(a) Pennsylvania Economic Revitalization Sinking Fund.--All bonds issued under the authority of this act shall be redeemed at maturity, together with all interest due, from time to time, on the bonds, and these principal and interest payments shall be paid from the Pennsylvania Economic Revitalization Sinking Fund, which is hereby created. For the specific purpose of redeeming the bonds at maturity and paying all interest thereon in accordance with the information received from the Governor, the General Assembly shall appropriate moneys to the Pennsylvania Economic Revitalization Sinking Fund for the payment of interest on the bonds and notes and the principal thereof at maturity. All moneys paid into the Pennsylvania Economic Revitalization Sinking Fund and all of the moneys not necessary to pay accruing interest shall be invested by the State Treasurer in such securities as are provided by law for the investment of the sinking funds of the Commonwealth.

(b) Purchase of bonds.--In the event that all or any part of the bonds and notes are purchased, they shall be canceled and returned to the loan and transfer agent as canceled and paid bonds and notes and thereafter all payments of interest thereon shall cease and the canceled bonds, notes and coupons together with any other canceled bonds, notes and coupons shall be destroyed as promptly as possible after cancellation but not later than two years after cancellation. A certificate evidencing the destruction of the canceled bonds, notes and coupons shall be provided by the loan and transfer agent to the issuing officials. All canceled bonds, notes and coupons shall be so marked as to make the canceled bonds, notes and coupons nonnegotiable.

(c) Reporting requirements.--The State Treasurer shall determine and report to the Secretary of the Budget by November of each year the amount of money necessary for the payment of interest on outstanding obligations and the principal of the obligations, if any, for the following fiscal year and the times and amounts of the payments. It shall be the duty of the Governor to include in every budget submitted to the General Assembly full information relating to the issuance of bonds and notes under the provisions of this act and the status of the Pennsylvania Economic Revitalization Sinking Fund of the Commonwealth for the payment of interest on the bonds and notes and the principal thereof at maturity.

(d) Debt service appropriations.--The General Assembly shall appropriate an amount equal to such sums as may be necessary to meet repayment obligations for principal and interest for deposit into the Pennsylvania Economic Revitalization Sinking Fund.

(e) Interest rate on loans.--Except as otherwise provided by law, the rate of interest on any loan made using funds appropriated from the Pennsylvania Economic Revitalization Fund shall not be less than the rate of interest paid by the Commonwealth on the general obligation bonds or notes issued pursuant to this act that, notwithstanding the provisions of any other law to the contrary, the interest rate charged shall not be set such that the aggregate of the interest, penalties and other payments to the Commonwealth on loans and other assistance made using funds appropriated from the Pennsylvania Economic Revitalization Fund will cause the general obligation bonds issued pursuant to this act to be deemed arbitrage bonds pursuant to section 103(c) of the Internal Revenue Code of 1954¹ and the regulations promulgated thereunder. In the case of loans initially funded from the proceeds of notes and subsequently funded from renewal bonds and notes, the interest rate to be charged on the loans shall be established in accordance with this subsection upon the sale of bonds or notes, as the case may be, for the loans. It is the intention of the General Assembly that the penalties assessed for breach of program conditions imposed upon borrowers shall not be treated as interest income for purposes of section 103(c) of the Internal Revenue Code of 1954.