Legislature(1997 - 1998)
02/20/1997 03:04 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE HEALTH, EDUCATION AND SOCIAL
SERVICES STANDING COMMITTEE
February 20, 1997
3:04 p.m.
MEMBERS PRESENT
Representative Con Bunde, Chairman
Representative Joe Green, Vice Chairman
Representative Al Vezey
Representative Brian Porter
Representative Fred Dyson
Representative J. Allen Kemplen
Representative Tom Brice
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
*HOUSE BILL NO. 121
"An Act relating to A.W. Brindle memorial scholarship loans; and
providing for an effective date."
- HEARD AND HELD
HOUSE JOINT RESOLUTION NO. 18
Proposing an amendment to the Constitution of the State of Alaska
relating to changing the rate of a tax or license that supports a
dedication of its proceeds.
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 121
SHORT TITLE: WINN BRINDLE SCHOLARSHIP LOAN
SPONSOR(S): REPRESENTATIVE(S) WILLIAMS
JRN-DATE JRN-DATE ACTION
02/10/97 292 (H) READ THE FIRST TIME - REFERRAL(S)
02/10/97 292 (H) HES
BILL: HJR 18
SHORT TITLE: DEDICATED FUNDS: RATE MAY BE CHANGED
SPONSOR(S): REPRESENTATIVE(S) IVAN
JRN-DATE JRN-DATE ACTION
01/29/97 164 (H) READ THE FIRST TIME - REFERRAL(S)
01/29/97 164 (H) STA, HES, JUD, FINANCE
02/04/97 (H) STA AT 8:00 AM CAPITOL 102
02/04/97 (H) MINUTE(STA)
02/06/97 (H) STA AT 8:00 AM CAPITOL 102
02/06/97 (H) MINUTE(STA)
02/11/97 (H) STA AT 8:00 AM CAPITOL 102
02/11/97 (H) MINUTE(STA)
02/12/97 305 (H) STA RPT CS(STA) NT 4DP 1DNP 1NR
02/12/97 305 (H) DP: JAMES, HODGINS, DYSON, IVAN
02/12/97 305 (H) DNP: VEZEY
02/12/97 305 (H) NR: BERKOWITZ
02/12/97 305 (H) FISCAL NOTE (GOV)
02/12/97 305 (H) REFERRED TO HES
WITNESS REGISTER
REPRESENTATIVE BILL WILLIAMS
Alaska State Legislature
Capitol Building, Room 524
Juneau, Alaska 99801
Telephone: (907) 465-3424
POSITION STATEMENT: Sponsor of HB 121
MIKE MAHER, Director of Student Financial Aid
Alaska Commission on Post Secondary Education
1893 Fritz Cove Road
Juneau, Alaska 99801
Telephone: (907) 789-0224
POSITION STATEMENT: Testified in support of HB 121
REPRESENTATIVE IVAN IVAN
Alaska State Legislature
Capitol Building, Room 418
Juneau, Alaska 99801
Telephone: (907) 465-4942
POSITION STATEMENT: Sponsor of HJR 18
TOM WRIGHT, Legislative Assistant
to Representative Ivan
Alaska State Legislature
Capitol Building, Room 418
Juneau, Alaska 99801
Telephone: (907) 465-4942
POSITION STATEMENT: Testified in support of HB 121
ACTION NARRATIVE
TAPE 97-12, SIDE A
Number 0000
CHAIRMAN CON BUNDE called the House Health, Education and Social
Services Standing Committee meeting to order at 3:04 p.m. Members
present at the call to order were Representatives Bunde, Porter,
Kemplen and Brice. Representative Dyson arrived at 3:05 p.m. and
Representatives Green and Vezey arrived at 3:07 p.m.
HB 121 - WINN BRINDLE SCHOLARSHIP LOAN
Number 0026
CHAIRMAN BUNDE announced the first item on the agenda, HB 121, "An
Act relating to A.W. Brindle memorial scholarship loans; and
providing for an effective date."
