Legislature(1995 - 1996)
03/29/1996 09:04 AM HES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE HEALTH, EDUCATION AND SOCIAL SERVICES COMMITTEE March 29, 1996 9:04 a.m. MEMBERS PRESENT Senator Lyda Green, Chairman Senator Loren Leman, Vice-Chairman Senator Mike Miller Senator Judy Salo MEMBERS ABSENT Senator Johnny Ellis OTHER MEMBERS PRESENT Representative Con Bunde COMMITTEE CALENDAR SENATE BILL NO. 301 "An Act relating to postsecondary education." PREVIOUS SENATE COMMITTEE ACTION SB 301 - See Senate Health, Education & Social Services minutes dated 3/6/96. WITNESS REGISTER Mike Tibbles, Staff Senator Green State Capitol Juneau, Alaska 99801-1182 POSITION STATEMENT: Compared the proposals of EO 97 and SB 301. Mike Ford, Legislative Legal Counsel Legislative Affairs Agency 130 Seward Street, Suite 409 Juneau, Alaska 99801-2105 POSITION STATEMENT: Discussed the changes encompassed in SB 301. Diane Barrans, Executive Director Alaska Commission on Postsecondary Education Department of Education Executive Officer, Alaska Student Loan Corporation 3030 Vintage Boulevard Juneau, Alaska 99801-7109 POSITION STATEMENT: Discussed SB 301. Kathleen Strasbaugh, Assistant Attorney General Civil Division Department of Law PO Box 110300 Juneau, Alaska 99811-0300 POSITION STATEMENT: Discussed the constitutional problems with the confirmation aspect of SB 301. ACTION NARRATIVE TAPE 96-25, SIDE A SB 301 POSTSECONDARY EDUCATION Number 002 CHAIRMAN GREEN called the Senate Health, Education and Social Services (HESS) Committee to order at 9:04 a.m. and introduced SB 301 as the only order of business before the committee. MIKE TIBBLES, Staff to Senator Green, informed everyone that he would go through the proposals of the Executive Order (EO) and explain how they have been changed in SB 301. The executive order proposed that the higher education and policy planning functions be transferred to the Department of Education. Mr. Tibbles noted that some of those functions have become obsolete, are no longer required, and have been repealed from federal law. Those obsolete functions have been removed. The advisory functions have been left with the commission which will remain in tact. SENATOR SALO inquired as to what section that referred. MIKE FORD, Attorney with the Division of Legal Services, explained that functions relating to postsecondary institutions were left with the commission. Page 18 of the draft CS is where this is located. He noted that there are numerous differences between the draft CS and the EO. Some functions of the commission are transferred to the existing corporation while others are being placed in the Department of Education and some are left with the commission. Mr. Ford said this is an effort to maintain legislative confirmation of members to the commission, to transfer the loan functions to the corporation. CHAIRMAN GREEN mentioned that the task force had discussed the need to specify a difference between the institutional authorizations and loan approvals. Number 077 MIKE TIBBLES referred Senator Salo to Section 46 in answer to her question. The EO proposed to move the Alaska Student Loan Corporation to the Department of Revenue which SB 301 does. The proposed increase in the corporation's board membership from 5 to 7 is accomplished as well as adding three non voting members. The three non voting members consist of one student and a legislator from each body. Therefore, the majority of the board will consist of public members rather than agency individuals. EO 97 also proposed to eliminate the special interest positions which SB 301 does with specific language. EO 97 proposed to move the financial aid program administration and institutional authorization functions from the commission to the corporation. SB 301 leaves the institutional authorization with the commission, but SB 301 moves the financial aid program and administration to the corporation. CHAIRMAN GREEN said that the intent with SB 301 was to take everything from EO 97 possible and place it in the bill with legislative oversight and separate the institutional authorization and the financial aid program. Number 123 SENATOR SALO inquired as to what portions of the EO are not encompassed in SB 301. MIKE TIBBLES pointed out that SB 301 allows the commission to remain in tact with the institutional authorization in order to give the commission regulatory authority. MIKE FORD mentioned that Section 2 of SB 301 gives the University of Alaska the authority to run the WAMI program which the commission currently runs. Mr. Ford pointed out that some sections in SB 301 are clean-up from SB 123. Section 12 changes the amount of the loan a full-time undergraduate and a full-time graduate student can receive. Mr. Ford informed the committee of a suggestion regarding the ties between the two boards. The commission and the corporation are the same people. In the draft CS of SB 301, the members of the commission consist of the voting members of the corporation. He emphasized that the goal is to maintain legislative oversight of the loan process by having the power of legislative confirmation over the commission members. Mr. Ford suggested that the language be changed so that the corporation members consist of the commission members in order to avoid the dilemma of an unconfirmed commission member. CHAIRMAN GREEN inquired as to where the language would need to be changed. MIKE FORD pointed out that the board of the corporation is in Section 4, the board of the commission is in Section 44. The language should be reversed in those two sections. The corporation should consist of the voting members of the commission. Mr. Ford