02/10/2015 09:00 AM Senate STATE AFFAIRS
| Audio | Topic |
|---|---|
| Start | |
| SB6 | |
| SJR2 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 6 | TELECONFERENCED | |
| *+ | SJR 2 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE STATE AFFAIRS STANDING COMMITTEE
February 10, 2015
9:01 a.m.
MEMBERS PRESENT
Senator Bill Stoltze, Chair
Senator John Coghill, Vice Chair
Senator Charlie Huggins
Senator Lesil McGuire
Senator Bill Wielechowski
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 6
"An Act exempting the state from daylight saving time; and
providing for an effective date."
- MOVED SB 6 OUT OF COMMITTEE
SENATE JOINT RESOLUTION NO. 2
Proposing an amendment to the Constitution of the State of
Alaska relating to contracting state debt for postsecondary
student loans.
- MOVED SJR 2 OUT OF COMMITTEE
CONTINUING DISCUSSION OF THE IMPLEMENTATION OF BALLOT MEASURE
NO. 2 (13PSUM) - AN ACT TO TAX AND REGULATE THE PRODUCTION,
SALE, AND USE OF MARIJUANA.
- SCHEDULED BUT NOT HEARD
REVIOUS COMMITTEE ACTION
BILL: SB 6
SHORT TITLE: ELIMINATE DAYLIGHT SAVING TIME
SPONSOR(s): SENATOR(s) MACKINNON
01/21/15 (S) PREFILE RELEASED 1/9/15
01/21/15 (S) READ THE FIRST TIME - REFERRALS
01/21/15 (S) STA, FIN
02/10/15 (S) STA AT 9:00 AM BUTROVICH 205
BILL: SJR 2
SHORT TITLE: CONST. AM: G.O. BONDS FOR STUDENT LOANS
SPONSOR(s): SENATOR(s) MACKINNON
01/21/15 (S) PREFILE RELEASED 1/9/15
01/21/15 (S) READ THE FIRST TIME - REFERRALS
01/21/15 (S) STA, EDC, FIN
02/10/15 (S) STA AT 9:00 AM BUTROVICH 205
WITNESS REGISTER
SENATOR ANNA MACKINNON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 6.
ERIN SHINE, Staff
Senator MacKinnon
Alaska State Legislature
POSITION STATEMENT: Provided an overview of SB 6.
LYNN WILLIS, representing himself
Eagle River, Alaska
POSITION STATEMENT: Supports SB 6.
THOMAS MAYER, Director
Division of General Services
Alaska Department of Administration
Juneau, Alaska
POSITION STATEMENT: Addressed the impact of Daylight Savings
Time on building management.
JAY BUTLER, MD
Chief Medical Officer, and Director
Division of Public Health
Alaska Department of Health and Social Services
Anchorage, Alaska
POSITION STATEMENT: Commented on the health effects from
Daylight Savings Time.
MIKE STEDMAN, business owner
Wings Airways
Juneau, Alaska
POSITION STATEMENT: Opposes SB 6.
MIKE WILSON, member
Leadership Council
National Federation of Independent Business-Alaska
Juneau, Alaska
POSITION STATEMENT: Supports SB 6.
SENATOR ANNA MACKINNON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SJR 2.
KRISTEN PRATT, Staff
Senator Anna MacKinnon
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Offered to provide an overview of SJR 2.
JERRY BURNETT, Deputy Commissioner
Treasury Division
Alaska Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Answered revenue impact questions regarding
SJR 2.
DIANE BARRANS, Executive Officer/Executive Director
Alaska Student Loan Corporation/Alaska Commission on
Postsecondary Education
Juneau, Alaska
POSITION STATEMENT: Answered questions on SJR 2.
LANCE STEVENS, President
Juneau Chamber of Commerce
Juneau, Alaska
POSITION STATEMENT: Supports SJR 2.
MIKE COONS, representing himself
Palmer, Alaska
POSITION STATEMENT: Opposes SJR 2.
DAVID NEES, representing himself
Anchorage, Alaska
POSITION STATEMENT: Opposes SJR 2.
ACTION NARRATIVE
9:01:47 AM
CHAIR BILL STOLTZE called the Senate State Affairs Standing
Committee meeting to order at 9:01 a.m. Present at the call to
order were Senators Wielechowski, Huggins, and Chair Stoltze.