REPRESENTATIVE BILL WILLIAMS, Sponsor of HB 121, read from his
sponsor statement. He said HB 121 was introduced to attract more
Alaskan students to a career in the Alaska seafood industry. As we
all know our seafood industry is facing many challenges and will
face many more challenges in the future. To ensure that Alaska
will be able to overcome these challenges we need highly trained
fisheries experts. The A.W. (Winn) Brindle memorial scholarship
program offers financial aid to students who are pursuing higher
education in fisheries related programs.
REPRESENTATIVE WILLIAMS said, currently, the Winn Brindle memorial
scholarship program has over $1.5 million available for loans. At
latest count, approximately $316,000 has been utilized by the
students. He said 81 percent of these loans are to students
enrolled in colleges located within the state of Alaska. The loan
program offers forgiveness of loan principle to those students who
return to Alaska and put their degrees to work. Today, Winn
Brindle loan recipients receive forgiveness of 10 percent of the
loan principal up to a maximum of 50 percent of the loan principal.
REPRESENTATIVE WILLIAMS said under HB 121, a recipient would
receive forgiveness of one-fifth of the loan principle for each
one-year period during the first five years following graduation
with a maximum of 100 percent. The scholarship recipient must
still be employed full time in Alaska in a fisheries related field
as defined in Alaska statute. The five other memorial scholarship
loans that the state has established have a one-fifth year
forgiveness clause. It is his belief that by using the payback
provisions of the program we can attract more students to study
fisheries related programs. This in turn will give the state a
valuable resource of trained professionals to address the future
challenges the fishing industry will undoubtedly face.
Number 0284
MIKE MAHER, Director of Student Financial Aid, Alaska Commission on
Postsecondary Education, was next to testify. He said the Winn
Brindle Memorial scholarship program was established in 1986,
funded by private donations and contributions from fisheries
businesses. In return for these contributions these businesses get
tax exemption. Scholarships are provided for full time
undergraduates or graduate studies in fisheries, fisheries science,
fisheries management, seafood processing, seafood technology and
other fisheries related programs. The program's present structure
provides a fairly large balance in the fund which he thought was
closer to $2 million that $1.5 million. He said presently a 5
percent interest begins to accrue when the student ceases to attend
the program. Repayment of the principle and interest begins six
months thereafter. Recipients are eligible for up to 50 percent
forgiveness if they return to Alaska and work in a fisheries
related field.
Number 0392
MR. MAHER said, in essence, HB 121 provides for an interest free
loan for the life of the loan. Future borrowers, obtaining the
benefit, would only pay the principle. This piece of legislation
hadn't gone before the postsecondary education commission or
anything related to loan programs because there are not a lot of
loan programs right now and the last commission meeting was prior
to the beginning of the session. The commission has not taken a
stance on HB 121. It is his belief that they will probably be
neutral because as an agency they are neutral on it.
Number 0446
MR. MAHER said contributions have declined slightly over the last
three or four years while the program is growing. In fiscal year
1995 there were only six recipients and in the present year there
are 34 recipients. Presently, no loan caps are in place which has
been a concern of the commission. A student can borrow up to the
amount of the budget for books and tuition for the particular
program they attend. In some instances this amount exceeds the
amounts of the regular Alaska student loan program. The concern is
that there is an allowance for a few individuals to borrow a
significant amount of money who potentially might have problems
paying that money back.
MR. MAHER said, "Our estimate in our fiscal note, although there
would be no cost to the agency as a result of this legislation,
would just be downstream when those that borrow beginning July 1,
in the next school cycle would come into repayment on their loans,
which could be three to four years downstream, what would be a
small amount of interest lost. Our best guess there was about
$16,000 a year, to start out with, and we couldn't be very accurate
on that figure given the variables of the number of participants in
the program, the forgiveness benefit that we have no control over,
we don't know who will apply or receive that benefit. So, it is a
small loss in revenue stream of about $16,000 downstream." He said
they are supportive of getting more money out into this area and
have thrown out a great deal more information to colleges,
vocational centers around the state to present information and get
more people into the program.
