Legislature(2001 - 2002)

04/04/2001 09:38 AM EDU

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              HOUSE SPECIAL COMMITTEE ON EDUCATION                                                                            
                         April 4, 2001                                                                                          
                           9:38 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Con Bunde, Chair                                                                                                 
Representative Brian Porter                                                                                                     
Representative Gary Stevens                                                                                                     
Representative Reggie Joule                                                                                                     
Representative Gretchen Guess                                                                                                   
Representative Peggy Wilson                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Joe Green                                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 204                                                                                                              
"An  Act  relating  to the  Alaska  Commission  on  Postsecondary                                                               
Education and  the Alaska Student  Loan Corporation;  relating to                                                               
student  financial  aid  programs  and  the  financing  of  those                                                               
programs; establishing the Alaska  Advantage Loan Program and the                                                               
Alaska  Supplemental  Education   Loan  Program;  increasing  the                                                               
bonding  authorization of  the Alaska  Student Loan  Corporation;                                                               
providing for  liens resulting from  a default under AS  14.43 or                                                               
AS 14.44; relating to the  duties of the recorder regarding those                                                               
liens;  relating to  defaults under  the Western  Regional Higher                                                               
Education Compact; relating to  the prohibition on discrimination                                                               
regarding  programs under  AS  14.43; relating  to  fees for  the                                                               
review of  certain postsecondary institutions;  making conforming                                                               
amendments; and providing for an effective date."                                                                               
                                                                                                                                
     - MOVED HB 204 OUT OF COMMITTEE                                                                                            
                                                                                                                                
HOUSE BILL NO. 203                                                                                                              
"An Act making an appropriation  to the Legislative Council for a                                                               
study  of school  district  cost factors;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - MOVED CSHB 203(EDU) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 105                                                                                                              
"An Act relating to the base student allocation used in the                                                                     
formula for state funding of public education; and providing for                                                                
an effective date."                                                                                                             
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
HOUSE BILL NO. 71                                                                                                               
"An Act relating  to the education of  children with disabilities                                                               
and of  gifted children;  relating to  the Governor's  Council on                                                               
Disabilities   and    Special   Education;    making   conforming                                                               
amendments; and providing for an effective date."                                                                               
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
BILL: HB 204                                                                                                                  
SHORT TITLE:STUDENT LOANS/COMN. ON POSTSECONDARY ED.                                                                            
SPONSOR(S): RLS BY REQUEST OF THE GOVERNOR                                                                                      
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/22/01     0689       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/22/01     0689       (H)        EDU, HES, FIN                                                                                
03/22/01     0689       (H)        FN1: (EED)                                                                                   
03/22/01     0689       (H)        GOVERNOR'S TRANSMITTAL LETTER                                                                
04/02/01                (H)        EDU AT 8:00 AM HOUSE FINANCE                                                                 
                                   519                                                                                          
04/02/01                (H)        <Bill Postponed to 4/4>                                                                      
04/04/01     0840       (H)        EDU RPT 5DP                                                                                  
04/04/01     0841       (H)        DP: PORTER, STEVENS, JOULE,                                                                  
                                   GUESS,                                                                                       
04/04/01     0841       (H)        BUNDE                                                                                        
04/04/01     0841       (H)        FN2: (EED)                                                                                   
04/04/01                (H)        EDU AT 8:00 AM HOUSE FINANCE                                                                 
                                   519                                                                                          
                                                                                                                                