also noted that a substantive change was made in Section 22 which left in an existing provision of law on page 9, line 19. The same issue occurs in Section 30 of SB 301 and that too should be changed. Mr. Ford believed that the fees are subject to appropriation and that language should be in the bill. Number 232 SENATOR SALO inquired as to the effect of moving the WAMI program into the university. Senator Salo noted that every year there has been debate over the funding for this program. Will this pass on the obligation without the money? MIKE FORD clarified that the power of appropriation will remain. Mr. Ford did not envision any change other than who receives the funds. CHAIRMAN GREEN mentioned that the concern was that currently there are two separate budget items which pertain to WAMI one being in the Department of Education and the other in the university. Chairman Green said that the university should handle the program if the program is a valid university and state program. She inquired as to who made the request for this change. REPRESENTATIVE BUNDE said that he made the request. Currently, there are two different funding communities for the same program and this would simply consolidate the program. The program would not be changed at all. This is pass through money after the first year; the university instead of postsecondary education would pass the money to the University of Washington. SENATOR SALO felt that the WAMI funding would be more vulnerable under this arrangement because of the pressures on the university's budget. She noted her support of the WAMI program. REPRESENTATIVE BUNDE said that if Senator Salo meant vulnerable in the sense that the actual cost of the program would be more evident, he would agree. He believed the debate over whether the state can afford to fund WAMI will continue. Representative Bunde felt that placing the funding in a single budget item would clarify the debate by showing the cost of the program in one item. MIKE FORD informed the committee that there are a number of changes encompassed in SB 301 and the committee should have a sectional analysis specifying the technical changes. He said that he had previously pointed out the substantive changes. There are some clean-up provisions removing many provisions that are no longer required under federal law. CHAIRMAN GREEN asked if that, the repealers, was contained in Section 55. MIKE FORD replied no, part of the repealers are contained in Section 55. The repealers are in many provisions relating to the existing functions of the commission, references, and the relationship between the commission and the corporation which are no longer necessary. Number 298 SENATOR MILLER moved that Ford workdraft 3/28/96, version C be adopted in lieu of the original bill for discussion purposes. Hearing no objection, it was adopted. SENATOR SALO recommended that the committee review the suggestion regarding which board creates the other board. This probably is not the final workdraft. SENATOR MILLER agreed. DIANE BARRANS, Executive Director of the Alaska Commission on Postsecondary Education and Executive Officer of the Alaska Student Loan Corporation, noted that the commission has worked with Representative Bunde, Representative Toohey, and Senator Green on this draft; however, that does not mean that SB 301 would be an ideal situation. Ms. Barrans said that the commission has always been committed to making the necessary changes for the success of the loan program. The EO would have consolidated all agency functions under one board with a clear focus on the general welfare of the program and its customers. Ms. Barrans acknowledged that SB 301 does accomplish some positive changes such as separating the institutional authorization function by placing that function in the Department of Education and moving the administration of the loan fund to the Department of Revenue. The question still remains: why are two boards necessary? Under SB 301, the inefficiencies of a state agency having to administer the function of two distinctly separate bodies would remain. Ms. Barrans echoed the benefits of SB 301 which Mr. Tibbles and Mr. Ford previously mentioned. The change in the number of board members would provide some cost reduction. Furthermore, arranging meetings and doing corporation business would be easier. All of the AS 14.43 functions and administration of the loan fund would also be consolidated with the administration of the loan finances. Moving the institutional authorization function to the Department of Education would clearly separate that activity as well as the liability from the fund. Ms. Barrans also reiterated the clean-up language that eliminates the outdated or unnecessary language which was not possible under the EO. Ms. Barrans believed that the Department of Education is working on a fiscal note reflecting the cost of managing the institutional authorization function as well as the commission board. SB 301 does provide for the assessment of fees in order to offset the cost to the department. Ms. Barrans indicated that the department would pass along the cost of regulation to the regulated bodies. Currently, that function is funded through corporation receipts. Due to the indenture and covenants on the bonds, the transfer of the current funding source for those activities is not possible. Ms. Barrans offered to answer any questions. Number 366 SENATOR SALO inquired as to Ms. Barrans reaction to changing who is a subset of who regarding the corporation and the commission. DIANE BARRANS said that this was the first discussion of such and she would have to consult with the Bond