SB 6-ELIMINATE DAYLIGHT SAVING TIME
9:02:10 AM
CHAIR STOLTZE announced that the business before the committee
was the consideration of SB 6.
9:02:30 AM
SENATOR ANNA MACKINNON, Alaska State Legislature, Juneau,
Alaska, provided a sponsor's overview as follows:
SB 6 is requesting a conversation with the people of
Alaska about the repeal of Daylight Saving Time (DST).
As many of you know in 1784, Benjamin Franklin in an
effort to save "wax and wicks" suggested that we could
change the time that we do our daily living activities
and save energy. DST was first implemented in the
United States in 1918 and in 1966, America adopted the
Uniform Time Act. In 2005, the Energy Policy Act
extended DST, we're now participating in the moving
forward of one hour every day for almost 7 months. Mr.
Chairman and members of the committee, I don't have
any personal ambition about repealing DST or not, but
I would like to bring to your attention is some of the
effects that DST has differently than other states on
Alaskans, and Americans in general.
9:02:59 AM
SENATOR COGHILL joined the committee meeting.
SENATORY MCGUIRE joined the committee meeting.
SENATOR MACKINNON reviewed statistics from a study referring to
health consequences from DST as follows:
I know each of you are aware of the heavy incidences
of suicide in Alaska. I alluded to this in a previous
session. When I first brought forward DST I asserted
that there may be a relationship between suicide and
DST and it's just the flipping, it's the changing of
times and how everyone's body associates itself with
the sun. We are creatures of this world and the sun
and the moon actually does have an effect on our
wellbeing and as we move back and forth between these
two times that are artificially put before us by the
U.S. Government, we are affecting people's health.
In your packets there are studies, we have studies
that show that heart attack rates for men in the first
24 or 48 hours coming out of DST in March that your
heart attack rates increase by almost 5 percent; as
well, we have a study that shows the rates of suicide
for men. There's also issues regarding safety in the
workplace and car crashes that happen more frequently
in the spring. We have feedback from across the state,
but specifically Northwest Alaska regarding attendance
issues in schools as well as testing issues for our
students and how students actually have lower
performance rates when we move on and off of DST.
While I haven't provided it, I do have the
documentation for you, we have studies regarding
energy and the increased energy cost, at least in
Indiana when they moved on to DST and they saw an
increase of $9 million overall for that increase. What
I'm here to tell you is in the past we've moved on and
off because of energy issues because of DST and while
that may or may not be a fact, from my perspective, we
have adverse health effects with this flipping on and
off.
9:06:13 AM
SENATOR MAKINNON addressed support for SB 6 as follows:
I always like to know who is in support and who is in
opposition to different pieces of legislation so that
we may make sure we bring those particular
constituencies to the table when we talk about policy
issues that could affect businesses or health. So I
would just advise you that some feedback I've received
is from the financial markets, they are concerned that
moving off of DST would create their employees having
to come to work one hour earlier, so we would be off
of Wall Street per se by five hours for almost seven
months out of the year, so that is a concern that
those employees would have to come to work earlier;
but, I would refer you to other personal testimony,
Mr. Dan Cuddy, [Chairman] of First National Bank
Alaska, is in favor of moving the time zone, that's
just one instance of people with different
perspectives of this issue, but I wanted to make sure
you knew that from a financial perspective people
would have to come to work earlier, possibly to meet
those markets or change the way that they do business
in some way. To counteract that particular assertion,
we do have people that believe that technology has
brought us a long way and that those business
practices could be accommodated in this world for
Alaska.
The second group I have heard from when I carried this
bill in the past was the networks and the networks
said that they may have trouble bringing live TV, like
a live football game may be a challenge because of
timing issues; so to try to address that particular
need we extended the effective date out until 2017 so
that those that had to schedule things like Alaska
Airlines who we are reaching out to and others that
have scheduling issues, cruise ships as an example,
that they would have a full year and a half to
implement changes and so they could respond. So we
have tried to be responsive to people who have
suggested troubles for their particular industry. In
addition, I had a group of individuals before me
yesterday during a meeting environment that was
talking to me about DST, those are private tourism
companies that have direct schedules to when a cruise
ship docks and the specific folks spoke to me
yesterday said there may be difficulty getting the
last helicopter flight or the last air flight during
the evening if we moved forward in time and stayed
there.
In favor of DST opposition I believe are over 50
percent of Alaskans. We have a survey that is opening
up online right now, that's at AlaskaSenate.org\DST.
