Legislature(1995 - 1996)
03/28/1996 02:05 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 535 - POSTSECONDARY EDUCATION Number 134 CO-CHAIR BUNDE stated this was the second hearing on HB 535 after many subcommittee meetings of the HESS Committee. The committee had a committee substitute before them. Number 219 REPRESENTATIVE ROKEBERG moved to adopt CSHB 535, Work Draft 9- LS1748\K, Ford, dated 3/27/96. Hearing no objection, the committee substitute was adopted. REPRESENTATIVE TOM BRICE arrived at 2:08 p.m. Number 241 DIANE BARRANS, Executive Director, Alaska Commission on Postsecondary Education and Executive Officer, Alaska Student Loan Corporation, said she had reviewed the committee substitute and believed there were portions of the bill that support their commitment to make changes necessary for the financial success of the loan program. She pointed out the Executive Order introduced by the Governor earlier in the session and disapproved by the legislature, would have consolidated all agency functions under one board with a clear and distinct focus on the general welfare of the program and their customers. She said this legislation makes some positive changes in the way of separating the institutional authorization function by leaving it to the staff of the Department of Education, while moving the administration of the loan fund and the loan program to the Department of Revenue under the Alaska Student Loan Corporation. This legislation does however, leave unresolved the question of why two boards would continue to exist. When she was asked the question of why the institutional authorization function was not simply transferred to an already existing body within the Department of Education, the State Board of Education, she was unable to respond with any convincing or compelling reason. Under this legislation there would still be some inefficiencies of a state agency having to administer the functions of separate entities without a clear basis for why one would not suffice. By that she was referring to the fact that the Department of Education already is subject to direction by the Board of Education, a Board that is subject to legislative confirmation and that is a function they could incorporate in their existing activities already. However, having raised these concerns, she pointed out the clear benefits to some of the changes in the legislation. Number 385 MS. BARRANS said the size of the administrative body (the corporation under the bill) and the commission would be reduced from 17 to 10, with 3 ex officio members. This change would provide for some cost reductions similar to the fiscal note the ACPE attached to the Governor's Executive Order. It would also be easier to arrange meetings and to conduct Board business because of the smaller number of members and the expectation of achieving a quorum with less trouble. It does move the corporation to the Department of Revenue and consolidates all administrative activity with respect to the loan program into the one governing body. It also refines the focus on the financial basis. The legislation moves the institutional authorization function away from the loan program to be staffed by an entirely separate governmental agency. This would be part of refining the focus to eliminate the blurring between institutional authorization activities and student loan activity, which currently is a concern and does create some legal liability for the loan program, as well. It also provides cleanup to the archaic or unnecessary language that currently exists in law which was discussed previously. She was appreciative on behalf of the management team at the loan program, for the improvements over the current situation that have been attempted in this legislation. She reiterated that the Department of Education would probably have some concerns with respect to having responsibility not only for additional functions, but for overseeing the activity of another board or commission. REPRESENTATIVE CAREN ROBINSON arrived at 2:12 p.m. Number 550 CO-CHAIR BUNDE referenced the institutional authorization function being transferred to an already existing body - the Board of Education, and asked if the Board of Education had ever had a role before where they authorized institutions? MS. BARRANS said to her knowledge they have not; however, it is certainly a goal of the current Commissioner of Education to look at authorizing or accrediting institutions at the elementary and the secondary level. It would be a natural next step that the board would look at the entire K-12+ spectrum of institutions within the state. CO-CHAIR BUNDE asked if the Board of Education had been just K-12, not postsecondary education to this point? MS. BARRANS responded that was correct. Number 649 TERESA WILLIAMS, Assistant Attorney General, Fair Business Practices Section, Department of Law, said she would be available via teleconference to answer questions. She advised the committee that someone from the Attorney General's office would also be available. CO-CHAIR BUNDE noted that Kathleen Strasbaugh was present from the Attorney General's office as well as Mike Ford from the Division of Legislative Legal Services. He reiterated that HB 535 was an attempt to streamline the postsecondary education commission and get it to the point of reflecting reality, while still maintaining legislative oversight of the appointments to the board. He asked if there were any questions or further testimony on HB 535. Hearing none, he closed public testimony. Number 710 REPRESENTATIVE ROBINSON asked why the decision had been made to have the board confirmed by the legislature. She recalled the discussion that took place in the State Affairs Committee about what groups could be confirmed and which ones could not. It was her understanding having this board subject to confirmation would be in violation of the state Constitution. CO-CHAIR BUNDE said the question was why his goal was to keep the legislature involved with the postsecondary education commission and the student