Legislature(2009 - 2010)CAPITOL 106
02/09/2009 08:00 AM House EDUCATION
| Audio | Topic |
|---|---|
| Start | |
| Confirmations Hearings(s): || University of Alaska | |
| HB109 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| *+ | HB 109 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE EDUCATION STANDING COMMITTEE
February 9, 2009
8:03 a.m.
MEMBERS PRESENT
Representative Cathy Engstrom Munoz, Vice Chair
Representative Wes Keller
Representative Peggy Wilson
Representative Robert L. "Bob" Buch
Representative Berta Gardner
MEMBERS ABSENT
Representative Paul Seaton, Chair
Representative Bryce Edgmon
COMMITTEE CALENDAR
CONFIRMATION HEARINGS(S):
University Of Alaska Board of Regents
Kenneth J. Fisher, Juneau
Mary K. Hughes, Anchorage
- CONFIRMATION(S) ADVANCED
HOUSE BILL NO. 109
"An Act relating to eligibility for the Alaska supplemental
education loan program and to the interest rate for a loan made
under the Alaska family education loan program; and providing
for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 109
SHORT TITLE: EDUC. LOANS: SUPPLEMENTAL & FAMILY
SPONSOR(s): EDUCATION
02/02/09 (H) READ THE FIRST TIME - REFERRALS
02/02/09 (H) EDC, FIN
02/09/09 (H) EDC AT 8:00 AM CAPITOL 106
WITNESS REGISTER
KENNETH J. FISHER, Professional Engineer (P.E.)
Appointee
to the University of Alaska Board of Regents
Juneau, Alaska
POSITION STATEMENT: Testified as appointee to the University Of
Alaska Board Of Regents.
MARY K. HUGHES, Appointee
to the University of Alaska Board of Regents
Anchorage, Alaska
POSITION STATEMENT: Testified as appointee to the University Of
Alaska Board Of Regents.
KATIE KOESTER, Staff
to Representative Paul Seaton
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented HB 109 on behalf of the House
Special Committee on Education, sponsor by request, chaired by
Representative Seaton.
DIANE BARRANS, Executive Director
Alaska Commission on Postsecondary Education
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 109.
ACTION NARRATIVE
VICE CHAIR CATHY ENGSTROM MUNOZ called the House Education
Standing Committee meeting to order at 8:03 a.m.
Representatives Munoz, Keller, Gardner, and Buch were present at
the call to order. Representative Wilson arrived as the meeting
was in progress. Representatives Seaton and Edgmon were
excused.
^CONFIRMATIONS HEARINGS(S):
^UNIVERSITY OF ALASKA
8:03:49 AM
VICE CHAIR MUNOZ announced that the first order of business
would be confirmation hearings for two seats on the University
Of Alaska Board Of Regents.
8:04:27 AM
KENNETH J. FISHER, Professional Engineer (P.E.), Appointee to
the University Of Alaska Board Of Regents, noted the strengths
of the University of Alaska system, and pledged to continue the
efforts of maintaining the standards for higher education in the
state.
8:05:44 AM
REPRESENTATIVE KELLER stated that he has a personal history with
the candidate, by which he is able to recommend him for
appointment. He said he anticipates that the candidate will
fulfill the position with integrity, thoroughness, and
commitment to the job, and thanked Mr. Fisher for his interest
in becoming a regent.
8:06:09 AM
REPRESENTATIVE GARDNER cited the candidate's lengthy resume and
asked what areas he expects to advocate for, as a regent.
MR. FISHER pointed out that the board of regents responsibility
rests in the constitution with guidance from the legislature.
With a background in government performance, he said he looks
forward to expanding his understanding of the higher educational
needs throughout the state and then work with the board to
achieve its academic goals. He reported that he has worked in
many Bush areas, and said considers finding teachers for rural
positions a priority, as well as providing for rural health care
needs.
8:07:55 AM
REPRESENTATIVE BUCH noted that Mr. Fisher is trained as a civil
engineer with a work history spanning state and federal
government agencies.
MR. FISHER clarified that the majority of his work has been with
the federal government, including tribal governments.
REPRESENTATIVE BUCH asked what his views are on the distance
learning programs, and what he anticipates creating in this
area.
MR. FISHER likened the learning districts in Alaska to islands.
Without the benefit of roads, it is important to deliver the
programs as close to the user as possible, he said, an area the
university is prioritizing.