Council. Ms. Barrans expressed concern that the business of the corporation must continue even with the process of legislative confirmation. SENATOR SALO requested an explanation of the general fund or corporation receipts to which Ms. Barrans previously referred. DIANE BARRANS explained that the institutional authorization function works out of the Anchorage office. Those employees administer student financial aid compliance reviews as well as institutional authorization reviews which achieves efficiency. Ms. Barrans estimated that the staffing costs for institutional authorization alone would total about $125,000 per year. The dual activity of the staff may allow institutional authorization to be administered more efficiently than under the Department of Education. Currently, the Department of Education does not have staff to look at postsecondary institutions. SENATOR SALO asked if Ms. Barrans meant that there is a problem with the bond. DIANE BARRANS explained that there are covenants on the bonds. That revenue, corporation receipts, funds all of the activity. Therefore, only functions related to the student loan program can be financed. The institutional authorization function has been done without general fund support, but staff has done institutional authorization functions as well as loan functions. SENATOR SALO suggested that if this function is transferred to the Department of Education and that employee is given other duties within the department, there would be a problem with corporate receipts paying for that. DIANE BARRANS agreed. Ms. Barrans emphasized that it is not an option to transfer staff funding or revenues with this. Perhaps, the positions could be transferred. Ms. Barrans estimated that it would amount to 1.3 full-time positions in order to administer institutional authorization. Ms. Barrans reiterated that SB 301 does provide for the assessment of fees on the regulated institutions to offset or cover the cost of the function. Long-term there should be a program receipt offset to pay for the function. Number 419 SENATOR SALO inquired as to how that would work. Senator Salo asked if that meant paying for an evaluation authorization under the program as a postsecondary institution. DIANE BARRANS replied yes. Currently, there are fees associated, $100. Other states charge fairly substantial authorization fees. Ms. Barrans said that this is similar to occupational licensing. Regardless of the passage of SB 301, Ms. Barrans hoped that under the Governor's fees bill there will be an opportunity to take this function off of the corporation receipts and have program receipts to fund this function. CHAIRMAN GREEN was confused. She thought that this workdraft was brought forward by Ms. Barrans and Ms. Williams to the committee. She was troubled by this very different reaction to the workdraft that Chairman Green heard in the subcommittee last week. Has something changed since that time? DIANE BARRANS said that nothing had changed. She reiterated that SB 301 does contain advantages and improvements to the program. Ms. Barrans pointed out that she has consistently supported a single board. CHAIRMAN GREEN asked Ms. Barrans if she had determined language creating a single board with legislative confirmation. DIANE BARRANS replied no. That is why SB 301 is before the committee today. CHAIRMAN GREEN stated that the legislature feels the need for confirmation. DIANE BARRANS said that Kathleen Strasbaugh may want to speak to that. Ms. Barrans pointed out that the commission has performed these functions for 21 years and without legislative confirmation. With the two ex officio members on the corporation board, there is a voice - if not a vote - from both the House and the Senate. Ms. Barrans indicated that may be why the confirmation issue has not been pressed. The language has been present for the commission's 21 years, but no general public members have been confirmed. CHAIRMAN GREEN pointed out that there was also more strict criteria regarding who the members would be or represent. Chairman Green believed there was an interest to reach confirmation. She expressed interest in developing a method to which Ms. Barrans approved. SENATOR SALO did not believe that the interest in legislative confirmation was universal for the legislature. Senator Salo was interested in developing the best governing body which could function without disruption. She agreed that legislative input may be desirable, but it may be problematic to create a situation in which the board cannot function for any period of time. The language must ensure that the corporation maintains a good bond rating and can function amidst political upheaval. Senator Salo felt that it was more important for the governing body to be able to clearly function rather than for the legislature voting on the membership of the body. DIANE BARRANS believed that the commission's preferred approach has been consistent on this issue. She believed there to be an ernest effort to improve the program and a bill that could be debated and discussed with regards to the best interest of the loan program. Number 482 KATHLEEN STRASBAUGH, Assistant Attorney General in the Department of Law, informed the committee that the confirmation of the board poses constitutional problems. The board has not been subject to confirmation in the past 21 years because the enforcement activities of the board were somewhat less than a majority of the activities of that commission. Ms. Strasbaugh pointed out that governors of both parties have been willing to overlook the constitutional violation in legislative membership on any such board. This dual office holding