loan process as much as possible. He noted that in discussions with the various attorneys, concern was expressed to ensure that we were in sync with the state Constitution. There is always a possibility of court challenges and a variety of opinions. However, the bill has been drafted so the postsecondary education corporation maintains a quasi-judicial role; that is it meets on appeals for the institutional authorization and is the ultimate court of appeals, via the executive director, for loans to students who were turned down. In Co-Chair Bunde's mind that maintains the quasi-judicial requirement that is necessary for legislative confirmation. He asked Mr. Ford if he had correctly characterized the bill. Number 843 MIKE FORD, Attorney, Legislative Legal and Research Services, said the power of the legislature to confirm flows from certain functions of the agency. Under this draft, the agency would still have a regulatory function over postsecondary institutions which is a function it currently has, so the function is being maintained for the commission. By virtue of maintaining that, the legislature has power of confirmation over the board members. He believed that in this particular draft the concept is to also have an influence over the loan program, which would be moved to the corporation. (Indisc.) the governing bodies of the corporation and the commission are the same people, that legislative connection is maintained. (Indisc.) have a power of confirmation over the members of the public corporation because they are wearing two hats in this situation; they are also the head of the commission and by virtue of the commission having regulatory functions, there is also the power of confirmation. Number 906 KATHLEEN STRASBAUGH, Assistant Attorney General, Civil Division, Department of Law, said the two different boards do indeed have a different status under the Constitution. The loan corporation is not subject to confirmation. She noted in glancing at the latest draft, it appeared to her the postsecondary commission is similar to the status quo and has a variety of functions including regulatory activity. There is a potential argument that the regulatory activity might subject this board to confirmation, but it has never been confirmed and it has been the opinion of the Department of Law since 1977 that it should not be. She believed the history had to do with that regulation is only a part of what they do. She pointed out that governors of both parties have tolerated legislative membership on the commission and in the loan corporation, even though it's not constitutional because it didn't spend a lot of time performing its regulatory function. That approach had to do with the fact that it was not subject to confirmation and the trade-off was there were two legislators to observe and participate. Consequently, the history is that this board is not subject to confirmation. In her view there would only be a strong argument for confirmation if the function was solely regulatory. She disagreed with the statement that the loan application function presents a regulatory or quasi-judicial function sufficient to bring the board under Article 3, Section 26 of the Constitution which states what boards are to be confirmed. The processing of loans and taking appeals is incidental to the main function which is to raise the money and to make sure the program operates. She commented there is a fairly substantial amount of case law which supports the notion that the public corporations, as Mr. Ford said, are not subject to confirmation and in particular, public corporations that float loans. She thought there was a fundamental difference as to what would happen if this were to be argued, but no one has yet argued it, so that institutional dispute which has always been there would remain if this legislation was passed. Number 1060 MS. STRASBAUGH said there have been boards with dual functions before, so she couldn't say that a board couldn't wear two hats. She noted that was previously done with the Personnel Board and the Labor Relations Agency before they were split, but in both those cases they were clearly regulatory and quasi-judicial. At any rate, she thought it would remain a substantially up in the air question with respect to the postsecondary as it is drafted in the committee substitute. CO-CHAIR BUNDE asked for Ms. Williams' comments. Number 1094 MS. WILLIAMS said she would defer the question of confirmations to Kathleen Strasbaugh as that was her area of expertise. REPRESENTATIVE AL VEZEY noted there was legislative confirmation of the PERS and TERS Boards. MS. STRASBAUGH said the appeals that come before those boards are really substantial. She represents the administrator in those appeals and they are full trial type proceedings with evidence being presented and it is one of their chief functions. She said there was some difference, at least in how much time they spent on it. REPRESENTATIVE VEZEY agreed there was some difference, but asked if their duties weren't almost the same. MS. STRASBAUGH said they might occupy the same number of pages in the statute books, although she thought it might even be shorter, but one of their central functions is to hear those appeals. REPRESENTATIVE VEZEY asked what the disadvantage would be of having legislative confirmation? MS. STRASBAUGH replied because it's not constitutional. REPRESENTATIVE VEZEY said, "You can't tell me that the duties, if you don't quantify them just list them, you can't tell me the duties of this new board doesn't look very similar to dozens of other boards with legislative confirmation." MS. STRASBAUGH disagreed with Representative Vezey. CO-CHAIR BUNDE said the past policy of the postsecondary education commission sitting as a quasi-judicial body was to hear, with some inconsistency granted, student appeals on loans from people who were having problems with their loans. MS. STRASBAUGH said that was correct. MS. WILLIAMS said that is not a quasi-judicial role, as quasi- judicial roles are viewed as more