8:10:42 AM
REPRESENTATIVE GARDNER made a motion to advance from committee
the nomination of Kenneth J. Fisher, as appointee to the
University Board of Regents, to the joint session for
consideration. There being no objection, the confirmation was
advanced from the House Special Committee on Education.
8:11:57 AM
MARY K. HUGHES, Appointee to the University Of Alaska Board Of
Regents, indicated her previous six and one half years of
service on the Board of Regents, to fill a partial term. She
said she is humbled by the governor's appointment to a full
term. A University of Alaska graduate herself, along with other
family members, she underscored the importance of educating
Alaskan's, in Alaska, as a key to retaining a strong work force.
Additionally, she opined that the opportunities for the
university are great, given the support from the legislature.
8:13:37 AM
REPRESENTATIVE KELLER stated his support for the appointee.
8:14:01 AM
REPRESENTATIVE GARDNER asked how telecommunications might be
improved in the educational field.
MS. HUGHES said her background is in telecommunications and
stated that the technology has become better over the decades.
This is the direction where she sees the educational system in
Alaska can grow; an important avenue for the educational field
to be cultivating. Additionally, she stressed the importance
of, and lauded the university regents for, the support and
prioritization of programs directed to the K-12 schools, through
the leadership of Commissioner Larry LeDoux.
8:18:09 AM
REPRESENTATIVE BUCH asked for her comments on the recently
announced Alaska Supreme Court decision regarding Moore v.
State.
MS. HUGHES apologized for not having an opinion, and said she
would formulate one in the coming week.
REPRESENTATIVE BUCH cited the dilemma of preparing students for
postsecondary education, and asked what her role would be in
remedying the situation.
MS. HUGHES opined that it is an immense opportunity and
responsibility for the university. Outreach, partnerships, and
collaboration with the school districts are efforts that will
prove beneficial in this regard. She stated her observation
that Alaska tends to have regional challenges. An example is
the loss of students in Southeast, where high school graduates
prefer to attend outside colleges. Additionally, she described
the university's partnership with the Kotzebue school district,
local Native corporations, and tribal entities, to enhance
educational opportunities in that region. The regional focus on
education is imperative, she stressed.
8:22:49 AM
REPRESENTATIVE GARDNER commented that the Moore v. Alaska
decision has not been published, having been handed down in the
last few days. She asked whether Alaska is on the right path
with what is being done in the telecommunication/education
field.
MS. HUGHES pointed out that many satellites are positioned over
the equator and do not serve Alaska directly. Despite the
constraints, the use of cellular technology has been a boon to
rural areas. The expensive aspect for this technology is the
bandwidth being used, which comes into play with various
programs such as the on-line medical program. As educational
providers, she stipulated, every tool needs to be utilized but
not necessarily the most expensive when alternatives exist. She
offered an example of a science class being served efficiently
over the internet, in Bethel. Additionally, assistance can be
cultivated through civic partnership donations in the
telecommunications field.
8:28:05 AM
REPRESENTATIVE GARDNER indicated the university's funding
request last year to increase bandwidth, which, without the
bandwidth availability, precluded the administration from
opportunities to bid on grants. Although the state funding was
denied, she asked if bandwidth donations from a civic partner
would allow these grants to be considered.
MS. HUGHES replied that the bandwidth requests were for a
variety of uses. The $30 million request that was not approved
last year included the improvement of the research potential of
the university. She described how bandwidth use is maximized,
and explained that, the 2008 partnership donation from GCI, has
eliminated the need to include the request in the current year
budget proposal.
8:30:21 AM
REPRESENTATIVE BUCH pointed out that post graduates are often
encumbered with financial burdens. At one time the university
offered a 50 percent forgiveness incentive, and he asked for her
comments.
MS. HUGHES admitted to being a beneficiary of the 50 percent
forgiveness opportunity. Although she found the loan helpful,
she stipulated that she would have returned to the state
regardless of the incentives offered. Ms. Hughes praised the
efforts of the Post Secondary Education Commission for making
funds available to students. The university yearly tuition
averages $8,000, which she opined is very competitive. The
state loan programs, and other funding sources, are very
helpful, and, in addition, the lower schools need to encourage
students to continue on to post secondary education. It is her
belief that grade school students do not have a realistic
understanding of what is required for a career early enough in
school to prepare themselves for college.
