Legislature(1993 - 1994)
04/08/1994 08:38 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 8, 1994
8:38 a.m.
TAPE HFC 94-113, Side 1, #000 - end.
TAPE HFC 94-113, Side 2, #000 - end.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee to order
at 8:38 a.m.
PRESENT
Co-Chair Larson Representative Hoffman
Co-Chair MacLean Representative Martin
Vice-Chair Hanley
Representative Brown Representative Parnell
Representative Foster Representative Therriault
Representative Grussendorf
ALSO PRESENT
Representative Cliff Davidson; Dave Kamrath, Staff, House
Community and Regional Affairs Committee; Diane, Barrans,
Postsecondary Education; Eric Forrer, Council on
Postsecondary Education; Nancy Bear-Usera, Commissioner,
Department of Administration;
SUMMARY INFORMATION
HB 301 "An Act prohibiting the sale of certain studded
tires or the sale of certain studs to be installed
in tires; and providing for an effective date."
CSSSHB 301 (L&C) was reported out of Committee
with a "do pass" recommendation and with a fiscal
impact note by the Department of Transportation
and Public Facilities.
HB 427 "An Act relating to compensation for members of
the Local Boundary Commission."
HB 427 was HELD in Committee for further
discussion.
HB 506 "An Act relating to student loans; to sanctions
for defaulting on a student loan, including denial
of a state occupational license or disbursement of
state money; and providing for an effective date."
HB 506 was HELD in Committee for further
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discussion.
HB 301 "An Act prohibiting the sale of certain studded
tires or the sale of certain studs to be installed
in tires; and providing for an effective date."
Co-Chair Larson noted his intention to waive HB 406, HB 525,
HB 527 and HJR 47 from Committee.
Representative Brown asserted that the zero fiscal note
accompanying HB 527 is inaccurate. She expressed support
for HB 527, but estimated that there would be some fiscal
impact as a result of the legislation.
HOUSE BILL NO. 301
"An Act prohibiting the sale of certain studded tires
or the sale of certain studs to be installed in tires;
and providing for an effective date."
Representative Hanley observed that studies have
demonstrated that studded tires have significant wear on
roads. He estimated that reducing the weight of studs in
studded tires will reduce road wear by 50 percent. He
maintained that lighter weight studs perform equal to
standard studs. Lighter studs are available for purchase.
Lighter studs cost between $1 to $2 dollars, per tire, more
than standard studs. He noted that HB 301 prohibits sale of
the standard stud after FY 97.
In response to a question by Representative Hoffman,
Representative Hanley reiterated that lighter studs function
equal to standard heavier studs.
In response to a question by Representative Brown,
Representative Hanley clarified that use of standard tires
will not be prohibited. Owners will be able to use their
old tires until they wear out.
Representative Brown observed that the fiscal note by the
Department of Transportation and Public Facilities reflects
an immediate savings. She pointed out that the law will not
go into effect until 1997. Co-Chair Larson agreed that the
fiscal note should be revised.
Representative Hanley noted that the Department of
Transportation and Public Facilities would like to see studs
that are of lighter steel weight than the aggregate in
roads. He concluded that lighter studs are unavailable and
would wear out too quickly.
Representative Therriault noted that only a few countries
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manufacture studs. He estimated that as the demand for
lighter studs grow, they may be cheaper than standard studs.
Representative Hanley observed that factories in Germany
seem to be switching to the lighter weight studs.
Representative Grussendorf MOVED to report CSSSHB 301 (L&C)
out of Committee with individual recommendations and with a
revised fiscal note by the Department of Transportation and
Public Facilities.
CSSSHB 301 (L&C) was reported out of Committee with a "do
pass" recommendation and with a fiscal impact note by the
Department of Transportation and Public Facilities.
HOUSE BILL NO. 427
"An Act relating to compensation for members of the
Local Boundary Commission."
DAVE KAMRATH, STAFF, HOUSE COMMUNITY AND REGIONAL AFFAIRS
COMMITTEE testified in support of HB 427. He reviewed the
Commission's responsibilities. He observed that the
Commission is one of five boards and commissions with
origins in the Alaska Constitution. He discussed the makeup
of the Commission. He noted that the legislation would
provide compensation to Local Boundary Commissioner members
at a rate of $100 dollars for each day or portion of the day
that a member of the commission is engaged in official
business or travel. It allows the Commission to adopt
regulations to provide for compensation of partial days in
which a member is engaged in travel. He discussed the
accompanying fiscal note. He stressed that the board meets
18 times each year. Half of the meetings are
teleconferenced.
Co-Chair Larson spoke in support of funding for Local
Boundary Commission members.
