Legislature(1995 - 1996)
02/27/1996 03:04 PM Senate HES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
JOINT HOUSE & SENATE HEALTH, EDUCATION AND
SOCIAL SERVICES COMMITTEE
February 27, 1996
3:04 p.m.
HOUSE MEMBERS PRESENT
Representative Con Bunde, Co-Chair
Representative Cynthia Toohey, Co-Chair
Representative Al Vezey
Representative Norman Rokeberg
Representative Gary Davis
Representative Tom Brice
Representative Caren Robinson
HOUSE MEMBERS ABSENT
None
SENATE MEMBERS PRESENT
Senator Lyda Green, Chairman
Senator Loren Leman
Senator Mike Miller
Senator Johnny Ellis
Senator Judy Salo
SENATE MEMBERS ABSENT
None
COMMITTEE CALENDAR
* SENATE SPECIAL CONCURRENT RESOLUTION NO. 3
Disapproving Executive Order No. 97
- PASSED OUT OF COMMITTEE
* HOUSE SPECIAL CONCURRENT RESOLUTION NO. 3
Disapproving Executive Order No. 97
- PASSED OUT OF COMMITTEE
(* First public hearing)
PREVIOUS ACTION
BILL: HSCR 3
SHORT TITLE: DISAPPROVING EXECUTIVE ORDER 97
SPONSOR(S): HEALTH, EDUCATION & SOCIAL SERVICES
JRN-DATE JRN-PG ACTION
02/21/96 2833 (H) READ THE FIRST TIME - REFERRAL(S)
02/21/96 2833 (H) HEALTH, EDUCATION & SOCIAL SERVICES
02/27/96 (H) HES AT 3:00 PM CAPITOL 106
BILL: SSCR 3
SHORT TITLE: DISAPPROVING EXECUTIVE ORDER 97
SPONSOR(S): HEALTH, EDUCATION & SOCIAL SERVICES
JRN-DATE JRN-PG ACTION
02/21/96 2491 (S) READ THE FIRST TIME - REFERRAL(S)
02/21/96 2491 (S) HEALTH, EDUCATION & SOCIAL SERVICES
02/27/96 (S) HES AT 3:00 PM CAP. ROOM 106
WITNESS REGISTER
DIANE BARRANS, Executive Director
Alaska Commission on Postsecondary Education;
and Executive Officer, Alaska Student
Loan Corporation
3030 Vintage Boulevard
Juneau, Alaska 99801
Telephone: (907) 465-2113
POSITION STATEMENT: Testified on HSCR 3 and SSCR 3
ERIC FORRER, Representative
University Board of Regents
Postsecondary Commission
176 Behrends Avenue
Juneau, Alaska 99801
Telephone: (907) 586-1847
POSITION STATEMENT: Testified on HSCR 3 and SSCR 3
ACTION NARRATIVE
TAPE 96-17, SIDE A
HSCR 3 DISAPPROVING EXECUTIVE ORDER 97
SSCR 3 DISAPPROVING EXECUTIVE ORDER 97
Number 008
CO-CHAIR CON BUNDE called the meeting of the Joint House & Senate
Health, Education and Social Services (HESS) Committees to order at
3:04 p.m. House members present at the call to order were
Representatives Bunde, Toohey, Vezey, Rokeberg, Davis, Brice and
Robinson. Senate members present at the call to order were
Senators Green, Leman, Miller and Ellis. A quorum was present of
both House and Senate members to conduct business. The first order
of business was HSCR 3, Disapproving Executive Order 97 and SSCR 3,
Disapproving Executive Order 97.
SENATOR JUDY SALO joined the meeting at 3:05 p.m.
CO-CHAIR BUNDE opened the meeting for public testimony.
Number 128
DIANE BARRANS, Executive Director, Alaska Commission on
Postsecondary Education; and Executive Officer, Alaska Student Loan
Corporation, said when she testified before the committee last
month, she spoke about the history of the Commission and the
various functions it has performed over the past 22 years. She
described how the current functions, primarily management of the
operations and finances of the Alaska Student Loan Program, are not
well-served by the existing configuration of two boards --
especially when the designated members are particularly susceptible
to special interest influences, sometimes to the detriment to the
loan fund itself.
MS. BARRANS said this past week, she met with groups at AMBAC, the
Alaska Student Loan Fund's bond insurer, as well as staff at Moodys
and Standard & Poor's credit rating agencies in New York City. In
anticipation of the upcoming bond issue, she provided for them an
overview of the pending legislation and a servicing and operational
status report. Their reaction to her update was uniformly quite
positive. When reviewing the Executive Order and the related
comments by Bond Counsel to the Loan Corporation, Ken Vassar, they
were pleased to see that we in Alaska are continuing to refine our
focus on the financial well-being of the loan fund.