8:36:36 AM
REPRESENTATIVE GARDNER made a motion to advance from committee
the nomination of Mary K. Hughes as appointee to the University
Of Alaska Board Of Regents, to the joint session for
consideration. There being no objection, the confirmation was
advanced from the House Special Committee on Education.
HB 109-EDUC. LOANS: SUPPLEMENTAL & FAMILY
8:37:27 AM
REPRESENTATIVE MUNOZ announced that the final order of business
would be HOUSE BILL NO. 109, "An Act relating to eligibility for
the Alaska supplemental education loan program and to the
interest rate for a loan made under the Alaska family education
loan program; and providing for an effective date."
8:37:41 AM
KATIE KOESTER, Staff to Representative Paul Seaton, Alaska State
Legislature, presented HB 109, a bill being introduced by the
House Special Committee on Education, on behalf of the
Postsecondary Education Commission, paraphrased from the sponsor
statement, which read as follows [original punctuation
provided]:
HB 109 requires that, as a condition of eligibility
for an Alaska Supplemental Education Loan (ASEL), a
borrower must have good credit or, if unable to
document a history of good credit, must apply with a
credit-worthy co-signer. Administered by the Alaska
Commission on Postsecondary Education (ACPE), these
loans are funded by the Alaska Student Loan
Corporation (ASLC). ASLC issues bonds in the capital
markets using its various AlaskAdvantage education
loans as collateral pledged to support the bonds. The
loans are in two categories: those with a federal
guaranty (Stafford, Federal PLUS and Grad PLUS) and
non-guaranteed State loans. With bonds collateralized
by guaranteed loans, investors know they can rely on
the backing by the federal government. ASELs have no
guarantee and therefore the underlying quality is a
primary concern. ASLC has determined that unless the
credit quality of ASELs is improved, they will not be
usable as collateral.
Compared to credit standards imposed by lenders in
other states, ASEL credit requirements are among the
least restrictive for alternative education loans.
ACPE currently only reviews histories for bad credit.
If an applicant has no credit history they may borrow
without a co-signer. In today's national economic
climate, bond investors are extremely averse to bonds
backed by certain asset types. Unfortunately, in this
new environment ASELs are viewed as subprime loans.
ASLC financial advisors indicate there is little
likelihood this conservative investor perspective will
change in the future. Passage of HB 109 is intended
to permit ACPE to improve ASEL quality so they will be
more positively received in the bond market. If ASLC
is unable to finance the ASEL program through the
capital markets, in the future the State would have to
directly fund this program or ASELs would be
unavailable. ACPE estimates that its annual loan
demand through the ASEL program will continue to be
$40 to $50 million.
HB 109 also allows ASLC to set the interest rate for
Family Education Loans (FEL) in accordance with the
rate set for the ASEL (not to exceed 8.25%). The FEL
program allows a family member to take out a loan on
behalf of another family member. This program
accounts for less than 2% of ASLC loans. Currently
ASLC must charge the 5% interest rate set in statute
for the FEL. HB 109 gives ASLC the flexibility to set
the interest rate according to the current fiscal
environment.
The Legislature should carefully examine changes that
put limitations on borrowers. However, HB 109 is
necessary for ACPE and ASLC to continue to meet their
shared mission to promote, support, and provide access
to postsecondary education for Alaskans and in Alaska,
without relying on the State General Fund to finance
its operation.
MS KOESTER directed attention to the committee packet and
identified the supporting documents.
8:39:57 AM
DIANE BARRANS, Executive Director, Alaska Commission on
Postsecondary Education, stated her appreciation for the
committee's effort to bring this bill forward.
8:40:37 AM
REPRESENTATIVE GARDNER stated support for HB 109, citing it as
necessary in order to continue the existing loan program. Her
understanding is that the loan default record does not present a
problem, and asked whether that has changed. Additionally, she
pondered how other states are addressing similar issues for
providing loans given the current economic upheaval.
MS BARRANS said that collection on alternative loans have had a
positive repayment history, since they began 30 years ago. The
web site has an annually published cohort rate, which for the
past several years has been at, or below, the target rate of 5
percent. She explained how the loan defaults are being tracked
and how extrapolation methods indicate that the rate will rise
to 11 percent; a rate not palatable to investors.