Representative Foster noted that the commission member from
Nome has resigned because he could not afford to remain on
the Commission.
Representative Hanley asserted that all boards and
commissions should be revised to assure that they are
compensated equitably.
Representative Brown asked the rate of compensation for
other boards. Representative Therriault pointed out that
the Reapportionment Board receives $150 dollars a day
compensation. She emphasized that membership on the Board
could become a full-time job. She recommended that the
Committee review compensation of other boards.
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HB 427 was HELD in Committee for further discussion.
HOUSE BILL NO. 506
"An Act relating to student loans; to sanctions for
defaulting on a student loan, including denial of a
state occupational license or disbursement of state
money; and providing for an effective date."
REPRESENTATIVE CON BUNDE spoke in support of HB 506. He
emphasized that the legislation will make the student loan
program more viable from a business stand point. He observe
that professional and occupational licenses would not be
renewed for people that are in default on their student
loans. The interest rate would be variable. If an
individual's loan has been written off due to medical or
other reasons, they would be ineligible for a period of five
years. He maintained that Family education loans would be
more readily available. He observed that the legislation
contains a provision to hold state warrants to individuals
in default of their student loan and doing business with the
state, until their loan is resolved.
Representative Bunde provided members with a proposed
committee substitute, work draft 8-LS1752\D, dated 3/25/94
(copy on file). He explained that the proposed committee
substitute addresses the WAMI program medical school
arrangement with the state of Washington. He observed that
the proposed committee substitute would change the program
from a direct grant to a loan with a forgiveness of one
fifth of the loan for each year the individual practices
medicine in the state of Alaska.
DIANE BARRANS, DIRECTOR, STUDENT FINANCIAL AID PROGRAM,
DEPARTMENT OF EDUCATION stressed that the legislation will
send a message to borrowers and bondholders that the
Commission considers the student loan debt to be a serious
obligation. She asserted that the Alaska Student Loan
Program should be made as consumer friendly as possible.
Ms. Barrans did not think the Commission would oppose the
proposed committee substitute.
ERIC FORRER, MEMBER, POSTSECONDARY EDUCATION COMMISSION
spoke in support of the legislation. He noted that the
state of Alaska has invested approximately $500.0 million
dollars in the Student Loan Program. He asserted that the
Program must be self perpetuating. He spoke in support of
rigorous management.
Representative Grussendorf discussed loan repayment. Mr.
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Forrer observed that repayments go into the General Fund.
The Commission needs legislative authority to spend
receipts.
Representative Martin expressed concern that individuals
would be deprived of the ability to repay their loan if
their license renewal is denied.
Mr. Forrer noted that individuals in default can negotiate
with the Commission to be in good standing. The loan does
not have to be repaid in it's entirety for the individual to
be in good standing. He reiterated that the fund must be
managed rigorously to ensure that it continues.
Representative Parnell expressed concern with language
specifying default. He asked how the Commission would
administer defaults.
Representative Brown asked the long term fiscal soundness of
the Fund. She noted that in FY 93, $7.6 million dollars
were forgiven and $8.4 million dollars were lost through
written off loans. She asked if loan repayments are
returning to the program.
Ms. Barrans noted that repayments are returned to the
Revolving Loan Fund. Legislative authority is needed for
expenditure of operational costs. New loans are made from
repayments and sales of bond.
Representative Brown expressed concern with section 2 which
changes the way interest is calculated.
(Tape Change, HFC 94-113, Side 2)
In response to a questions by Representative Brown, Ms.
Barrans stressed that oversight will come from the Board and
the Commission and the Legislative Budget and Audit
Committee to assure that the administrative cost is
efficient. The amount forgiven each year is the amount of
statutory obligation on loans made prior to 1987. Write
offs are the sum total of death and disability, bankruptcy
and major medical. She observed that loan forgiveness has
peaked. Write offs will remain constant. She explained
that a 1 percent guarantee fee will be added to students'
loans to cover write off costs. The fee is a one time fee,
added at the time of origination.
Representative Therriault noted that response time from the
Commission to student's inquires can be lengthy. A student
may be in default before they can resolve disputes with the
Commission in regards to payments or other matters.
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Co-Chair MacLean asked if section 10 which allows the state
to withhold payments on warrants would withstand litigation.
NANCY BEAR-USERA, COMMISSIONER, DEPARTMENT OF ADMINISTRATION
spoke in support of aggressive management. She noted that
repayments on the loan go to pay off the bonds issued for
new loans. She expressed concern with the relative autonomy
of the Commission and Corporation Board.