BILL: HB 203                                                                                                                  
SHORT TITLE:APPROP: STUDY OF SCHOOL COST FACTORS                                                                                
SPONSOR(S): REPRESENTATIVE(S)WILSON                                                                                             
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/22/01     0688       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/22/01     0688       (H)        EDU, FIN                                                                                     
03/28/01     0762       (H)        COSPONSOR(S): LANCASTER                                                                      
03/30/01     0794       (H)        COSPONSOR(S): CISSNA, STEVENS                                                                
04/04/01                (H)        EDU AT 8:00 AM HOUSE FINANCE                                                                 
                                   519                                                                                          
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DIANE BARRANS, Executive Director                                                                                               
Postsecondary Education Commission                                                                                              
Department of Education and Early Development                                                                                   
3030 Vintage Boulevard                                                                                                          
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Testified on HB 204.                                                                                       
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-23, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CHAIR CON BUNDE  called the House Special  Committee on Education                                                               
meeting  to order  at  9:38  a.m.   [The  minutes  for the  joint                                                               
meeting  of the  House  Special Committee  on  Education and  the                                                               
House Health,  Education and  Social Services  Standing Committee                                                               
on SB 133 are found in the 8:08 a.m. minutes for the same date.]                                                                
                                                                                                                                
HB 204-STUDENT LOANS/COMN. ON POSTSECONDARY ED.                                                                               
                                                                                                                                
CHAIR BUNDE  announced the next  order of business as  HOUSE BILL                                                               
NO.  204,   "An  Act  relating   to  the  Alaska   Commission  on                                                               
Postsecondary Education and the  Alaska Student Loan Corporation;                                                               
relating to student  financial aid programs and  the financing of                                                               
those programs;  establishing the  Alaska Advantage  Loan Program                                                               
and the  Alaska Supplemental  Education Loan  Program; increasing                                                               
the   bonding   authorization   of  the   Alaska   Student   Loan                                                               
Corporation; providing  for liens resulting from  a default under                                                               
AS 14.43  or AS  14.44; relating  to the  duties of  the recorder                                                               
regarding  those liens;  relating to  defaults under  the Western                                                               
Regional Higher  Education Compact;  relating to  the prohibition                                                               
on discrimination regarding programs  under AS 14.43; relating to                                                               
fees  for  the  review  of  certain  postsecondary  institutions;                                                               
making  conforming amendments;  and  providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
Number 0042                                                                                                                     
                                                                                                                                
DIANE  BARRANS,   Executive  Director,   Postsecondary  Education                                                               
Commission, Department  of Education and Early  Development, came                                                               
forth  and  stated  that  HB   204  represents  an  exciting  new                                                               
initiative from  the [Postsecondary Education] Commission.   More                                                               
than a  year ago  the commission's financial  status and  that of                                                               
its  financial  partner,  the  Alaska  Student  Loan  Corporation                                                               
(ASLC), had  been stabilized.   She stated that  the commission's                                                               
managers had been  challenged by the corporation's  board to find                                                               
ways to  expand the services  and increase the benefits  of those                                                               
services  to Alaskans.   In  response, she  said, the  commission                                                               
focused  on a  strategic  recommendation that  had  been made  by                                                               
[ASLC's]  external  audit  firm  to consider  an  expansion  into                                                               
federal student  aid administration.   Over  the past  ten months                                                               
the  [Postsecondary Education  Commission] has  analyzed customer                                                               
needs and  expectations and has had  extensive communication with                                                               
administrators.                                                                                                                 
                                                                                                                                
MS. BARRANS stated:                                                                                                             
                                                                                                                                
     House Bill 204  has been introduced by  the governor to                                                                    
     establish the  Alaska Advantage  Program.   Simply put,                                                                    
     successful  implementation  of   the  Alaska  Advantage                                                                    
     Program will  return meaningful benefits  and dividends                                                                    
     to  each  of  our  shared stakeholder  groups.    Those                                                                    
     stakeholders include the  students whose future success                                                                    
     rests  on educational  preparation; parents  seeking an                                                                    
     economically  viable means  to  assist their  children;                                                                    
     higher  education institutions  in Alaska  that [serve[                                                                    
     as  a training  resource for  citizens and  industry in                                                                    
     the  state; financial  aid  administrators tasked  with                                                                    
     facilitating   educational   financing;   [legislators]                                                                    
     looking  out  for  their constituents'  best  interest;                                                                    
     Alaska  employers seeking  a resident  source of  human                                                                    
     capital; and the commission  and corporation seeking to                                                                    
     provide  value-added  benefits  to  borrowers  and  the                                                                    
     statewide community.                                                                                                       
                                                                                                                                
