improving, 17 equipping, renovating, or repairing of any buildings, structure, 18 facility, or other permanent improvement project, or the cost of the 19 acquisition of land to construct or establish a building, structure, 20 facility, or permanent improvement project as defined and limited 21 in Section 24750. 22 (3) ‘University or college’ means the colleges and universities 23 listed in Section 5910110. 24 (4) ‘Enterprise activities’ means athletic programs and 25 functions, and auxiliary programs or functions, funded solely by 26 funds not received from the general fund of the State or from 27 undergraduate tuition, such as the programs or functions identified 28 in Section 5914730, including, but not limited to, those primarily 29 related to economic development, research, housing, food services, 30 stores, and athletics, with each constituting an enterprise activity. 31 (5) ‘Enterprise division’ means an operational unit of a college 32 or university created pursuant to this chapter. 33 (6) ‘Enterprise division personnel’ means all college or 34 university employees or personnel who are allocated by the board 35 of trustees to one or more enterprise activities and who devote a 36 significant portion of their efforts to supporting enterprise 37 activities. 38 (7) ‘Procurement’ has the same meaning as in Section 39 1135310(24). 40 (8) ‘SCCPC’ means the South Carolina Consolidated 41 Procurement Code, as provided in Chapter 35, Title 11, and 42 regulations promulgated pursuant to it.

[542] 3 1 (9) ‘Transferable items’ means, collectively, the duties, 2 responsibilities, assets, personnel, and resources of, allocated to, or 3 supporting an enterprise activity. 4 5 Section 59-157-130. (A) A board of trustees, by resolution, 6 may establish an enterprise division for its college or university. 7 (B) An enterprise division created pursuant to this chapter is a 8 constituent part of its college or university. 9 (C) The resolution creating the enterprise division must provide 10 for allocation to the enterprise division of the transferable items of 11 one or more enterprise activities as the board of trustees may 12 consider appropriate. The board of trustees may amend the 13 resolution from time to time to allocate transferable items to the 14 enterprise division or to reallocate transferable items between the 15 college or university and the enterprise division as it considers 16 appropriate. 17 (D) The board of trustees may adopt a resolution assigning 18 direct oversight and management responsibility over the enterprise 19 division to an existing committee of the board of trustees or to a 20 new committee established by the board of trustees, but final 21 decisionmaking responsibility with respect to the governance of 22 the enterprise division remains with the board of trustees. 23 24 Section 59-157-140. (A) The board of trustees has the same 25 powers, duties, and responsibilities to manage and control the 26 enterprise division as it does with other duties, responsibilities, 27 assets, personnel, and resources of the college or university. 28 Without limiting the foregoing, the board of trustees has the 29 following additional authority with respect to the enterprise 30 division: 31 (1) It may purchase, lease as lessee, accept, and otherwise 32 acquire any real and personal property and other assets upon the 33 terms and conditions it considers appropriate. Contracts or 34 agreements effecting or governing a purchase, lease, acceptance, or 35 other acquisition are exempt from the provisions of Sections 11155 36 through 11165; Chapter 47, Title 2; and Section 59103110. The 37 board of trustees shall provide on an annual basis a report of 38 property acquired and any contract or agreement to the Governor, 39 the Chairman of the Senate Finance Committee, and the Chairman 40 of the House Ways and Means Committee. This report must be 41 based on the appropriate fiscal year of the college or university and 42 must be provided not more than ninety days after the end of the 43 fiscal year.

