Reporting entity

The State Turnpike Commission $($STC$)$ was established as an instrumentality of the state to construct, operate, and maintain the state turnpike system. The STC was created as a separate legal entity with powers to issue revenue bonds payable from tolls and other revenues. Its governing body consists of eight members appointed by the governor for fixed $10-$year terms and three state officials serving ex officio$-$the elected state treasurer, the elected state comptroller, and the appointed superintendent of highways.

The STC is financially self$-$sufficient. The state cannot access its assets or surpluses, nor is it obligated to subsidize STC deficits. The state does not approve STC rates or the STC budget. The bond agreement states that the debt of the STC is not an obligation of the state. However, state statutes authorize the state budget director to include in the budget submitted to the legislature an amount sufficient to make the principal and interest payments on STC bonds in the event STC revenues are insufficient to meet debt service requirements. Is the STC a component unit of the state? If so$,$ how should the state report the financial activities of the STC$?($Adapted from GASB S$14,$ par. $142)$

Based on the information provided, select the correct statement.

The STC qualifies as a discretely presented component unit.

The STC qualifies as a blended component unit.

The STC does not meet the criteria to be considered a component unit.