has been tolerated because there was not a confirmation process and the legislature was allowed to participate. Ms. Strasbaugh stated that she had mispoken yesterday and neither the PERS or TERS board are subject to confirmation. Members of the TERS board are subject to confirmation because they are the personnel board. Currently, postsecondary is an open constitutional question due to the smaller role their current activities play in their overall activities. SB 301 would maintain two boards solely for the legislature to indirectly confirm the members of the loan corporation. Loan corporations are not subject to confirmation which was determined early in the constitutional juris prudes in two cases in 1963 and 1969. There is a specific constitutional definition of which boards are subject to confirmation. Ms. Strasbaugh said that the argument against confirmation is made substantial due to the lack of confirmation over these 21 years. Ms. Strasbaugh emphasized that the only reason for the second board is to reach the corporation which would not otherwise be possible constitutionally. In Ms. Strasbaugh's opinion, the postsecondary commission is not a confirmation board in the present workdraft. There have been dual boards, PERS and the personnel board who was also the Labor Relations Agency. In this case, the corporation is supposed to be separate so that its assets are only subject to liability and not the full faith and credit of the state. SENATOR SALO said that the workdraft before the committee establishes that the corporation board is subject to confirmation. KATHLEEN STRASBAUGH replied not directly. If the corporation board is the postsecondary board or vice versa, only the postsecondary board is subject to confirmation. Ms. Strasbaugh emphasized that in name the student loan corporation is not before the legislature; however, if the statutes say they are the same people then in essence the student loan corporation is being confirmed. Number 536 SENATOR MILLER commented that this has been an ongoing discussion. The other argument is that the framer's of the constitution probably never envisioned the semi-public corporations of today who control billions of dollars of state assets. Perhaps, the constitution may have been written differently if this had been envisioned. Senator Miller inquired as to the time when the legislature would be involved with the billions in state assets, the assets of the people of Alaska. He mentioned that there are some constitutional amendments that would change part of that. KATHLEEN STRASBAUGH clarified that she was present to point out that this is a constitutional problem and must be addressed in a constitutional fashion. SENATOR MILLER noted that there were a few recommendations on amendments. CHAIRMAN GREEN asked if Mr. Ford had the language for the changes. MIKE FORD said that there were a number of minor issues that were pointed out in House HESS yesterday. There was a recommendation to change "program to "programs" on page 4, line 21. Also there was a recommendation to delete subsection (b) of Section 6 in order to allow the attorney general to be legal counsel. KATHLEEN STRASBAUGH interjected that there is a process that the attorney general is supposed to approve legal contracts which almost every statute includes without the second section. She felt that subsection (b) might create confusion about the procurement code requirements regarding legal counsel. Deleting subsection (b) removes any ambiguity, but is does not prohibit access to private counsel. CHAIRMAN GREEN specified lines 29 and 30 on page 4. MIKE FORD directed the committee to page 13, line 30 where it was suggested to insert the "subject to appropriation" language. Mr. Ford suggested that the existing approach to the commission and the corporation should be reversed in order to be clear that if a member of the commission is not confirmed, the person could not sit on the corporation board. Mr. Ford did not believe there would be any greater a disruption than currently because the current members of the corporation are subject to confirmation as commissioners. Number 580 SENATOR LEMAN said that Amendment 1 consists of the following: page 4, line 21 delete "program" insert "programs", delete subsection (b) under Section 6, page 13 reinsert "subject to appropriation." Senator Leman moved Amendment 1. SENATOR SALO inquired as to where the "subject to appropriation" language was located. CHAIRMAN GREEN directed Senator Salo to page 13, line 30. Reinserting the language would make it consistent with the language on page 9. TAPE 96-25, SIDE B SENATOR SALO said that she would appreciate another workdraft which incorporated the amendments. She indicated that she would like more time with the bill. CHAIRMAN GREEN said that was her intention. Chairman Green requested that the workdraft clarify the language regarding the boards. She invited Ms. Barrans to give input on this. Chairman Green said that she had intended to incorporate everything possible from the EO with input from everyone involved. She reiterated the importance of confirmations and addressing the issue before it becomes a problem. DIANE BARRANS pointed out that her charge was the well-being of the student loan fund. There are issues larger than this that Senator Miller has addressed; Ms. Barrans said that debate was beyond her purview. CHAIRMAN GREEN asked Ms. Barrans to stay in touch so that another draft could be ready for Monday. DIANE BARRANS pointed out that page 17, line 25 of Section 44 refers to the commission as the Alaska Postsecondary Education Commission while everywhere else the bill refers to the