Number 0227                                                                                                                     
                                                                                                                                
MS. BARRANS explained to the committee:                                                                                         
                                                                                                                                
     House Bill 204 creates  the statutory framework for the                                                                    
     corporation   and  the   commission   to  develop   and                                                                    
     implement the premiere educational  loan program in the                                                                    
     United  States, administered  in  Alaska for  Alaskans.                                                                    
     Statutory  changes  made by  the  bill  will result  in                                                                    
     lower-cost  educational  loans   in  Alaska  and  other                                                                    
     improvements   to   borrowers'   loan   terms.      The                                                                    
     commission's success  in marketing such a  program will                                                                    
     be one means  of helping Alaskans fight  the high costs                                                                    
     of  postsecondary education  and hopefully  ensure that                                                                    
     every  state   citizen  perceives  that   education  is                                                                    
     affordable and therefore accessible to them.                                                                               
                                                                                                                                
     The  bill's provisions  allow  us  to facilitate  these                                                                    
     changes without putting at  risk the financial strength                                                                    
     of  the  corporation.   The  Alaska  Advantage  Program                                                                    
     provides for the integration of  benefits from both the                                                                    
     federal  and state  aid  initiatives, specifically  for                                                                    
     borrowers.     The   Alaska   Advantage  Program   will                                                                    
     guarantee the lowest  possible borrowing rates; improve                                                                    
     aid  packaging and  delivering by  creating a  one-stop                                                                    
     aid   shop  ensuring   simultaneous   grant  and   loan                                                                    
     application;  improve and  expand borrowers'  deferment                                                                    
     and repayment  options; and provide an  opportunity for                                                                    
     debt consolidation with an Alaska lender.                                                                                  
                                                                                                                                
     For  the  institutions  that partner  with  us  through                                                                    
     ASLNet  (Alaska  Student  Loan Net),  the  commission's                                                                    
     web-enabled  information portal,  the Alaska  Advantage                                                                    
     Program will  provide a recruitment and  retention tool                                                                    
     for  Alaskan institutions  through offering  beneficial                                                                    
     interest  terms.   It will  streamline and  improve the                                                                    
     financial   aid   delivery    process,   easing   their                                                                    
     administrative  burden; it  will eliminate  unnecessary                                                                    
     program  differences that  simplify the  administration                                                                    
     for  staff and  ease  loan comparison  by students  and                                                                    
     their   families;  it   will   also  provide   specific                                                                    
     financial  rewards   for  borrowers  remaining   in  or                                                                    
     returning  to  Alaska;  and  it  will  enhance  default                                                                    
     management support.                                                                                                        
                                                                                                                                
Number 0375                                                                                                                     
                                                                                                                                
MS. BARRANS continued, stating:                                                                                                 
                                                                                                                                
     For  the   corporation  itself,  it  will   reduce  the                                                                    
     financial risks through the  federal guaranty that will                                                                    
     underwrite loans made through  that program.  I believe                                                                    
     it will  allow us to  improve our bond rating  from the                                                                    
     current  double-A to  a triple-A  status, resulting  in                                                                    
     further   bond  cost   reductions,   and  improve   the                                                                    
     corporation's  cash flow  as we  enjoy  the benefit  of                                                                    
     federal  interest  subsidies  and a  special  allowance                                                                    
     income.  In addition, ...  it will eliminate 98 percent                                                                    
     of  the  loss-risk  on   those  federal  student  loans                                                                    
     because  the  federal   government  will  offset  those                                                                    
     losses in the event of death, disability, or default.                                                                      
                                                                                                                                
