Legislature(2003 - 2004)
03/02/2004 01:55 PM House FIN
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 404
An Act relating to the Alaska Commission on
Postsecondary Education; relating to the Alaska Student
Loan Corporation; relating to bonds of the corporation;
relating to loan and grant programs of the commission;
relating to an exemption from the State Procurement
Code regarding certain contracts of the commission or
corporation; making conforming changes; and providing
for an effective date.
DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION
COMMISSION, DEPARTMENT OF EDUCATION, noted that she has
previously requested support for agency initiatives. In
2001, Alaska Student Loan Corporation (ASLC) requested
approval to redefine its role in becoming Alaska's full
service financial aid assistance and postsecondary education
planning agency. The Legislature has consistently exhibited
bipartisan support for ASLC mission to promote postsecondary
participation and success by Alaskans.
Ms. Barrans requested support for the current legislation,
HB 404. The Commission and Corporation, having successfully
implemented the AlaskAdvantage suite of programs and
services for Alaskans, seeks support for the next step of
organizational growth.
Ms. Barrans outlined the legislation's objectives:
· To broaden the scope of the Corporation's bonding
authority to include the ability to bond for the
general benefit of the State.
· To contribute to statewide efforts to use assets as
efficiently as possible, the corporation has
developed a plan to return a substantial portion of
the capital originally given. The change is
requested to insure that the capacity to return
contributed capital back to the State; there would
be a variety of means to do that.
· To provide the Commission with greater flexibility
in offering loan consolidation options to borrowers.
Current statutes limit the way in which, the
Commission can offer consolidation and certain
customers, who have borrowed from both the
discontinued loan program and the AlaskAdvantage
loans, and hence, cannot currently be served through
consolidation.
· At the recommendation of the Department of Law, the
bill will clarify the Commission's ability to
administratively issue liens in the collection of
defaulted education loans and set out the due
process for appealing such an action by the
Commission.
· To provide an exemption from the State Procurement
Code for certain services related to guaranteeing
and disbursing education loans. Under the current
business structure for education loans, a lender
must be prepared to conduct business with the
guarantors and disbursing agents preferred by the
schools participating in the loan programs.
Ms. Barrans commented on the corporation's activities
leading up to developing the "Return of Capital" plan. In
2001, the corporation managers and financial advisors began
planning to modify the education loan programs' financing
structure. In order to do so, they identified assets within
the original master trust indenture. Because of substantial
improvement in portfolio performance that could be
identified as excess above the asset to debt coverage level
required by the terms of the 1988 master indenture.
In 2002, in tandem with the implementation of the
AlaskAdvantage Programs, a new master trust was created
using the cash and assets transferred from the 1988 Trust.
Out of the 2002 Trust, the Alaska Student Loan Corporation
(ASLC) has noted intent to continue the issuance of bonds to
finance core programs. The Return of Capital plan is
designed to continue capturing the "excess" from the 1988
Trust, without waiting until 2018 when the final outstanding
bonds are paid off.
Representative Stoltze asked about the procurement code
model. Ms. Barrans explained that the exemption requested
by the Commission, would allow doing business with school
business partners. In order to follow the State procurement
code with the dispersing agent, they would go through the
RFP process. It might be disadvantageous to continue using
"paper checks" with an agent who won the contract. She
stated that in respect to the guarantee agency, no cost is
paid out of hand. Under the federal education loan model,
receipt of income on the loan volume provides a federal
government guarantee. That business relationship would be a
"poor fit" for the procurement code and the services would
be used but not paid for.
Co-Chair Harris commented on the federal receipt fiscal
note. Ms. Barrans clarified that was correct for operating
funds, however, there is a capital fund amount requested to
purchase the software to administer the State grant program.
Vice Chair Meyer noted concern with $85 thousand dollars
being spent on software. Ms. Barrans pointed out that
number was approximately $15 thousand dollars less than the
Corporation has been able to find. She stressed that the
type of database that is being developed for State agencies
to administer grant programs is very expensive to build.
Discussion followed between Ms. Barrans and Vice Chair Meyer
regarding the software capabilities of that program and the
complexities of the process.
Representative Foster MOVED to report CS HB 404 (HES) out of
Committee with individual recommendations and with the
fiscal notes. There being NO OBJECTION, it was so ordered.
CS HB 404 (HES) was reported out of Committee with
"individual recommendations" and with zero note #1 by the
Department of Administration, zero note #2 by the Department
of Community & Economic Development, zero note #4 by the
Department of Labor and Workforce Development and fiscal
note #5 by the Department of Community & Economic
Development.
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