[542] 4 1 (2) It may sell, convey, lease as lessor, exchange, and 2 otherwise dispose of any real and personal property and other 3 assets upon the terms and conditions it considers appropriate. The 4 proceeds derived from the sale, conveyance, lease, exchange, or 5 disposition of any real and personal property and net of transaction 6 costs and payment of any debts, secured by the sold, conveyed, 7 leased, exchanged, or disposed property, must be remitted to the 8 board to be used exclusively for the support of the enterprise 9 division or the college or university. Contracts or agreements 10 effecting or governing the sale, conveyance, lease, exchange, or 11 other disposition are exempt from the provisions of Sections 11155 12 through 11165, Section 101130, and Section 59101180 as well as 13 state surplus property laws. The board of trustees shall provide on 14 an annual basis a report of property disposed of pursuant to this 15 item and any contract or agreement to the Governor, the Chairman 16 of the Senate Finance Committee, and the Chairman of the House 17 Ways and Means Committee. This report must be based on the 18 appropriate fiscal year of the college or university and must be 19 provided not more than ninety days after the end of the fiscal year. 20 (3) Without the necessity of additional approval, it may 21 retain the services of advisors, consultants, attorneys, accountants, 22 and financial experts as necessary in the board of trustees’ 23 judgment in connection with any aspect of the enterprise division 24 and to determine the duties of those retained pursuant to this item 25 and to fix their compensation. 26 (4)(a) Upon the approval and implementation by the State 27 Department of Administration, it shall participate in the 28 comprehensive human resources system for public institutions of 29 higher learning and technical colleges pursuant to SECTION 3 of 30 Act 74 of 2011, provided however, that any existing exemptions 31 from general state government personnel policies and applicable 32 laws that generally regulate state employee workforce are 33 preserved and shall be preserved if personnel are moved into the 34 enterprise division. 35 (b) Each of the enterprise division’s personnel are state 36 employees for purposes of eligibility for participation in 37 retirement, health insurance, and other insurance plans and 38 programs administered by the South Carolina Public Employee 39 Benefit Authority and for purposes of the South Carolina Tort 40 Claims Act. 41 (5) It shall establish the management controls and staffing of 42 the enterprise division’s personnel as the board considers 43 appropriate for the prudent conduct of the enterprise division,

[542] 5 1 including the establishment of an internal audit function to monitor 2 the activities of the enterprise division. 3 (6) It may enter into relationships or transactions with 4 notforprofit entities established, in whole or in part, to support the 5 mission of the college or university, it being understood that a 6 support entity is not considered an entity owned or controlled by 7 the enterprise division or the college or university and is not 8 subject to the laws and regulations applicable to the enterprise 9 division. However, if a notforprofit entity acquires a capital 10 improvement on behalf of or for the use of the enterprise division 11 and funds of the enterprise division or college or university are 12 used in the acquisition, financing, construction, or current or 13 subsequent leasing of the capital improvement, then the acquisition 14 is subject to the provisions of the enterprise division’s policies that 15 the board adopts pursuant to this chapter. 16 (7) It may issue bonds, notes, or other obligations or 17 evidences of indebtedness in the name of the college or university 18 and on behalf of the enterprise division in the same manner and for 19 the same purposes, including the purposes of the enterprise 20 division. Also, it may utilize or benefit, as the case may be, from 21 the provisions of the Higher Education Revenue Bond Act, as 22 provided in Chapter 147, Title 59, and the provisions of the South 23 Carolina JobsEconomic Development Fund Act, as provided in 24 Chapter 43, Title 41. This item only applies so long as the 25 proceeds of the bonds, notes, or obligations are not utilized to fund 26 a capital improvement project. 27 (B)(1) Capital improvements of the enterprise division, and the 28 financing of these capital improvements, are exempt from the 29 provisions of Section 111180; Chapter 47, Title 2; and Section 30 59103110. The board shall provide on an annual basis a report of 31 capital projects authorized by the board of trustees to the 32 Governor, the Chairman of the Senate Finance Committee, the 33 Chairman of the House Ways and Means Committee, and the 34 Commission on Higher Education. This report must be based on 35 the appropriate fiscal year of the college or university and must be 36 provided not more than ninety days after the end of the fiscal year. 37 (2) The board of trustees must establish a review process for 38 the consideration of any permanent improvement project proposal 39 by the enterprise division and the board must approve any capital 40 improvement project as defined in Chapter 47, Title 2, in a public 41 vote. 42 (3) Notwithstanding any other provision of subsection (B), 43 after full architecture and engineering design work is completed on