commission as the Alaska Commission on Postsecondary Education. MIKE FORD said that as long as the language is consistent it would not matter; the commission could be referred to in either manner. Mr. Ford asked if Mr. Barrans had a preference. SENATOR LEMAN inquired as to how the letterhead was printed. DIANE BARRANS said Alaska Commission on Postsecondary Education. Number 549 CHAIRMAN GREEN inquired as to Ms. Barrans' view on the WAMI and WITCHE programs. DIANE BARRANS noted that the commission has been supportive of the WAMI program over the years. Ms. Barrans expressed concern with the effort to make the WAMI program at least partially a loan program. The university is not organized to administer a loan program, but if that is the desired direction of the program then Ms. Barrans believed it appropriate to leave that with the agency which administers loan programs. CHAIRMAN GREEN requested that Ms. Barrans review the reasoning for creating one line item for these programs. DIANE BARRANS explained that historically, the program began its first year on the Fairbanks campus as a State of Alaska program. Currently, there is a contract between the State of Alaska, the University of Washington, and the University of Alaska. When the Fairbanks campus reorganized and downsized, the Fairbanks campus said that it could not afford to have the program. For a couple of years, the entire four years of the program was in Seattle. Then the University of Alaska decided that it would make sense for them to have a biomedical program as well as the nursing program. The first year's funding in the University of Alaska's budget is dedicated to the biomedical program which is the first year training for the WAMI program. Ms. Barrans clarified that since the program is a State of Alaska program, the commission is the agency that funds State of Alaska student aid programs so that the second, third, and fourth year funding was placed in the commission's budget. This was to ensure the funding would be independent from the university since the funding would not be used on campus. CHAIRMAN GREEN surmised that it would not necessarily be inconsistent that the funding be located in the university budget. If the university has the first year, then it would not be inconsistent for the university to have the following years. DIANE BARRANS replied not necessarily. SENATOR SALO noted that there are advantages to the state and there are involvements between Alaska and Washington which go beyond the tuition of the students in the medical program. Therefore, Senator Salo was leery of all the funding being placed in the university budget. Senator Salo did not believe the program would survive in the university budget in the same way due to the pressures the university faces. She indicated that the connection between the medical community in Alaska and a major medical hospital and university and the consultations are advantageous to the entire state. That advantage has very little to do with the students in the program or the university. Some of the functions of the program are a partnership between the states rather than between the two universities. For these reasons as well as the aforementioned possibility of the program moving to a loan status, Senator Salo wanted to have more time with the bill. DIANE BARRANS informed the committee that the University of Washington School of Medicine does view itself as our regional medical school as a state. The relationship is broader than only a relationship with the University of Alaska-Anchorage (UAA). The University of Washington has worked with the biomedical staff of UAA and medical professionals in Anchorage for the last three years in order to establish a family medical residency program. Number 489 SENATOR LEMAN asked if Amendment 1 was adopted. CHAIRMAN GREEN said that Amendment 1 was adopted. Chairman Green explained that Mr. Ford would include the remaining changes in the next workdraft. SENATOR LEMAN asked if there was an existing student member on the board and is this the same procedure. Are there other universities or colleges which offer course work; are those excluded by the language? DIANE BARRANS explained that the institutions that are listed are four year institutions that are public or nonprofit. There is another institution that has a junior college program. Ms. Barrans did not believe there to be an organized student government on any other school campus than those listed. SENATOR LEMAN noted that Whalen Baptist College exists. What is the rationale for naming only the ones in the bill? DIANE BARRANS said that she could explore the possibilities. This structure has been the most efficient structure providing nominees. CHAIRMAN GREEN interjected that it does not have to be limited to those listed in the bill; it is merely the nominee. She believed that making the language more inclusive would be better. SENATOR LEMAN agreed with the list, but he wondered if it excluded other nominees from being considered. Senator Leman asked that issue be reviewed. MIKE FORD said that it could be described generically as a four year public or nonprofit institutions submit nominees. DIANE BARRANS suggested that the definition include language that the institution have an organized student government in order to ensure that the student be representative of the student body from which they come. MIKE FORD asked if the committee wanted that change. CHAIRMAN GREEN said yes. CHAIRMAN GREEN said that this bill would be before the committee on Monday as well as HB 465 and HB 540. There being no further business before the committee, the meeting was adjourned at 10:07 a.m.