MS. BARRANS pointed out that in his January 10 letter commenting on
the Executive Order, Mr. Vassar noted that this reorganization
would be "beneficial to the corporation's efforts to finance the
student loan program through the sale of its bonds and beneficial
to the student loan program generally." Mr. Vassar has been bond
counsel to the corporation since its creation and therefore his
comments are particularly valuable. While not an insider to the
management of operations, he has been a consistent and objective
observer over time. He goes on to add "The existence of two,
separate state agencies with identical staff and possessing powers
and duties relating to the same program is confusing. Even the
members of the commission and the members of the corporation have
been confused as to the boundaries of their respective powers and
duties." Additionally, he adds "consolidation will also eliminate
the inefficiencies of having two entities that must transact the
same business with each other." Mr. Vassar provides examples of
the inefficiency and reiterates that "it would improve the
efficiency of the entire process to have the same entity
responsible for these interwoven procedures." Ms. Barrans said Mr.
Vassar will be in town for a corporation meeting tomorrow afternoon
and would be available to answer questions regarding his
experiences with the commission and corporation.
MS. BARRANS concluded that they are convinced the consolidation
under Executive Order 97 provides for stronger, more focused
management of the Loan Fund and they respectfully asked that the
committee not disapprove it through the Resolution. Members of the
legislative body may elect to amend the statutes through the bill
process. She was looking forward to working with any of the
committee members on such an initiative. She stated however, at
this point, it is critical that the entities which can positively
or negatively impact our bottom line, that credit rating agencies,
the insurer of the bonds has the highest possible comfort level
that we are working cooperatively and continuing to move in the
right direction.
Number 416
CO-CHAIR BUNDE said speaking for himself and he believed for the
House and Senate HESS Committees, it would be their goal to
continue to work toward this consolidation. He added that
statutory changes would be needed to achieve that.
Number 453
SENATOR JUDY SALO said when they dealt with the issues in SB 123 as
well as the items in this Executive Order, she thought that these
were all part of a package to make the whole loan fund more
financially stable. She asked if that was true.
MS. BARRANS replied that from an administrative perspective, all of
these changes are pieces of what is necessary to move the fund to
a financially stable existence. She said having a single entity
that administers both the financial side as well as the operational
side is a big part of that.
SENATOR SALO said the reason she asked the question is that she had
some problems with portions of SB 123. She felt it was sort of a
hard hit on students who were taking out the loans and profited
from this program over the years and there were a couple of places
where the increased costs were significant. But in combination
with decreasing the administrative costs and becoming more
realistic about those costs, that's what sold her. So, she was
happy to hear the committee's commitment to address the concepts in
this Executive Order.
CO-CHAIR BUNDE responded that he was cautious to speak for himself
and for the House HESS Committee, the wheels are already in motion
to begin to deal with it. He emphasized that it would require an
extensive statutory change.
Number 600
ERIC FORRER said the question before the committee concerns the
status of the Governor's Executive Order that changes the governing
structure of the postsecondary education agency. He commented he
is one of the University Board of Regents representatives to the
Postsecondary Commission. He sat on the commission for two years
and is now chair of that commission. While two years is not that
much, he said it did give him a bit of the history and the flavor
of the commission's operations, including at some meetings, as much
as a full day of student appeals. His arrival on the commission
coincided with the hiring of a new agency director, the initiation
of a new management style and the creation of a new internal
organization. Upon that director's departure for a job in
Washington, he wrote the commission a position paper, in which he
was able to refer to a Division of Legislative Audit report from
December 1994, which pointed out the Alaska Student Loan Program
Fund is not self-sustaining and is in a state of financial
deterioration. The report also noted that the current role of the
Alaska Commission on Postsecondary Education does not reflect its
statutory mandate. The outgoing director also wrote "Over the past
20 years, our education policy changes in Alaska have definitely
resulted in the obsolescence of the ACPE's original role." Mr.
Forrer said he was quite interested in the financial deterioration
part of the assessment, and at the last meeting of the Student Loan
Board, he asked the managing director of Smith Barney, a New York
debt security firm, what that deterioration amounted to. The
answer he gave, which got the nod from other financial advisers in
the room, was that of the 480 million general fund dollars invested
by the state in the student loan fund, some 260 million dollars
remain. He was shocked at the notion that the commission of which
he is chair, has been living with a set of statutes, rules and a
political environment that enabled 45 percent of such a huge
investment to be lost. His initial reaction was and remains that
the second half of this fund is not going to disappear on his
watch.
MR. FORRER said the upshot of his experience is that he has
cooperated with the Governor's Office in the creation of the
Executive Order and he urged the committee to let it stand. He
noted that if the committee denies its passage, it will be one of
the most expensive political gestures the state has endured. The
connection between the structure of the commission and the
management of the fund is that the commission as it is currently
structured is a very blunt tool for rigorous management. It is a
difficult environment in which to muster sustained political will.
It suffers from lack of authority and it is fatally subject to the
relentlessly self-serving lobbying of private sector interests that
have arrayed themselves around the fund. Consequently, the public
policy governing the fund is structured at least in part, by
interests for which the fund was never intended in the first place.