The last time I had this legislation we had over 500
people from across the Alaska, specifically our
teachers in Northwest Alaska and as I've said before,
are supportive and talked to increased disruption I
their classroom.
9:09:42 AM
SENATOR MACKINNON summarized that the DST issue is very
important to Alaskans. She noted that she had introduced similar
legislation six years prior and added that Senator Wielechowski
also introduced a bill during the Session. She said the
difference between the bill she introduced 6 years ago and SB 6
was that the previous bill was tied to specific DST dates. She
explained that the federal government can change dates at any
time and Alaska would then randomly be forced back on DST. She
said SB 6 is tied directly to the federal government's code on
time versus the specific dates. She added that the effective
date is further out to accommodate those that may be adversely
effected by scheduling.
9:10:28 AM
CHAIR STOLTZE asked Senator MacKinnon to address the effects
from Alaska's time zone consolidation in 1983.
SENATOR MACKINNON noted that Southeast Alaska is geographically
opposed. She noted that Southeast Alaska had given up an hour
from consolidation. She pointed out that Southeast Alaska used
to be linked to Seattle and they still believe their economy is
crucially linked to Seattle. She said Southeast Alaska feels
like they have already given up their hour as a team effort for
the whole state to align. She specified that there are currently
two time zones, Adak and further west is on Hawaii Time.
CHAIR STOLTZE asked how many time zones Alaska had prior to the
consolidation.
SENATOR MACKINNON answered five.
CHAIR STOLTZE commented that Alaska had more time zones than the
Continental U.S.
SENATOR MACKINNON added that her original attempt was to advance
Alaska's time zone and stay off of DST so Alaska would be three
hours off of the stock markets and aligned with Seattle. She
revealed that Alaska was told that the state could not do that.
She said SB 6 is specific about the revolving back-and-forth
issue that is directly related to health that is supported with
statistics. She conceded that an additional conversation is
needed at some point to address the consolidation of five time
zones. She noted that the Northwest Arctic's students are
impacted from the artificial time change when the sun is at its
highest at 3:00 p.m. rather than noon. She stated that sun-time
has a significant impact on health. She revealed that while
serving on Alaska's Suicide Prevention Council, she hypothesized
whether there could be an issue with Alaska's sun-time versus
suicide rates and noted that she did not have any proven studies
when she carried her previous bill six years ago. She asserted
that she now has some initial research that addresses sun-time
versus suicide rates.
CHAIR STOLTZE asked what authorizing entities must be contacted
for time zone changes and inquired what the next steps are
should SB 6 pass.
SENATOR MACKINNON replied that a letter would be issued by the
Alaska Department of Transportation (DOT) to the federal
government for the state to make a case for changing a time
zone.
9:13:36 AM
ERIN SHINE, Staff, Senator Mackinnon, Alaska State Legislature,
Juneau, Alaska, explained that changing a time zone requires a
two-step process. She specified that the state would have to
exempt itself from the Uniform Time Act and then either pass a
resolution or executive order to petition the U.S. DOT.
CHAIR STOLTZE noted that Senator Wielechowski has a companion
bill. He asked Senator Wielechowski for any comments.
SENATOR WIELECHOWSKI explained that he has met with Senator
MacKinnon and supports SB 6. He noted that when he first ran for
office going door-to-door, he was surprised at the magnitude of
feeling that people have about DST. He revealed that he surveyed
his constituents a year ago and 75 percent supported changing
DST.
CHAIR STOLTZE commented that the feeling from constituents is
probably higher during March and October.
SENATOR HUGGINS concurred that his constituents feel the same as
Senator Wielechowski's constituents. He asked if the
Administration supports SB 6.
SENATOR MACKINNON answered that a request was made to meet with
the Governor's office and to date there has not been a response
that allows her to ask the question.
SENATOR HUGGINS noted that receiving word from the
Administration is important in order to unite the regions and
understand the rational and the Administration is the right
place to do that. He apologized for addressing DST over the past
years because it is artificial and people realize that. He
commended Senator Mackinnon for taking on the DST task once
again.
9:16:21 AM
SENATOR MCGUIRE noted that she has supported the DST change in
the past. She said a series of economic and health impacts were
noted and pointed out that the committee had not heard whether
the Chamber of Commerce supported SB 6 due to possible DST
impact on workplace efficiency.
MS. SHINE noted two DST studies that show a financial impact on
businesses where an increase in non-work related websites are
accessed as well as an increase in workplace injuries during the
time switch in the spring when an hour is lost.