Number 0578
CHAIRMAN BUNDE clarified that there are no general funds involved
in the Winn Brindle scholarship loan program. He said there is
already a forgiveness program and clarified that the change in
forgiveness would not impact postsecondary education in
administering the loan.
Number 0603
REPRESENTATIVE JOE GREEN said, "That you're indicating that you are
dropping, you're increasing the forgiveness, you're doubling in
effect and 50 to 100 percent in a five year period if they come
back to work to attract more people and yet this indicates that
between '95 and now you've gone from 6 to 34 applicants. That's
under the existing program? That's a pretty significant increase
and so I'm not quite sure is there, am I missing something on the
statements?"
Number 0642
CHAIRMAN BUNDE clarified that they have quite a chunk of capital
that is not being used.
MR. MAHER said there is money in the fund and the program is
growing with more and more people becoming interested in it with
the 50 percent forgiveness. The mere fact that it could go to
interest free will attract more people. The closest loan program
to it now would be the family education loan program which is where
a co-signor or a family member takes out a loan on behalf of a
student which has an interest rate of 5 percent whereas other loans
are 8.9 percent.
Number 0696
REPRESENTATIVE GREEN asked what effect would occur to the 34
recipients who are beneficiaries of this loan program. He asked if
they would be retroactively included in this forgiveness program.
Number 0723
MR. MAHER said with an effective date of July 1, 1997, it would not
have an effect on the previous recipients unless they went back to
school or if they were in mid-stream, meaning that they had
completed two years and then the next year, after July 1, they
would qualify. They would have sort of a mixture in their loan,
but it wouldn't be anything that couldn't be handled.
Number 0749
REPRESENTATIVE TOM BRICE said he qualified for a limited amount of
forgiveness in his student loans. He said a process is set up
where the accounting isn't something that you have to think about.
Number 0786
REPRESENTATIVE BRIAN PORTER asked if someone wants to go to college
for a four year fisheries program, is the money allocated annually
to the institution.
Number 0801
MR. MAHER said the money is allocated directly to the institution
and the individual, both of them need to sign. The institution is
getting the funds and the funds then get signed over to the
individual. He said they usually back out their budget (indic.--
paper shuffling) to the things the institution needs up-front.
Number 0823
REPRESENTATIVE PORTER referred to the student who would be
effected, if HB 121 were passed, during his sophomore or junior
year. He would have 50 percent of his forgiveness for the first
two years and 100 percent potential forgiveness for the second two
years.
Number 0844
CHAIRMAN BUNDE referred to the decreasing amount of contributions
to the loan fund and the impact on increasing the forgiveness
amount to 100 percent. He asked if they had speculated on the life
of the loan program.
Number 0866
REPRESENTATIVE WILLIAMS said in discussions, with some of the
larger contributors of $40,000 or more, they found that these
contributors didn't mind increasing the forgiveness. Their only
question was whether or not anything would happen to the tax
exemption. They were reassured that the tax exemption would stay
in place. He said he hoped that this program was ongoing with
contributors continuing to donate money to it.
Number 0907
CHAIRMAN BUNDE said we don't want to empty the loan program and
then some time in the future not have the program available.
Number 0915
REPRESENTATIVE PORTER said this program, of the six listed, is the
only one that has a 50 percent provision. All the rest of them
have what it is you're seeking, a 100 percent provision.
Number 0927
MR. MAHER said, concerning overall loan programs, the teacher
scholarship loan program still has a 50 percent forgiveness. That
program is for teachers who come back to Alaska and teach in rural
areas.
Number 0955
CHAIRMAN BUNDE said the sponsor statement refers to the five
memorial scholarships and, with the exception of the Winn Brindle
loan program, they all have 100 percent forgiveness.
Number 0960
MR. MAHER did not believe that any of those programs had any money
or any contributions in a number of years. He said the Winn
Brindle loan program is the only program that is solvent and
growing.
Number 0973
REPRESENTATIVE BRICE asked if the teacher scholarship loan program
was funded through the state or through private contributions.