He was not accusing the proprietary schools of doing anything
except engaging in self-preservation, but their vision has a very
close horizon. How this group can make arguments for a structure
that results in a loss of millions of dollars annually to the fund
upon which they depend is beyond him. He explained that when the
fund loses its ability to sell bonds and the state loses the equal
access aspects of the loan fund, the first crowd at the table
begging for fresh money will be the private interests that take
such a keen interest in influencing the statutes and regulations.
The arguments that should be made to counter their positions have
a constituency that is as wide as the entire state, but at any
given moment, is only a few students deep. There is no well-
connected lobbyists for the united future student borrowers of
Alaska, there is only the agency itself, himself, and the committee
members who have the authority to help rescue this investment of
public dollars for the state's future. He urged the committee to
let Executive Order 97 stand and to use subsequent clean up
legislation to achieve more finely directed goals.
Number 863
REPRESENTATIVE CAREN ROBINSON referenced Mr. Forrer's comment that
he had worked with the Governor's office and asked him to explain
how they reached the conclusion to go in the direction taken in the
Executive Order.
MR. FORRER responded that anyone who has paid attention to
postsecondary in the past, would come to the same conclusion; that
is, it needs significant structural change and the two bodies
existing simultaneously is confusing and serves no purposes. He
began to question what could be done to solve this problem and what
are the things that drive the postsecondary education; that is to
say the legislation that created it. It turned out to be a bigger
can of worms than what he realized. For example, two regents are
there because of the statutory language that states post secondary
oversees the university's budget, which has never occurred and on
and on. He wasn't certain who actually came up with the proposal
to move in the direction of the Executive Order.
CO-CHAIR BUNDE said it becomes a question of the cart before the
horse. It would require some serious statutory changes, which Mr.
Forrer had alluded to, and whether there's an Executive Order that
goes halfway and then statute, or just statutory change is a policy
call. Co-Chair Bunde assured Mr. Forrer that he shares the
concerns about the financial stability of the loan.
CO-CHAIR BUNDE asked if there was further public testimony.
Hearing none, he opened the meeting for discussion.
Number 1000
REPRESENTATIVE TOM BRICE questioned the statement on the fiscal
note stating the estimated savings reflected in Executive Order 97
will not be achieved in the manner proposed by the Governor. He
said there is no back up documentation in the packet to
substantiate that statement and asked if there was any information
available.
CO-CHAIR BUNDE said as he previously mentioned, the Executive Order
only makes half of a step and significant statutory change is
required in order to achieve the needed efficiency. He added that
it's going to take legislation which overhauls the entire post
secondary system, instead of just limiting the number of people.
REPRESENTATIVE BRICE asked if the bill was currently in the
drafting stage.
CO-CHAIR BUNDE responded the bill was presently being drafted and
he would make it available as soon as it was available to him. He
anticipated it to be an ambitious, cooperative and perhaps lengthy
goal to write the applicable statutes.
Number 1116
SENATOR MIKE MILLER moved to pass Senate Special Concurrent
Resolution 3 out of the Senate HESS Committee with individual
recommendations. An objection was raised. CHAIRMAN GREEN asked
for a roll call vote. Voting in favor of the motion were Senators
Green, Miller and Leman. Voting against the motion were Senators
Salo and Ellis. CHAIRMAN GREEN announced that action on the
Resolution disposes of the issue of Executive Order 97 and it will
be passed to the Senate Secretary.
Number 1158
REPRESENTATIVE ROKEBERG moved to pass House Special Concurrent
Resolution 3 out of the House HESS Committee with attached fiscal
notes. REPRESENTATIVE BRICE objected and raised a point of
question relating to procedure. He explained that it is normal
procedure for the House HESS Committee not to pass a bill out of
committee on the first hearing. Given the impact of this Executive
Order, he felt it would be appropriate to hold it over until the
next meeting.
CO-CHAIR BUNDE noted the House HESS Committee has moved bills out
of committee at the first hearing on several occasions, and that it
was his wish to do so with HSCR 3.
Number 1203
REPRESENTATIVE VEZEY asked for a call of the previous question.
REPRESENTATIVE BRICE pointed out that when bills had passed out of
committee at the first hearing, it had been done with a consensus
of the committee.
Number 1235
CO-CHAIR BUNDE asked for a roll call vote. Voting in favor of the
motion were Representatives Vezey, Rokeberg, Davis, Toohey and
Bunde. Voting against the motion were Representatives Brice and
Robinson. C0-CHAIR BUNDE announced that House Special Concurrent
Resolution 3 had moved from the House HESS Committee. The action
on the Resolution disposes of the issue of Executive Order 97 and
it will be passed to the House Clerk.
CO-CHAIR BUNDE adjourned the joint meeting of the House & Senate
HESS Committees at 3:23 p.m.
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