SENATOR MACKINNON noted that an article pointed out that
thousands of hours are lost as far as gross domestic product by
just changing mechanical clocks twice a year.
SENATOR COGHILL asked why the U.S. DOT must be involved.
SENATOR MACKINNON explained that the U.S. DOT acts as a central
location to notify other countries. She reiterated that the
state has to make a case for a time zone change with a
resolution.
9:19:47 AM
SENATOR COGHILL asked if the Governor is involved in the time
zone change request.
MS. SHINE replied that to change Alaska's time zone, the state
would have to petition or pass a resolution requesting the U.S.
DOT to change the state's time zones.
SENATOR COGHILL asked if a resolution should be prepared in
anticipation of a time zone change.
SENATOR MACKINNON replied that she will let Senator Coghill know
as soon as she talks to the Governor.
CHAIR STOLTZE explained that in 1983, Governor Sheffield made
the personal request to then Secretary of Transportation,
Elizabeth Dole during the Regan Administration. He specified
that a state generally asks permission for a time zone change
rather than demanding a change from the federal government.
MS. SHINE answered that Chair Stoltze is correct.
SENATOR HUGGINS stated that to say Alaska is in a different time
zone is an understatement. He noted that the number of days to
gain 1 hour of daylight after DST is 6 days in Barrow and 40
days in Miami.
CHAIR STOLTZE announced that the committee will proceed to
public testimony.
9:22:44 AM
LYNN WILLIS, representing himself, Eagle River, Alaska, Supports
SB 6. He said most Alaskans want to stop DST. He pointed out
that he is concerned that the bill will meet the same fate as
five previous bills that did not pass the Legislature since
1999. He stated that the 1983 time zone change placed Alaska's
southcentral and western communities on permanent DST. He noted
that DST causes problems with the human circadian rhythm where
the sun is at its highest during DST at 2:00 p.m. in Anchorage,
3:00 p.m. in Kotzebue and Nome. He opined that proponents have
argued that DST is necessary for commerce, a claim that is no
longer valid due to the impact from the internet's 24 hour a day
business cycle. He said DST works in the temperate zones and
tends not to work in the polar or equatorial regions where the
length of day either varies significantly or hardly at all. He
stated that when DST was moved up a month, mornings without
daylight were extended which makes for dangerous working
conditions for outdoor workplaces. He summarized that DST does
not save energy and noted that no testimony has ever been given
or information provided that cites energy savings in Alaska.
9:27:50 AM
CHAIR STOLTZE noted that he is a co-sponsor for SB 6. He
revealed that Senator MacKinnon's previous legislation passed
through the House Finance Committee.
9:28:25 AM
CHAIR STOLTZE announced that committee will stand at ease.
9:28:37 AM
CHAIR STOLTZE called the committee back to order. He stated that
now is the time for the Administration to step forward and note
their issues or concerns. He asked Senator MacKinnon if she had
any questions for the Administration.
SENATOR MACKINNON noted that the financial impact on the state
changing its "mechanicals" twice a year is not known.
CHAIR STOLTZE asked Mr. Mayer for a comment on DST's fiscal or
technical impacts on the state.
9:30:02 AM
THOMAS MAYER, Director, Division of General Services, Alaska
Department of Administration (DOA), Juneau, Alaska, explained
that the DOA manages approximately 20 buildings and the vast
majority are on electronic systems that automatically adjusts.
He specified that electronic systems are simple to adjust and
there is minimal savings if Alaska goes off of DST. He said for
the buildings that DOA manages, most have had a significant
amount of energy work done. He asserted that the DOA does not
see any fiscal impact to the department at all.
CHAIR STOLTZE stated that it is hard to put a value on a
happier, healthier, more rested workforce.
MR. MAYER replied that what Chair Stoltze noted is pretty hard
to do from a facility standpoint. He pointed out that he was
speaking specifically from a facility standpoint and did not
claim to have personal knowledge of whether or not having DST
will make him healthier or not.
SENATOR COGHILL asked Mr. Mayer if the DOA manages some of the
DOT's facilities.
MR. MAYER answered no. He explained that the DOA strictly
manages facilities assigned by the Legislature or the
Administration. He specified that DOA manages 12 public building
fund buildings and 6 non-public building fund buildings which
are traditionally non-office space buildings that are warehouse
type buildings. He specified that DOT manages their own
buildings and noted that they have a very large portfolio of
buildings as well.