     In time,  we expect  the program to  allow us  to offer                                                                    
     additional financial  benefits in  the form  of upfront                                                                    
     interest   rate   reductions   for   Alaska   Advantage                                                                    
     borrowers,   timely  repayment   rewards,  "bank   pay"                                                                    
     rewards,  other  interest  [offsets] that  can  act  as                                                                    
     incentives, and rewards for  borrowers who display good                                                                    
     repayment behavior.                                                                                                        
                                                                                                                                
     House  Bill  204  also ensures  that  the  supplemental                                                                    
     state  loans remain  available to  bridge excess  costs                                                                    
     not  met  through federal  aid.    This bill  is  about                                                                    
     ensuring    borrower    savings   and    administrative                                                                    
     efficiencies  and has  been drafted  to ensure  that no                                                                    
     student  is  left  behind  or left  out.    The  Alaska                                                                    
     Student Loan  will remain  available as  a supplemental                                                                    
     loan   for   use    at   commission-authorized   Alaska                                                                    
     vocational  schools that  do not  currently participate                                                                    
     in Title IV programs.                                                                                                      
                                                                                                                                
Number 0518                                                                                                                     
                                                                                                                                
MS. BARRANS concluded by stating:                                                                                               
                                                                                                                                
     The result  achieved by the commission  and corporation                                                                    
     in  recent years  have met  significant improvement  in                                                                    
     both program  financing and  servicing.   These results                                                                    
     could    not   have    been   achieved    without   the                                                                    
     administration's  initiatives  to  date and  the  broad                                                                    
     support of  the legislature for those  initiatives, the                                                                    
     partnering of  our participating institutions,  and the                                                                    
     support  of Alaska's  students  for those  initiatives.                                                                    
     At this  time we  collectively have  a choice  to make:                                                                    
     either we  maintain the  status quo  or we  can convert                                                                    
     these  successes into  positive momentum  and take  our                                                                    
     service to  the next level.   I believe  that continued                                                                    
     and  substantial improvement  is only  possible through                                                                    
     this   proposed   integration   of   programmatic   and                                                                    
     financial  strengths  of   federal  and  state  student                                                                    
     services.                                                                                                                  
                                                                                                                                
     Our  timeline  is  an  aggressive one  as  we  seek  to                                                                    
     successfully  implement the  program for  the 2002-2003                                                                    
     loan  year.   That means  that in  just nine  months we                                                                    
     must be ready to  receive and process aid applications.                                                                    
     Expedited  consideration  of  passage of  HB  204  will                                                                    
     permit  the   commission  to  immediately   direct  100                                                                    
     percent of management and  staff resources to planning,                                                                    
     marketing,  and   implementation  activities.     I  am                                                                    
     convinced that success is feasible  if we begin work in                                                                    
     earnest by May  of this year; however,  we cannot fully                                                                    
     implement   that  process   until  we   understand  the                                                                    
     statutory framework that we'll  be working in.  Failure                                                                    
     to   pass  this   bill  this   year  will   delay  full                                                                    
     implementation.                                                                                                            
                                                                                                                                
Number 0655                                                                                                                     
                                                                                                                                
CHAIR  BUNDE asked  if it  has been  the Postsecondary  Education                                                               
Commission's policy  to encourage students to  take federal loans                                                               
first  and then  seek  the  Alaska Student  Loan  as a  secondary                                                               
option, because it would be to their financial advantage.                                                                       
                                                                                                                                
MS. BARRANS responded that there  hasn't been a formal policy but                                                               
the commission  has advised borrowers  to be  informed borrowers.                                                               
She  remarked  that  to  the  extent that  there  may  be  lower-                                                               
interest-rate  loans  available   through  the  federal  program,                                                               
[borrowers] should  seek those  first.   She explained  that this                                                               
bill would offer a federal loan  to Alaskans at a lower rate than                                                               
the  federal program  would stipulate,  for a  year.   The Alaska                                                               
Student  Loan, in  recent years,  has  been strongly  competitive                                                               
with the federal program because of the ability to reduce rates.                                                                
                                                                                                                                
