Legislature(2007 - 2008)SENATE FINANCE 532

04/18/2007 09:00 AM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Administration Presentations
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved CSSB 100(FIN) Out of Committee
Moved CSSB 76(HES) Out of Committee
9:11:34 AM                                                                                                                    
     CS FOR SENATE BILL NO. 76(HES)                                                                                             
     "An Act establishing a higher  education savings program for                                                               
     eligible  children who  were placed  in out-of-home  care by                                                               
     the state; and providing  for confidentiality of identifying                                                               
     information of a beneficiary under the program."                                                                           
This was  the first hearing for  this bill in the  Senate Finance                                                               
9:11:52 AM                                                                                                                    
Co-Chair Stedman  commented that although this  legislation would                                                               
have no  impact on  the adult population,  the benefits  could be                                                               
significant for future generations.                                                                                             
9:12:07 AM                                                                                                                    
SENATOR JOHNNY  ELLIS, Sponsor of  the bill, testified  that this                                                               
proposal had been offered in  previous legislatures, although had                                                               
not been  passed into law.  The legislation before  the Committee                                                               
had "even stronger support" and  "no known opposition." This bill                                                               
would  create the  A.S.P.I.R.E. Program,  an acronym  of Alaska's                                                               
Youth  Succeed When  People Invest  Resources  in Education.  The                                                               
pilot  program  was  designed   to  connect  churches,  community                                                               
groups,  nonprofit  organizations,  businesses  and  individuals,                                                               
with foster  children for the  purpose of  providing "educational                                                               
opportunities beyond high school".                                                                                              
Senator  Ellis  told  of  the  approximately  2,000  children  of                                                               
various  ages who  reside  in  "out of  home  placement" and  are                                                               
commonly referred to as foster  children. Each year approximately                                                               
100  of those  foster children  "age out  of the  system". Foster                                                               
parents could  not be expected  to fund the college  education of                                                               
these youth  given the  expenses these  parents incur  in raising                                                               
the  children.  Nor  could grandparents  or  other  relatives  be                                                               
expected  to  establish  higher  education  funds.  Additionally,                                                               
"government can't do everything."                                                                                               
Senator Ellis stated  that the education of these  youth could be                                                               
addressed  through  a  "non-governmental approach".  These  youth                                                               
have  "very few  educational  opportunities and  some pretty  bad                                                               
outcomes" once they  reach the age of legal adulthood  and are no                                                               
longer served  by the children's  services system and  move "from                                                               
loving homes".                                                                                                                  
Senator Ellis advised that the  ASPIRE program utilized a similar                                                               
program administered in  the state of Missouri as a  model, "as a                                                               
way to  connect a lot  of the  compassion and generosity"  of the                                                               
private sector.  Contributors could  essentially adopt  youth for                                                               
educational  purposes. This  legislation "is  making useā€¦  of the                                                               
award   winning,   brilliant,   terrific  529   college   savings                                                               
accounts."  He qualified  that the  aforementioned statement  was                                                               
somewhat misleading because the funding  could be expended at any                                                               
educational  institute  for  any  approved  educational  expense.                                                               
Although administered  by the University  of Alaska,  the funding                                                               
could  be utilized  for any  educational program  in the  nation.                                                               
This would  provide flexibility for  foster children  to "achieve                                                               
their potential."                                                                                                               
9:15:17 AM                                                                                                                    
Co-Chair Stedman  requested further explanation of  how the funds                                                               
contributed to this program could be expended.                                                                                  
9:16:04 AM                                                                                                                    
GABE ACEVES, Staff  to Senator Johnny Ellis,  testified that once                                                               
established, the  funds held in  these savings accounts  could be                                                               
expended for  any form of  further education. This  would include                                                               
not only  university costs, but also  vocational institutions and                                                               
community college courses.                                                                                                      
9:17:04 AM                                                                                                                    
Co-Chair  Stedman listed  examples of  vocational occupations  as                                                               
welders, machinists, auto and diesel mechanics and hairdressers.                                                                
Co-Chair Stedman asked the portability  of the savings account in                                                               
the event that  the designated youth opted not to  further his or                                                               
her education.                                                                                                                  
9:17:32 AM                                                                                                                    
Mr. Aceves explained that the  accounts would be administered and                                                               
controlled by  the State. If  the youth designated on  an account                                                               
did not utilize the funds, the beneficiary could be changed.                                                                    
9:18:10 AM                                                                                                                    
Co-Chair Stedman pointed out that  the accounts commonly known as                                                               
529   college  savings   plans  are   structured  to   allow  for                                                               
transferability in the  event that the child does  not expend the                                                               
funds.  Therefore,   the  provisions  of  this   bill  would  not                                                               