SENATOR COGHILL asked if there is anything that Mr. Mayer would
find in opposing the resolution he previously proposed to the
Administration to exempt the state from DST.
MR. MAYER answered no.
SENATOR COGHILL noted that DOT should be on the record due to
their impact from DST.
CHAIR STOLTZE opined that there is consensus to move SB 6 out of
committee. He asserted that all of the Administration's
departments should provide comments on any DST challenges.
9:34:21 AM
JAY BUTLER, MD, Chief Medical Officer, and Director, Division of
Public Health, Alaska Department of Health and Social Services,
Anchorage, Alaska.
CHAIR STOLTZE announced that the committee will not ask Dr.
Butler to take a position and asked for general comments. He
stated that Dr. Butler's input will not be viewed as the
Administration's position.
DR. BUTLER addressed the increased rates of heart attaches after
the period DST takes effect and pointed out that the study came
from Sweden, an Arctic region rather than a temperate area. He
noted another study that revealed increased rates of motor
vehicle accidents during the day after the one hour DST change
in the spring. He revealed that he had recently looked at the
seasonality of suicide. He explained that there is a peak in
suicide in mid-summer and another in November. He stated that he
cannot say that there is a causation in November is due to the
change back to standard time from DST.
CHAIR STOLTZE thanked Dr. Butler and asked if anyone would like
to testify.
9:36:55 AM
MIKE STEDMAN, business owner, Wings Airways, Juneau, Alaska,
explained that Wings Airways is a tour operator business that
caters to the cruise ships in the summer time. He added that
Alaska Seaplanes is also a business that he owns that acts as a
small commuter airline that flies throughout Southeast Alaska.
He said he opposes SB 6 because in the summer time, as the
daylight starts to dwindle, there are late trips that will be
impacted because of the daylight issue. He explained that
floatplanes cannot land on water during darkness. He revealed
that Wings Airways' cruise ship business will realize a 20
percent reduction in tours as well as a loss of charter business
on Alaska Seaplanes due to the loss of DST. He asserted that SB
6 is a commerce issue that will cause a big impact with a 20
percent loss in revenue for his business.
9:38:50 AM
MIKE WILSON, member, Leadership Council, National Federation of
Independent Business-Alaska, Juneau, Alaska, noted that he
operates an aviation business in Juneau and stated that his
business finds DST to be an inconvenience.
CHAIR STOLTZE noted that Mr. Wilson's company is a helicopter
tour business.
MR. WILSON answered correct.
SENATOR COGHILL noted that the timeline for the bill's sponsor
takes the movement of cruise ships into account. He asked if Mr.
Wilson's company is in the tourism business.
MR. WILSON answered correct. He stated that his business will
not be affected because his permits require tours to be
completed by 8:00 p.m.
CHAIR STOLTZE asked if Mr. Wilson's permit is based on a local
ordinance.
MR. WILSON answered that the permits are federal and regulated
by the U.S. Forest Service.
9:40:41 AM
CHAIR STOLTZE announced that public testimony is closed. He
asked Senator MacKinnon if she had spoken to the education
community regarding DST's impact.
SENATOR MACKINNON replied that her office is reaching out to
every opportunity that it can. She said that she will verify
that her staff has reached out to all of the school districts in
Alaska.
CHAIR STOLTZE noted that a principal in his district is
addressing DST to advise the district's superintendent.
SENATOR MACKINNON specified that she does not want to adversely
affect any business. She said after she heard from Mr. Stedman,
she reached out to the cruise industry and noted that Mr.
Stedman had indicated that it is difficult to change the
schedules for the cruise ship because her intention is not to
harm anyone but to help people in any way possible. She conceded
that there are tradeoffs and asserted that the health aspect is
the overwhelming concern for her in advancing SB 6. She said she
will run the numbers in the Senate Finance Committee to
absolutely understand how businesses will be disadvantaged by SB
6.
9:43:10 AM
CHAIR STOLTZE stated that he is confident that Senator MacKinnon
will continue to research the bill's pros and cons. He said he
has no discomfort in moving SB 6 forward and noted the bill's
zero fiscal note. He added that Senator MacKinnon will further
study any impacts and noted that the Administration certainly
has a right to change the fiscal note.