of a role of a lender making decisions on what sort of leeway that lender is going to give under the law. It's not an APA hearing, for example. It's a real distinction if the institution authorization (indisc.) clearly APA and you're sitting with a quasi-judicial body determining what kind of institutions will remain open. CO-CHAIR BUNDE asked Ms. Williams to take it to the next step which would be if an institution did not receive authorization and wished to appeal to the board, would that be quasi-judicial in her opinion? MS. WILLIAMS responded yes, because they are sitting as the agency under the APA that makes the ultimate decision of whether or not that institution is going to stay open. CO-CHAIR BUNDE asked Ms. Barrans if people who have had problems with their authorizations in the past have come to the board and asked for an appeal. MS. BARRANS said she believed in the last five years, which is what she could address with certainty, there had been one such appeal. MS. STRASBAUGH asked to make a correction for the record that the three members on the PERS are the Personnel Board, which makes personnel rules and conducts hearings under the Personnel Act. Number 1327 REPRESENTATIVE BRICE asked why the student was a nonvoting member? CO-CHAIR BUNDE said one of the goals in reducing the membership of the commission was to eliminate designated seats. He has heard that students have been assured that a student would be appointed to the board, but we can't always depend on future executives being as enlightened as this Governor. He added it wasn't that he didn't want a student, but the concern was that if a student had a seat on the board, other people would lobby heavily for a seat as well and the board would begin to grow. MS. BARRANS referred to page 2, line 19, and said one of the issues they had requested was that the loan origination fees be deposited into the origination fee account. She pointed out this is the Alaska Student Loan reference, and the same language is in Section 30 of the committee substitute with reference to the Memorial Scholarship Loan. She said the language in Section 30, has the preferred reference where it simply indicates a direct deposit of origination fees into the origination fee account, without the subject to appropriation language. CO-CHAIR BUNDE questioned what her intended goal was. MS. BARRANS responded the goal is to have consistent language with respect to the treatment of the origination fee in both the Memorial Scholarship Loan Fund and the Alaska Student Loan Fund. She thought it may have just been an oversight. Number 1458 MR. FORD said it is the belief of the Legislative Legal Services staff that the Section 22 language should remain because the amounts are subject to appropriation. To delete it was, while not constitutionally significant, of some instruction to the public and to the legislature. With regard to the language in Section 30, he didn't know why that hadn't been changed, but thought perhaps it should be changed as well. Number 1515 CO-CHAIR BUNDE asked if the committee members would be comfortable with considering this as a conceptual amendment for technical cleanup. MR. FORD stated he thought the language should be consistent. MS. BARRANS informed the committee that the bond counsel to the corporation would have an opinion on whether or not these fees would be subject to appropriation. She suggested getting advice from the corporation's bond counsel on the appropriate language, which would be conveyed to Mr. Ford. CO-CHAIR BUNDE asked Mr. Ford if he had sufficient guidance from the committee to make the language consistent. MR. FORD said he could phrase the question to make sure it was clear to everyone: The question is whether these fees are subject to appropriation by the legislature? He said legally they are, that's why the language was included originally. He added that he would be glad to review it if the commission had a different opinion. CO-CHAIR BUNDE thought it was something that needed to be looked at. He referred to the last sentence on page 5 and the first sentence on page 6, and said he thought it had been duplicated. Co-Chair Bunde mentioned it is very likely there will be a fiscal note which meant the bill would end up in the Finance Committee so these issues could be addressed in Finance. Number 1599 MS. WILLIAMS suggested that "program" be changed to "programs" on page 4, line 21. MS. STRASBAUGH referred to page 4, line 29, and said it needed to be clear that under the procurement act and in general, that all legal counsel is subject to the approval of the attorney general. It doesn't mean that private counsel won't be retained from time- to-time, but ultimately those contracts require the approval of the attorney general. The language in the committee substitute creates some confusion because there are procurement code sections relative to that. She suggested that it might be better to leave out subsection (b) and have it track with existing legislation. MR. FORD said he had no problem with that suggestion. MS. BARRANS believed the language on page 3, line 6, should read, "...a person representing the Department of Education..." MR. FORD pointed out "department" is defined as the Department of Education in the Definitions Section of the bill. CO-CHAIR BUNDE commented that since the bill would definitely go to the Finance Committee because of the fiscal note, he would like the question reviewed about the appropriation and then it could be addressed in the Finance Committee. Number 1702 CO-CHAIR TOOHEY moved to pass CSHB 535(HES) to the next committee of referral with individual recommendations and no fiscal note. MS. BARRANS said that a fiscal note from both the Alaska Postsecondary Education Commission and the Department of Education would be available on Monday, April 1. CO-CHAIR BUNDE made a friendly amendment to the motion to include "anticipated fiscal notes." Hearing no objection, CSHB 535(HES) moved from the House HESS Committee.
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