CHAIR BUNDE asked if anyone is opposed to this legislation.                                                                     
                                                                                                                                
MS. BARRANS replied that there is no opposition.                                                                                
                                                                                                                                
Number 0798                                                                                                                     
                                                                                                                                
REPRESENTATIVE STEVENS  asked if the [Alaska  Teacher Scholarship                                                               
Loan] would be rolled into this as well.                                                                                        
                                                                                                                                
MS.   BARRANS  answered   that   the  [Postsecondary   Education]                                                               
Commission] does  not intend to  require that the  Alaska Teacher                                                               
Scholarship  Loan  recipients  receive  the  federal  loan  first                                                               
because they would  not have the same  forgiveness eligibility on                                                               
the federal loan as they would with the state.                                                                                  
                                                                                                                                
REPRESENTATIVE  PORTER  made  a  motion   to  move  HB  204  from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
notes.   There being no  objection, HB  204 moved from  the House                                                               
Special Committee on Education.                                                                                                 
                                                                                                                                
HB 203-APPROP: STUDY OF SCHOOL COST FACTORS                                                                                   
                                                                                                                                
CHAIR BUNDE announced  that the final order of  business would be                                                               
HOUSE  BILL NO.  203,  "An  Act making  an  appropriation to  the                                                               
Legislative Council for a study  of school district cost factors;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
Number 0942                                                                                                                     
                                                                                                                                
REPRESENTATIVE WILSON,  as sponsor  of HB  203, stated  that this                                                               
bill is  an Act appropriating  money for a school  district cost-                                                               
factor study.   Those  multipliers have  not changed  since 1986,                                                               
and  the Alaska  constitution  has an  obligation  to fully  fund                                                               
education for all students.   Inherent in this mission, she said,                                                               
is to account for the  diverse geographical, ethnic, and economic                                                               
changes  in Alaska.   She  explained  that this  would study  the                                                               
school district cost  differential to see what it costs  to run a                                                               
school in each district.                                                                                                        
                                                                                                                                
CHAIR  BUNDY  asked  if  this bill  would  task  the  Legislative                                                               
council to lead a contract to perform this study.                                                                               
                                                                                                                                
REPRESENTATIVE WILSON stated that he was correct.                                                                               
                                                                                                                                
REPRESENTATIVE GUESS stated  that in her mind  the methodology of                                                               
the study  that was done  during SB 36  was extremely poor.   She                                                               
asked if  [HB 203]  addresses ensuring  that this  doesn't happen                                                               
again  or that  every two  years [the  state] would  have to  pay                                                               
$350,000  for a  new  formula  instead of  creating  one that  is                                                               
updateable.                                                                                                                     
                                                                                                                                
REPRESENTATIVE WILSON answered that  she thinks [the study needs]                                                               
to be done  correctly in order to  see what it costs  for fuel in                                                               
each school district; what the  property insurance is; or what it                                                               
costs to  get a fire inspector  to the school and  check the fire                                                               
extinguishers.   For example,  with a small  school like  that in                                                               
Tok,  someone might  have to  fly  in or  take all  day to  drive                                                               
there.   All  of  these factors,  she said,  need  to be  thought                                                               
about, checked,  and done carefully.   She added that she  has an                                                               
amendment  that would  add "housing,"  after "food,"  on page  1,                                                               
line 10.                                                                                                                        
                                                                                                                                
Number 1137                                                                                                                     
                                                                                                                                
REPRESENTATIVE PORTER made  a motion to adopt  Amendment 1, which                                                               
would insert "housing," after "food," on page 1, line 10.                                                                       
                                                                                                                                
REPRESENTATIVE  GUESS objected  for  the  purpose of  discussion.                                                               
She  said  she  has  talked   to  some  of  the  top  educational                                                               
economists, and housing is very  difficult to do from an economic                                                               
standpoint in  small areas, which  is why there aren't  any small                                                               
area CPIs (consumer price indexes).   She added that although she                                                               
thinks it  is a  great intent,  it might not  be possible  to do.                                                               
She withdrew her objection.                                                                                                     
                                                                                                                                
