CA AB1463

Establishes the California Covenants Program under the State Treasurer to allow individuals to purchase fixed percentage tuition certificates for undergraduate education at California State University, University of California, or independent institutions of higher education.

Tuition certificates cover a fixed percentage of annual tuition and mandatory systemwide fees with annual increases capped at 7.5 percent, valid for up to 30 years, with minimum annual purchases of $300 between May 1 and June 30 starting in 2018.

Creates the California Covenants Program Fund to receive investments from certificate purchasers and bond proceeds, with funds allocated by the Treasurer to participating institutions to pay beneficiary tuition and fees upon legislative appropriation.

Excludes from gross income for state income tax purposes (beginning January 1, 2018) moneys invested in the California Covenants Program and disbursements from the program, with no tax penalty if the beneficiary does not attend a participating institution and the full investment plus interest is returned.

Becomes operative January 1, 2018 and takes effect immediately as an urgency statute to address rising postsecondary education costs in California.