implement a new procedure and flexibility would be ensured.                                                                     
9:18:40 AM                                                                                                                    
JAMES LYNCH,  University of Alaska, testified  via teleconference                                                               
from an  offnet location that  he was involved with  the creation                                                               
of  the  original  University of  Alaska  college  savings  plan.                                                               
Accounts   established  in   the  regular   plan  typically   are                                                               
transferable to  relatives of  the initial  beneficiary. However,                                                               
accounts  established  by a  faith  based  organization or  as  a                                                               
scholarship  could be  transferred to  any eligible  beneficiary.                                                               
The portability of the ASPIRE  accounts would be permitted to any                                                               
institution  of  higher  education eligible  to  receive  federal                                                               
financial aid funding.                                                                                                          
9:20:44 AM                                                                                                                    
Co-Chair  Stedman understood  the structure  of the  original 529                                                               
college savings plans is intended  to allow parents, grandparents                                                               
or other relatives  to assist in the funding  of their children's                                                               
college education.                                                                                                              
9:21:05 AM                                                                                                                    
Mr.  Lynch  affirmed.  Higher education  had  traditionally  been                                                               
funded  through  loans;  however  costs  have  accelerated  at  a                                                               
significantly faster  rate than  income. Those students  of lower                                                               
economic status would qualify for  financial assistance and those                                                               
students of  higher economic status  could afford the  costs. The                                                               
college  savings  plan  system   is  intended  to  address  those                                                               
students from middle income families.                                                                                           
Mr. Lynch  expressed that  Alaskans receive  discretionary income                                                               
through  the Alaska  Permanent  Fund.  The dividend  applications                                                               
include an  option to  allow recipients to  designate up  to one-                                                               
half of the dividend to  a college savings plan. Approximately 66                                                               
percent of participants  are from families with  an annual income                                                               
of less than $50,000.                                                                                                           
9:22:57 AM                                                                                                                    
Co-Chair Stedman  surmised that this legislation  would model the                                                               
original   college  savings   plan  to   allow  accounts   to  be                                                               
established   for    foster   children   by    corporations   and                                                               
9:23:39 AM                                                                                                                    
MIKE LESMANN,  Community Relations Manager, Office  of Children's                                                               
Services, Department of Health and  Social Services, testified to                                                               
the  Department's  involvement  and  support  of  this  bill.  He                                                               
continued to read his testimony into the record as follows.                                                                     
     Children that  become wards of  the State are  sometimes not                                                               
     financially prepared to  enroll in postsecondary educational                                                               
     opportunities.   The  ASPIRE   program   would  create   the                                                               
     potential  for  their  community  to  assist  them  in  that                                                               
     If we believe that our children are our future, then this                                                                  
     is very important legislation to all of Alaska.                                                                            
9:24:45 AM                                                                                                                    
Senator Olson  referenced the  sponsor statement  indicating that                                                               
current statutes  relating to confidentiality must  be amended to                                                               
allow for  the private contributions  for education. He  asked if                                                               
this issue had been a problem in the past.                                                                                      
9:25:07 AM                                                                                                                    
Mr. Lesmann  elaborated that this  bill would amend  AS 47.10.093                                                               
to  allow  the  Department   to  disclose  information  regarding                                                               
children  in  State  custody  to  the  University  of  Alaska  so                                                               
accounts could be established for these children.                                                                               
9:25:42 AM                                                                                                                    
Senator  Olson concluded  therefore  that confidentiality  issues                                                               
had not arisen.                                                                                                                 
Mr. Lesmann affirmed.                                                                                                           
9:25:46 AM                                                                                                                    
Senator Ellis reaffirmed  that no such problems  had occurred but                                                               
that  the  statutory change  is  necessary  to allow  the  ASPIRE                                                               
program to be implemented.                                                                                                      
9:26:02 AM                                                                                                                    
MICHAEL CURRAN,  Program Coordinator,  Office of Faith  Based and                                                               
Community Initiatives, Office of  the Commissioner, Department of                                                               
Health  and  Social  Services,   testified  in  support  of  this                                                               
legislation. He  detailed his credentials working  in the "social                                                               
justice"  and  "community  building"  fields, as  a  teacher  and                                                               
ordained priest. He  shared an experience in  reading an obituary                                                               
for a 21-year old former  student who had committed suicide. This                                                               
person had  been a  foster child,  was "bright  and intelligent",                                                               
aspired to  be an  astronomer, and who  could have  been accepted                                                               
into  any university.  Instead, at  the time  of his  death, this                                                               
person was  homeless and  had had no  opportunity to  receive the                                                               
