Connie Lee is authorized to insure municipal bonds rated by a national rating firm at or below the lowest investment grade category—the equivalent of Standard and Poor’s BBB and below ratings—issued by schools of higher education; the proceeds of these bonds are to be used to finance the construction and renovation of academic facilities. Connie Lee Primarily Insures the Lowest Investment Grade Bonds

Between October 29, 1991, the date Connie Lee sold its first primary insurance, and September 30, 1995, Connie Lee insured 95 bonds, totaling about $2.6 billion, for colleges, universities, and teaching hospitals. Federal and state law and industry practices impose limits on Connie Lee. In addition, some public and private schools receive funds for capital projects from other sources, such as endowments. Issuing Bonds Without Connie Lee Insurance

Some HBCUs may issue bonds without insuring them, and some may be able to obtain bond insurance from companies other than Connie Lee. Giving Connie Lee authority to borrow money from the federal government, as needed, to pay claims on defaulted bonds that it insured is another suggestion that Connie Lee officials offered. Conclusions

Connie Lee is limited to insuring bonds issued by a narrow range of schools. A recorded menu will provide information on how to obtain these lists.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on how the College Loan Insurance Association (Connie Lee) has served the needs of 102 Historically Black Colleges and Universities (HBCU).

What GAO Found

GAO found that: (1) Connie Lee insured 95 bonds totalling $2.6 billion from October 1991 through September 1995, 90 of which received the lowest investment grade rating; (2) Connie Lee offered to insure 8 HBCU bonds, declined to insure 3 HBCU bonds it considered risky, determined that 13 HBCU were rated above the category of risk they applied for, and was undecided on whether to issue insurance for 1 HBCU bond; (3) Connie Lee is limited to insuring low grade bonds by federal and state laws, as well as by industry practices; (4) some HBCU may finance the construction and renovation of HBCU facilities by issuing bonds without insurance, obtaining bond insurance from companies other than Connie Lee, and using loans or grants from federal and state governments, alumni, and private foundations; and (5) officials suggest removing federal limits and credit ratings on certain types of bonds Connie Lee insures, guaranteeing federal loans to pay for defaulted bonds, and providing Connie Lee with additional loans and grants for capital.