Number 0983
MR. MAHER said that program is funded through corporate receipts
and through the sale of bonds which are non-general funds.
Number 0993
REPRESENTATIVE VEZEY said, "all of these loans under 1443-305, I
guess or 250 rather, they are funded through tax creditable
contributions or tax deductible contributions?"
Number 1011
MR. MAHER said they are funded through tax deductible
contributions. He said he has always just heard it referred to as
tax exempt donations and has never looked into that side of it as
it has not had an effect on their agencies.
Number 1056
CHAIRMAN BUNDE said it is the policy of the committee to hear
proposed legislation one day, give the members a chance to look at
it and research some of these questions. He said HB 121 would be
before the committee on Tuesday, February 25, 1997, for final
action.
HJR 18 - DEDICATED FUNDS: RATE MAY BE CHANGED
Number 1110
CHAIRMAN BUNDE announced the next item on the agenda was HJR 18,
Proposing an amendment to the Constitution of the State of Alaska
relating to changing the rate of a tax or license that supports a
dedication of its proceeds.
Number 1120
REPRESENTATIVE IVAN IVAN, sponsor of HJR 18, read from the sponsor
statement. He said the resolution proposes an amendment to Article
IX, Section 7 of the state constitution. The current article
allows for the dedication of funds for a specific purpose as long
as it existed by April 24, 1956. This resolution would allow a
changing of a rate of a tax or license of which the proceeds are
dedicated to a special purpose. This proposed amendment would be
placed before the voters at the next general election, if approved
by the legislature.
REPRESENTATIVE IVAN said he introduced this resolution because of
the differing opinions represented by the attorney general's office
and Legal Services in regards to the dedication of a tax increment
to a specified purpose. In order to avoid litigation, especially
if the proceeds of the tobacco tax are to be placed into the school
fund or if the legislature changes any other tax rate or license
fee, into which proceeds are to be placed into a dedicated fund,
this resolution could be a solution to resolve that potential
problem.
REPRESENTATIVE IVAN said in the resolution's first committee of
referral, House State Affairs Standing Committee, an amendment was
adopted to make the amendment retroactive to October 1, 1997. This
retroactivity coincides with the effective date of the tobacco tax
as proposed by CSHB 1(STA).
Number 1218
CHAIRMAN BUNDE asked what other dedicated funds would be impacted
by HJR 18.
Number 1225
REPRESENTATIVE IVAN said he did not have a list in front of him,
but the other funds were discussed in the House State Affairs
committee. He believed the fish and game fund would be impacted.
Number 1242
TOM WRIGHT, Legislative Assistant to Representative Ivan, said the
only funds he knew that were still in existence, which are
considered dedicated, are the school fund and the fish and game
fund.
Number 1274
REPRESENTATIVE PORTER said the opinion that says we might not be
able to raise the tobacco tax and put that money into a dedicated
fund came from a 1959 attorney general's opinion. He asked if an
opinion had been sought from the current attorney general.
Number 1295
MR. WRIGHT said the 1956 opinion was the one that the attorney
general's office referred to in the State Affairs committee, the
Attorney General Opinion, Number 7. He said there have been
Attorney General Opinions, Numbers 7, 9 and 14, which have all
spoken to the same issue and said basically the same thing.
Number 1314
REPRESENTATIVE PORTER clarified that the current attorney general
agrees with the 1956 opinion.
Number 1336
REPRESENTATIVE VEZEY said the fisherman's fund for the relief of
injured fisherman is a fund that pre-existed statehood. Those were
the only three funds of which he was aware. He expressed confusion
as to why those funds that pre-existed statehood and still exist as
a dedicated fund can't be found.
Number 1350
CHAIRMAN BUNDE said HJR 18 would be held until next Tuesday,
February 25, 1997, when it would be heard again.
ADJOURNMENT
There being no further business to conduct, CHAIRMAN BUNDE
adjourned the meeting of the House Health, Education and Social
Services Standing Committee at 3:26
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