education "he  deserved." The ASPIRE  program could  have changed                                                               
Mr. Curran characterized children  as a "most precious commodity;                                                               
they  are  our future."  Foster  children  should have  the  same                                                               
opportunities as  a child "born  in privilege"  or at least  in a                                                               
"stable home situation".                                                                                                        
9:30:35 AM                                                                                                                    
Senator Elton  asked if the  account were considered an  asset to                                                               
the beneficiary  how the  existence of  these funds  would affect                                                               
the ability of that person to secure other financial aid.                                                                       
9:31:26 AM                                                                                                                    
Senator Ellis indicated he would  research the matter and provide                                                               
a response.                                                                                                                     
9:31:46 AM                                                                                                                    
Co-Chair Stedman  cited language in subsection  (a)(1) of Section                                                               
47.05.100 Higher  education savings program, inserted  by Section                                                               
1 of  the bill on  page 1, line  10. This provision  required the                                                               
program to  include "a central  office, dedicated  to faith-based                                                               
and  community services,  for development  and  marketing of  the                                                               
program".  He  requested an explanation of  the envisioned office                                                               
and the issues it would address.                                                                                                
9:32:12 AM                                                                                                                    
Senator Ellis acknowledged that  the provision "sounds expensive"                                                               
to implement;  however, the program  would be located  within the                                                               
existing Office of Faith Based and Community Initiatives.                                                                       
9:32:33 AM                                                                                                                    
Mr. Aceves  affirmed. The  existing Office  would be  tasked with                                                               
undertaking outreach  efforts to promote the  program. The Office                                                               
has  extensive   contact  with   churches  and   social  services                                                               
9:33:02 AM                                                                                                                    
Co-Chair Stedman  next referenced  Sec.47.05.400(a)(6) on  page 2                                                               
lines  9 through  11, pertaining  to a  procedure for  monitoring                                                               
success  of the  program. He  asked the  sponsor to  describe the                                                               
intended procedure.                                                                                                             
9:33:39 AM                                                                                                                    
Senator Ellis  supported the  missions and  measures methodology,                                                               
which applies to  all State agencies. This bill  does not provide                                                               
specifics about the  procedure that would be  implemented for the                                                               
ASPIRE program. However,  he assumed that the  number of accounts                                                               
established, the amount of funds  donated and the number of youth                                                               
participating  would  be  included   in  any  assessment  of  the                                                               
program's success. These factors would be "easy to measure".                                                                    
9:34:47 AM                                                                                                                    
Co-Chair  Stedman  suggested that  the  number  of accounts,  the                                                               
appreciation of  the balances of  these accounts, and  the amount                                                               
of donations made by "corporate Alaska" could be utilized.                                                                      
9:35:10 AM                                                                                                                    
Senator  Ellis anticipated  that the  Office of  Faith Based  and                                                               
Community Initiatives  would benefit from its  efforts to measure                                                               
success, as  the program would  be a "flagship" for  the Office's                                                               
9:35:53 AM                                                                                                                    
Co-Chair  Stedman opined  that some  youth were  not prepared  to                                                               
begin postsecondary  education immediately after  graduating from                                                               
high school  and wait until  they are 23  years of age.  He noted                                                               
the deadline  for beneficiaries to  participate would be  the age                                                               
of  30 years.  He asked  what  changes would  be made  to a  fund                                                               
established  for a  person who  does not  attend an  institute of                                                               
higher education by the age of 31 years.                                                                                        
Mr. Aceves  responded that  at age 30,  the beneficiary  would be                                                               
changed. Mr. Lynch, the Division  of Legal and Research Services,                                                               
and himself, determined this age  to be appropriate. The existing                                                               
college  savings plan  provides that  a beneficiary  could retain                                                               
the account  indefinitely; however, the intention  for the ASPIRE                                                               
program  would allow  for other  beneficiaries to  participate in                                                               
the event the original beneficiary opted against doing so.                                                                      
Mr. Aceves  qualified that many  youth transitioning  from foster                                                               
care are  not prepared to  immediately continue  their education.                                                               
Many are attempting to establish themselves "in regular life".                                                                  
9:38:04 AM                                                                                                                    
Co-Chair Stedman understood the regular  "529's" are subject to a                                                               
federal   requirement    that   the   beneficiary    must   begin                                                               
participation by the age of 30 years.                                                                                           
9:38:20 AM                                                                                                                    
Mr.  Aceves  deferred  to  Mr.  Lynch  who  Mr.  Aceves  recalled                                                               
testified  to  a previous  committee  that  the original  college                                                               
savings plan accounts could be held "forever".                                                                                  