[542] 6 1 a permanent improvement project, but prior to execution of a 2 construction contract, the project must be submitted to the Joint 3 Bond Review Committee for review and comment. 4 (4) The exemptions provided by subsection (B) do not apply 5 to capital improvements for athletics that expend, secure bonding 6 with, or otherwise utilize state appropriated funds, state general 7 obligation capital improvement bonds, student tuition, student fees, 8 or any other student charge except for nonmandatory ticket charges 9 to athletic events. For purposes of this item, ‘state appropriated 10 funds’ excludes federal funds and other funds that do not otherwise 11 make this subsection inapplicable. 12 (5) If a capital improvement project serves multiple purposes 13 and one or more of the purposes is not an enterprise activity, 14 thereby causing the exemptions provided by subsection (B) to not 15 apply, then the exemptions provided by subsection (B) do not 16 apply for the entire capital improvement project. 17 (C) The board of trustees shall conduct an annual audit by 18 independent certified public accountants selected by the board of 19 trustees, who shall review the accounts of the enterprise division 20 and report the findings of the audit to the Governor, the Chairman 21 of the Senate Finance Committee, and Chairman of the House 22 Ways and Means Committee in accordance with generally 23 accepted auditing standards and procedures. 24 (D)(1) Subject to the provisions of item (D)(2), the board of 25 trustees shall adopt for the enterprise division a procurement 26 policy and amend the policy as it considers appropriate. Before the 27 implementation of the procurement policy or any amendment, the 28 policy or amendment must be approved by the State Fiscal 29 Accountability Authority. Thereafter, every procurement of the 30 enterprise division is exempt from the SCCPC, and each 31 procurement instead is subject to the procurement policy adopted 32 by the board. 33 (2)(a) The procurement policy adopted by the enterprise 34 division may not include provisions relating to 35 telecommunications, and the enterprise division is subject to all 36 procurement provisions relating to telecommunications and 37 telecommunications equipment and service as set forth in the 38 SCCPC and Section 111430 unless otherwise exempt by Section 39 1135710(6). 40 (b) The enterprise division may not construct, own, or 41 operate a network that carries commercial traffic, commercial 42 internet traffic, or K12 traffic originated in South Carolina. 43

[542] 7 1 Section 59-157-150. The requirements imposed upon the 2 college or university, its board of trustees, and the enterprise 3 division by the provisions of this chapter may be enforced by 4 mandamus. However, failure to comply with requirements does 5 not invalidate the powers granted pursuant to this chapter. 6 7 Section 59-157-160. Notwithstanding any other provision of 8 this chapter, enterprise activities may only include athletics if the 9 college or university’s Athletics Grand Total Revenues, as 10 reported under the Equity in Athletics Disclosure Act as required 11 by The Higher Education Opportunity Act, Public Law 110315, 12 are equal to or exceed forty million dollars a year. 13 14 Section 59-157-170. Four years after the adoption of a 15 resolution providing for the allocation to the enterprise division of 16 the transferable items of one or more enterprise activities pursuant 17 to this chapter, and every four years thereafter, the provisions of 18 this chapter must be reauthorized by the adoption of a joint 19 resolution by the General Assembly, in separate legislation and 20 solely for that purpose. If this chapter, or any part thereof, is not 21 reauthorized, those provisions are no longer effective. 22 23 Section 59-157-180. It is the intent of the General Assembly to 24 review the provisions of this chapter and to determine the merit of 25 this pilot enterprise program after the program has been in effect 26 for at least four years. After reviewing this chapter and making a 27 determination, the General Assembly may consider the costs and 28 benefits of expanding the provisions of this chapter to additional 29 institutions of higher learning. 30 31 Section 59-157-190. Nothing in this chapter may be construed 32 to exempt the enterprise division from the provisions of Section 33 5910335, relating to the approval of new programs by the 34 Commission on Higher Education, and enterprise division land 35 transactions, including leases, and permanent improvement 36 projects are the only functions and areas removed from the 37 commission.” 38 39 SECTION 2. Section 1135710 of the 1976 Code is amended by 40 adding an appropriately numbered item at the end to read: 41 42 “( ) an enterprise division, if a division is established pursuant 43 to Chapter 157, Title 59, for which the board of trustees, pursuant

[542] 8 1 to Section 59-157-140(D), has adopted a procurement policy for 2 the division and the procurement policy was approved by the State 3 Fiscal Accountability Authority.” 4 5 SECTION 3. This act takes effect upon approval by the 6 Governor. 7 XX 8

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