Commissioner Usera noted that the Department is concerned
with the provision to withhold payments on warrants. She
suggested it would be difficult to administer. She
anticipated that the state would be assessed penalties on
payments withheld. She noted that the authority to attach
payments already exists. She observed that the cost of one
lawsuit regarding withheld vender payments could cancel out
receipts from collected payments.
Representative Brown questioned if the Department of
Administration would be authorized under federal law to use
social security numbers in order to track licensees in
default.
In response to a question by Representative Martin, Ms.
Barrans stated that the Commission will give borrowers
plenty of warning that the provisions to deny renewals may
affect them.
In response to a question by Representative Parnell, Ms.
Barrans explained that the individual's history with the
loan program would determine when their license renewal
would be approved.
In response to a question by Representative Martin, Ms.
Barrans noted that $8.0 million dollars were garnished
through permanent fund dividend checks. She stressed that
there is a approximately $500.0 million dollars in student
debt owed the state of Alaska. She emphasized that the
portion written off is a small portion of the debt.
Commissioner Usera noted that the Department of
Administration's fiscal note for $57.0 thousand dollars
would be zero if sections requiring the holding of vender
warrants are removed.
Ms. Barrans discussed the revised fiscal note.
Representative Bunde requested that the proposed committee
substitute be held. He explained that he would like to have
the WAMI program addressed in separate legislation.
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Representative Brown provided members with AMENDMENT 1 (copy
on file). She explained that the amendment would delete the
floating interest rate. She suggested that the provision
would allow an open ended charging of administrative
expenses of the Commission.
Representative Hanley echoed Representative Brown's concern.
He suggested that a percentage of administrative costs be
included to equal the amount paid on bonds issued plus a
maximum of 2 percent.
Commissioner Usera noted that financial institutions
commonly charge a 2 percent spread on the cost of money
versus the return on money to pay for administrative
overhead.
Amendment 1 was held for revision to include suggestions
that administrative costs be tied to a percentage of the
amount paid on bonds.
Representative Brown provided members with AMENDMENT 2 (copy
on file). She explained that the amendment would require
that the borrower receive adequate notice that the
Commission is proceeding to notify the Department of
Commerce and Economic Development that the loan is in
default. The borrower would have 60 days to take action to
bring the loan current or make other arrangements.
Representative Parnell noted that another term is being
added to the contract between the Postsecondary Education
Commission and the student. Ms. Barrans stated that the
Commission could comply with Amendment 2 through an
attachment to the 120 day letter. She stressed that the
Commission intends to notify the borrower of the statute
changes in multiple ways.
Representative Brown MOVED to ADOPT AMENDMENT 2. There
being NO OBJECTION, it was so ordered.
Representative Brown provided members with AMENDMENT 3 (copy
on file). She noted that the amendment would add to page 2,
line 17, "if the borrower has an occupational license issued
under AS 08. the license may not be renewed under AS
08.02.025." Representative Brown MOVED to ADOPT AMENDMENT
3. There being NO OBJECTION, it was so ordered.
Representative Brown provided members with AMENDMENT 4 (copy
on file). She explained that Amendment 4 would delete
sections requiring the Department of Administration to
withhold vender payments (sections 3 (c) and 9 and 10).
Representative Brown MOVED to ADOPT AMENDMENT 4. There
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being NO OBJECTION, it was so ordered.
Representative Martin MOVED to delete section 1. He
asserted that the provision to deny renewal of licensing
discriminates against individuals with state licenses. He
pointed out that other individuals could continue to be
employed even if they are in default of their student loans.
Representative Hanley emphasized that the Department of
Commerce and Economic Development will give individuals in
default a grace period to bring their loan into good faith.
A roll call vote was taken on the motion to delete section
1.
IN FAVOR: Martin, Foster
OPPOSED: Brown, Grussendorf, Hoffman, Parnell, Therriault,
Larson, MacLean
Representative Navarre was not present for the vote.
The MOTION FAILED (2-8).
Representative Davidson referred to the Family Education
Loan Program. He questioned if borrowers, who are residents
of the state, should be able to apply for students, who are
not residents of the state.
Ms. Barrans noted that the resident borrower would be
allowed to apply for their children residing outside of the
state. Representative Davidson clarified his intention as
the sponsor of the Family Education Loan Program. He
stated that his intention was that a family would co-sign a
loan. Co-Chair MacLean noted that "Alaskan resident" could
be added to "family member" on line 30, page 5. Co-Chair
Larson spoke against the change. He stressed that the
resident is obtaining benefits from the loan.
HB 506 was HELD in Committee for further discussion.
ADJOURNMENT
The meeting adjourned at 10:10 a.m.
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