9:38:55 AM                                                                                                                    
Co-Chair Stedman stated he would review the issue.                                                                              
9:39:18 AM                                                                                                                    
Co-Chair Stedman asked if donors  would have options to specify a                                                               
beneficiary or make  a donation that could be  utilized to assist                                                               
multiple foster children.                                                                                                       
9:39:51 AM                                                                                                                    
Senator Ellis relayed  this issue was addressed  with the program                                                               
administered  by  the  state  of   Missouri.  In  some  instances                                                               
corporations donate a large amount  to the program to be utilized                                                               
for unspecified  foster children.  Other accommodations  could be                                                               
made in the  ASPIRE program for a donation to  be specified for a                                                               
child of certain circumstances, such  as a girl from Rural Alaska                                                               
who was  a victim  of abuse  and neglect.  In other  instances, a                                                               
donor  could  know  a  child   directly  and  choose  to  specify                                                               
contributions to that beneficiary.                                                                                              
Mr. Aceves  continued that this  issue was  discussed extensively                                                               
with the Department  and the decision was reached  to establish a                                                               
procedure to allow a donor  to direct contributions to a specific                                                               
child.  In most  cases,  churches and  other organizations  would                                                               
unlikely  have direct  relationships with  specific children  and                                                               
therefore   donations   would   be  to   unnamed   beneficiaries.                                                               
Beneficiaries would  be selected  by administrators based  on the                                                               
age of the child and length  of time before transition from State                                                               
custody.  Additionally, a  mechanism  would  allow for  anonymous                                                               
9:42:09 AM                                                                                                                    
Co-Chair Stedman directed attention  to the fiscal note providing                                                               
for a  $41,400 appropriation to be  expended on set up  costs and                                                               
marketing efforts.                                                                                                              
9:42:34 AM                                                                                                                    
Senator Ellis  stated the amount  was not significant,  but would                                                               
be necessary. In consultation with  the Office of Faith Based and                                                               
Community Initiatives, he determined that  the costs could not be                                                               
absorbed within  the existing budget.  Funding would  be required                                                               
for  the  program to  be  successful.  Of the  amount  requested,                                                               
$20,000 would  be utilized  for "additional  staff time"  and the                                                               
remainder  would be  expended on  "small  print", television  and                                                               
radio "package" to advertise the program.                                                                                       
9:43:58 AM                                                                                                                    
Co-Chair Stedman  suggested that information on  the program also                                                               
be provided by the University of Alaska.                                                                                        
9:44:20 AM                                                                                                                    
Senator  Ellis  stated  he  would  approach  the  University  for                                                               
inclusion of ASPIRE information on its website.                                                                                 
9:44:33 AM                                                                                                                    
Senator  Thomas  understood that  the  funds  would be  disbursed                                                               
directly to  the postsecondary education institution  rather than                                                               
to a third party.                                                                                                               
Mr. Aceves detailed  that the State would serve as  the holder of                                                               
the account with the University  of Alaska disbursing the funding                                                               
to other institutes.                                                                                                            
9:45:10 AM                                                                                                                    
Co-Chair  Stedman asked  if the  funds could  be utilized  to pay                                                               
tuition costs and purchase books and other materials.                                                                           
Mr.  Aceves affirmed  and  added that  housing  and other  living                                                               
expenses would qualify as well.                                                                                                 
Senator Ellis  assured that the  funds could  not be used  by the                                                               
beneficiary to host a "big party".                                                                                              
9:45:25 AM                                                                                                                    
Senator  Olson   asked  the   accreditation  requirements   of  a                                                               
postsecondary  education  institute  qualified  to  accept  these                                                               
funds and  whether a  private institution  that does  not receive                                                               
federal funding would qualify.                                                                                                  
9:46:07 AM                                                                                                                    
Mr. Aceves  responded that a qualifying  institution must qualify                                                               
to  receive  federal financial  aid  for  its students.  This  is                                                               
unrelated  to   federal  funding  appropriated  directly   to  an                                                               
9:46:57 AM                                                                                                                    
Co-Chair Hoffman offered  a motion to report  SB 76, 25-LS0443\M,                                                               
from Committee  with individual recommendations  and accompanying                                                               
and new fiscal notes.                                                                                                           
There  was no  objection and  CS SB  76 (HES)  was REPORTED  from                                                               
Committee  with  zero  fiscal  note #1  from  the  University  of                                                               
Alaska, and a new fiscal note  dated 3/22/07 for $41,400 from the                                                               
Department of Health and Social Services.                                                                                       
AT EASE 9:47:23 AM / 9:52:01 AM                                                                                             

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