REPRESENTATIVE  STEVENS asked  Representative  Wilson  if she  is                                                               
talking  about  the  housing  costs  for  educators  or  for  the                                                               
districts in providing for housing for their employees.                                                                         
                                                                                                                                
REPRESENTATIVE  WILSON  stated  that  she is  talking  about  the                                                               
housing cost  to the districts.   In  some areas, she  said, [the                                                               
districts] have to  provide housing for teachers in  order to get                                                               
them to come [to those areas].                                                                                                  
                                                                                                                                
REPRESENTATIVE PORTER  stated that he agrees  with Representative                                                               
Guess  that  [the legislature]  should  try  to do  something  to                                                               
inspire  the appropriate  type of  examination of  the cost.   He                                                               
remarked that last time [the  money] being spent was examined, as                                                               
opposed to what  the costs were.  He added  that the direction to                                                               
the  Legislative Council  is to  get  somebody to  study what  it                                                               
costs, not what is being spent.                                                                                                 
                                                                                                                                
Number 1243                                                                                                                     
                                                                                                                                
CHAIR  BUNDE announced  that there  being  no further  objection,                                                               
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
REPRESENTATIVE STEVENS remarked that he  thinks it is a good idea                                                               
to do  a study like  this.  He stated  that he is  concerned that                                                               
this is  seen as being  in place of  an increase to  a foundation                                                               
formula.                                                                                                                        
                                                                                                                                
REPRESENTATIVE WILSON  responded that  there have  been a  lot of                                                               
changes  in the  economic climate  in many  areas since  1986 and                                                               
that this  is just to make  sure that everyone is  "playing on an                                                               
even playing board."  She added  that this has nothing to do with                                                               
where the  funding comes in  the formula.   She noted  that there                                                               
has been  a lot of comment  and work put into  looking at funding                                                               
for  schools.     When  the  Department  of Education  and  Early                                                               
Development [EED] had the last  study done by the McDowell Group,                                                               
it  recommended that  another study  be done  by reexamining  the                                                               
methodology.                                                                                                                    
                                                                                                                                
CHAIR  BUNDE  noted that  this  is  a  tool that  the  foundation                                                               
formula  thought to  use and  in no  way mitigates  the need  for                                                               
increasing the foundation formula.                                                                                              
                                                                                                                                
Number 1364                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUESS  clarified that  this legislative  body, not                                                               
the [EED],  did the McDowell  study.   She stated that  there are                                                               
four  other  states that  have  cost  factors;  all are  done  in                                                               
different ways.  She remarked  that every researcher she talks to                                                               
says  there is  nothing in  educational research  right now  that                                                               
says it  should be done a  certain way; every system  has a bias.                                                               
From her research,  she said, she believes this is  the worst way                                                               
to do  it.  She  added that she would  like every report  that is                                                               
created to discuss  the bias because there is not  going to be an                                                               
unbiased study.   Finally, she said she would like  for any study                                                               
or system that comes back to be updateable.                                                                                     
                                                                                                                                
Number 1460                                                                                                                     
                                                                                                                                
REPRESENTATIVE PORTER made  a motion to move HB  203, as amended,                                                               
from  committee  with  individual  recommendations  and  attached                                                               
fiscal  notes.   There being  no objection,  CSHB 203(HES)  moved                                                               
from the House Special Committee on Education.                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special  Committee on  Education meeting  was adjourned  at 10:00                                                               
a.m.   [The minutes for  the joint  meeting of the  House Special                                                               
Committee  on  Education  and the  House  Health,  Education  and                                                               
Social Services  Standing Committee  on SB 133  are found  in the                                                               
8:08 a.m. minutes for the same date.]                                                                                           
                                                                                                                                
                                                                                                                                

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