COLLEGE SAVING MADE EASIER; NEW PROGRAM DEFERS TAXES.

Byline: Chris Sieroty Staff Writer

Like most parents, Assemblyman George Runner and his wife, Sharon, have felt a high level of anxiety worrying about their children's college tuition costs.

The Runners' 22-year-old son Micah recently graduated with a communications degree from California State University, Sacramento. But they only have a few more years before their 11-year-old daughter Rebekah starts studying for her degree.

To assist families like his in saving for that first day of college, Runner co-authored bills that eventually created The Golden State ScholarShare College Savings Trust. The program gives California families the opportunity to invest and save for college or other higher education expenses while deferring state and federal taxes.

``It is much better planning to save for your child's tuition than expect a sports scholarship,'' said Runner, R-Lancaster, whose district stretches from the Antelope to Santa Clarita valleys. The program ``certainly makes sense for us as a family. We will be doing what thousands of other Californians will be doing,'' and that is saving money for college.

ScholarShare will accept as little as $15 a month to start an account. The maximum a person can contribute depends on the age of the prospective student and the estimated future costs at the most expensive school in California.

For example, Stanford University is the highest priced university in California. Parents whose children are between the ages of 1 and 2 but hope their tyke will grow to be a Cardinal can set aside $77,000 this year. But parents with a 16-year-old child can deposit up to $122,000 into a ScholarShare account, said Tom Pinto, a spokesman with the Teachers Insurance & Annuity Association, College Retirement Equities Fund, which is administering ScholarShare.

``Grandparents looking to reduce the size of their taxable estates can put as much as $50,000 in a child's college savings account per year, as long as they make no other gifts to that recipient in the next five years,'' added Pinto.

When the savings are eventually used to pay college costs, the money is taxed at the child's income tax rate, which is usually lower than the account holder's rate. Proceeds can be used for tuition, certain room and board expenses, books and required fees and supplies at any accredited institution in the United States, so children aren't limited to schools within California.

In addition, ScholarShare can be used for graduate, medical, law and vocational school.

The program is being offered and overseen by the state through the Scholarship Investment Board, which is chaired by State Treasurer Philip Angelides, and the California Student Aid Commission.

Signed by former Gov. Pete Wilson in October of 1997 and launched last week after being delayed for two years, ScholarShare is now the 19th state-sponsored college savings program to be created since Congress officially sanctioned the concept in 1996.

``About 5,000 people have put their name on our mailing list to receive an enrollment kit,'' said Sue Mapes, manager of client relations with the California Student Aid Commission. ``That doesn't mean they'll all join, but it does show a high level of interest in the program.''

Mapes said TIAA-CREF was hired in April to administer the program. The state signed a seven-year contract with the New York-based pension fund to establish and run the program.

TIAA-CREF is the world's largest pension fund manager and runs college savings programs for other states, including New York, Vermont, Kentucky, Missouri, Minnesota and Tennessee.

College savings invested in ScholarShare will be allocated to a mix of stocks, bonds and mutual funds. TIAA-CREF will choose the investments with the Scholarship Investment Board overseeing the selection of stocks and the portfolio mix. The combination of investments for each participant will depend on how many years until the student begins college.

Accumulations not used by an account beneficiary can be transferred without penalty to another family member to pay for his or her college costs, said Pinto. Any earnings withdrawn and not used for college are subject to a 10 percent penalty as well as full payment of taxes at the account owner's income tax rate.

Although ScholarShare is the newest savings mechanism for parents, it's certainly not the only one.

One well-known savings plan is the Uniformed Gifts to Minors Act, which ``we don't recommend, because it puts a limit of $500 a year a parent can deposit'' into a child's college savings, said Cari Kaye, a spokeswoman with Fidelity Investments. Fidelity has its own college savings program, as do most financial companies.

Parents also can use the Uniform Transfers to Minors Act to establish educational accounts in their children's names, she said. However, when the minor turns 21 years old, the money becomes the child's to use whether or not they attend college.

FOR MORE INFORMATION

Information on The Golden State ScholarShare College Savings Trust, including applications, is available by calling toll free (877) SAV-4EDU or by visiting www.scholarshare.com.

CAPTION(S):

Photo, Box

Photo: (Color in AV, Simi and Conejo only) Legislation co-authored by Assemblyman George Runner makes it easier to save for daughter Rebekah's college education.

Jeff Goldwater/Staff Photographer

Box: (Ran in Business, Simi and Conejo only) FOR MORE INFORMATION (See text)