8:42:41 AM
MS BARRANS addressed Representative Gardner's second question,
stating that the state loan program was launched at a time when
the Federal Education Loan Program (FELP) was popular. Because
FELP was a bank based program with few participating banks in
Alaska, in order to have an educational loan program the state
created its own. The federally guaranteed loan program was used
as a model, which is an entitlement program without applicable
credit criteria attached. The credit criteria that HB 109
proposes will bring the program closer to what other states
require. She acknowledged that high school graduates will
likely not have a credit score, and a co-signer will need to
meet the stipulated credit score; in New Jersey it is a minimum
of 760.
8:45:01 AM
REPRESENTATIVE WILSON asked whether the [University of Alaska
System] had been approached to provide lower tuition and costs
for these students.
MS BARRANS responded that price control at the university level
has not been suggested as an alternative to the bill. She
opined that students tend to borrow substantially, as indicated
by the loan amounts prior to the tuition freeze.
REPRESENTATIVE WILSON propositioned that every direction needs
to be explored for making education available.
8:47:46 AM
REPRESENTATIVE KELLER directed attention to Page 2, lines 23-24
and read: "The legislature finds the changes made by this Act
constitute an emergency under AS 44.62.250 ...". He asked for a
description of the emergency.
MS BARRANS explained that the regulatory promulgation process
can be lengthy, and in order to have HB 109 in place for the
2009-2010 school year, the language was included at her behest.
8:48:48 AM
REPRESENTATIVE KELLER referred to the cap of 8.25 percent, and
asked whether adding prime plus one or two was considered.
Taking action on point now could prevent the legislature from
having to take further measures, should the cap prove to be too
low.
MS BARRANS explained that it was specifically not tied to
indices in order to provide a definite rate limit. She stressed
the importance of having an understood limit, when working with
public policy.
REPRESENTATIVE KELLER cautioned that the current volatile,
economic situation, and projected a scenario of spiraling
interest rates. He acknowledged that these issues would be
taken up in-depth by the next committee of referral.
8:50:15 AM
REPRESENTATIVE BUCH read from the fourth paragraph of the
sponsor statement, "The FEL [Family Education Loan] program
allows a family member to take out a loan on behalf of another
family member," and asked about the mechanics of that clause.
MS BARRANS explained that the FEL program preceded the creation
of the Student Loan Corporation. Family members are allowed to
directly incur a student's debt. The language allows an Alaskan
resident family member, to borrow on behalf of a child who is
not a resident.
8:52:18 AM
REPRESENTATIVE WILSON observed that statute is not being changed
by this bill, but the parameters for making adjustments are
being expanded.
MS BARRANS corrected that statute is being changed by removing
the fixed 5 percent interest rate and indicating that the
student loan corporation can set the rate in accordance with the
rate set on the primary supplemental education loan. The same
rate will be used whether the borrower is a family member or the
student.
8:53:24 AM
REPRESENTATIVE MUNOZ noted how the credit worthiness of the
borrower is also being strengthened by the bill, allowing the
generated revenue to be used as collateral for bonding purposes.
MS BARRANS agreed. Further she stipulated that statute
indicates that an applicant may not have a credit history at the
time of application for a loan that demonstrates chronic
inability or unwillingness [to pay]. Hence, if they have no
credit or good credit, they can qualify. Responding to a
question from Representative Wilson, she directed attention to
page 2, lines 13-15, and paraphrased that the corporation shall
set the rate on a loan made under family education loan
statutes, not to exceed 8.25 percent; providing a fixed cap.
The rate has remained at 7.3 for the last two lending years, and
the expectation is for it to remain at that rate for the 2009-
2010 lending year.
8:55:24 AM
REPRESENTATIVE MUNOZ asked what amount of potential revenue is
expected to be generated through the bonds.
MS BARRANS said the level of bonding to perpetuate the program
is between $40-50 million.
8:55:56 AM
REPRESENTATIVE MUNOZ announced that HB 109 would be held over.
ADJOURNMENT
There being no further business before the committee, the House
Education Standing Committee meeting was adjourned at 8:56 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| hb 109 MATERIALS.pdf |
HEDC 2/9/2009 8:00:00 AM HEDC 2/11/2009 8:00:00 AM |
HB 109 |
| UA Board of Regents Confirmation hearing resume.pdf |
HEDC 2/9/2009 8:00:00 AM |