SENATOR MACKINNON stated that her purpose is to have a policy
discussion in front of the people of Alaska. She noted that she
had discussions with the Alaska Permanent Fund Corporation and
the Department of Revenue regarding the negative impact from SB
6 due to the added time difference when dealing with the
financial markets. She reiterated that her concern pertains to
the issue of health. She said she would consider a second step
to review Alaska's time zones after DST is addressed. She
reiterated that the state's legal department revealed that
Alaska cannot change to permanent DST.
SENATOR COGHILL commented that every policy the committee brings
up uncovers another need for policy. He opined that the time
zone really answers more to the objections of this bill than
almost anything that he has seen so far. He said if the state is
going to be under one time zone, then the flexibility between
the furthest east and the furthest west are just going to be in
huge tension with DST highlighting that. He asked if there is
anything the Legislature can do to help bring the time zone
issue up. He assumed that the time zone change is a federal
issue. He inquired if a resolution is required for a time zone
change.
9:45:22 AM
SENATOR MACKINNON replied that she has reached out to Alaska's
congressional delegation. She pointed out that different states
at different times are all trying to get off of DST and
specified that time-flipping is a health problem. She noted that
Dr. Butler had suggested that time-flipping is similar to jet-
lag where some people require 5 to 10 days to adjust.
She summarized that there is nothing that can be done at the
current time except recognizing DST's health consequences
followed by addressing Southeast Alaska's business issues. She
asserted that Alaska's northern and western communities,
especially children, struggle with being three hours off of
their circadian rhythm. She noted that March and November are
higher points of suicide rates in Alaska and she is trying to
see if the rates occur after the DST changes. She opined that
the state is having huge issues and dealing with DST from a
biological perspective is the right way to go.
9:48:10 AM
SENATOR WIELECHOWSKI noted that switching permanently to DST
solves a lot of the business community issues. He asked what
Senator MacKinnon's concerns are with switching to permanent
DST.
SENATOR MACKINNON answered that she is in favor of a permanent
DST and noted that she had originally asked the Legislature's
legal department to look at permanent DST. She revealed that the
legal department said the state could not switch to permanent
DST. She added that the National Conference of State
Legislatures revealed that several other states were actually
proceeding with eliminating DST. She added that changing DST and
time zones at the same time previously delayed legislation. She
reiterated that addressing Alaska's time zones should occur
after the state is taken off of DST.
CHAIR STOLTZE noted that he erred in saying that there was a
fiscal note. He added that the Administration has the
opportunity to express any concerns or potential costs.
9:50:17 AM
SENATOR WIELECHOWSKI moved that the committee move SB 6, [29-
LS0111\H], out of committee with individual recommendations and
zero fiscal note.
9:50:27 AM
CHAIR STOLTZE announced that hearing no objection, SB 6 moves
from committee.
SJR 2-CONST. AM: G.O. BONDS FOR STUDENT LOANS
9:50:49 AM
CHAIR STOLTZE announced that SJR 2 is the committee's next order
of business.
9:51:29 AM
SENATOR ANNA MACKINNON, Alaska State Legislature, Juneau,
Alaska, SJR 2 sponsor, explained that SJR 2 proposes to amend
Alaska's Constitution, a process that is an extremely serious
issue. She referred to page 30, Article 9, Section 8 in the
Constitution regarding state debt as follows:
No state debt shall be contracted unless authorized by
law for capital improvements or unless authorized by
law for housing loans for veterans and ratified by a
majority of the qualified voters of the state who vote
on the question; Mr. Chairman, what that means is that
we can't right now use the full faith and credit for
student loans, so our corporation goes out into a bond
market and uses a revenue stream to provide
opportunities for Alaskans to borrow.
Currently the state interest rates for student loans
is 6.7 percent and the federal rate is 4.66 percent;
should this be passed into law, the question would go
before voters in the 2016 election and the first time
we can try to reduce student loan debt, or at least
the interest rate we charge, would be in 2018 where we
would offer a bond and the first time a student could
benefit from this is 2019.
CHAIR STOLTZE pointed out that voting does not have to occur
during the general election.
SENATOR MACKINNON answered correct and noted that voting could
occur in a special election.
She declared that SJR 2, should it be passed by the people of
Alaska, would provide an opportunity to reduce student loan debt
through refinancing or lowered interest rates.
9:53:38 AM
KRISTEN PRATT, Staff, Senator MacKinnon, Alaska State
Legislature, Juneau, Alaska, confirmed that Senator MacKinnon
had addressed the resolution's main points.
