Legislature(1993 - 1994)

04/08/1994 08:38 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                     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                 
                                                                               
                                1                                              
                                                                               
                                                                               
            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                 
                                                                               
                                2                                              
                                                                               
                                                                               
  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.                               
                                                                               
                                3                                              
                                                                               
                                                                               
  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.                 
                                                                               
                                4                                              
                                                                               
                                                                               
  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.                          
                                                                               
                                                                               
                                5                                              
                                                                               
                                                                               
  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.                          
                                                                               
                                6                                              
                                                                               
                                                                               
  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                 
                                                                               
                                7                                              
                                                                               
                                                                               
  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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