CHAIR STOLTZE asked to verify that there were similar mechanisms
for veterans' bonds in 1982 and 2002. He inquired if there are
any other bond authorization mechanisms.
SENATOR MACKINNON replied that bonding mechanisms have been for
capital improvements that were originally in the Constitution.
She noted that Chair Stoltze pointed out that the Constitution
was amended in 1982 to include veteran housing. She reiterated
that SJR 2 specifically allows an opening for something that is
not capital. She noted that there has been conversation about
trying to broaden the resolution to give the Legislature the
full power and authority to use the state's Triple-A credit
rating. She summarized that SJR 2 addresses Alaska's students
who are adversely effected by the revenue bond stream and that
the people of Alaska support the change.
CHAIR STOLTZE noted that SJR 2 is a constitutional amendment and
that he intends to have the Department of Revenue address
questions. He asked if there was a time limit or if there was a
substantive change on the veteran's housing bonds authorization
that required the Legislature to do a new constitutional
amendment.
9:54:27 AM
JERRY BURNETT, Deputy Commissioner, Treasury Division, Alaska
Department of Revenue, Juneau, Alaska, explained that the
constitutional amendment in 1982 allowed for veterans' mortgage
bonds and additional veterans' mortgage bonds was authorized in
2002. He stated that he assumed the change in 2002 was strictly
an authorization and not a constitutional change.
CHAIR STOLTZE asked to verify that 2002 was not another
constitutional amendment.
MR. BURNETT answered correct. He remarked that using general
obligation bonds for student loans would have no adverse effect
on the state's credit rating. He noted that student bonds would
not be included in the state's calculation of state supported
debt due to the secured revenue from the student loan program.
He revealed that he sits on the board of the Student Loan
Corporation and the Department of Revenue is familiar with the
bonding issue. He pointed out that due to adverse market
conditions, legislation was passed in 2009 to allow student
loans to be financed directly out of the general fund.
CHAIR STOLTZE asked if the difficulty was linked to federal
laws.
MR. BURNETT answered no. He explained that the change was in
response to the financial crisis where direct student loan
lending was locked-up.
9:58:02 AM
CHAIR STOLTZE recalled that Postsecondary Education prompted the
Legislature to pass some statutory changes on requirements.
MR. BURNETT replied correct. He specified that the changes
improved the program with additional credit standards. He added
that legislation was passed to allow the state to have a letter
of credit to support the Student Loan Program's borrowing and
finance student loans directly from the general fund.
CHAIR STOLTZE noted that enhanced levels of securitization by
the borrower was added.
SENATOR MACKINNON noted that the rating for student credit was
changed where students were required to either use parents'
credit ratings or have parents co-sign for loans.
SENATOR WIELECHOWSKI noted that there are very interesting
provisions in the Constitution's original section about the
state being able to contract debt for the purpose of "Repelling
invasion, suppressing insurrection, and defending the state in
war." He asked what the current student loan rates were and how
much the interest rates could possibly be lowered.
MR. BURNETT answered that Diane Barrans could address questions
regarding interest rates. He stated that borrowing from the
Triple-A rated general obligation debt will result in low
interest rate loans when the current money market is sub-three
percent.
10:00:26 AM
SENATOR HUGGINS asked what the default rates were for veterans'
mortgages and student loans.
MR. BURNETT answered that he was not certain. He explained that
the programs are structured in a way that there's additional
security beyond the borrowing to allow a default rate that does
not directly hit the lending.
SENATOR HUGGINS noted that student loans have some forgiveness
provisions and pointed out that mortgages cannot be forgiven. He
asked what the student loan default rate was.
10:02:06 AM
DIANE BARRANS, Executive Officer/Executive Director, Alaska
Student Loan Corporation (ASLC)/Alaska Commission on
Postsecondary Education (ACPE), Juneau, Alaska, explained that
the current default rate for student loans is 6.6 percent on the
overall portfolio. She conceded that the default rate would
appear high when compared against commercial loans.
She explained that funding for student loan debt is over-
collaterized to ensure that the debt to loan ratio is never one-
to-one. She specified that the loan program always has excess in
order to offset any impacts to the program's ability to pay debt
service or outstanding loans.
She added that there have been no loan forgiveness provisions
for some years. She noted that forgiveness for the Teacher
Education Loan is being phased out due to an inability to fund
the program with debt.
CHAIR STOLTZE asked to verify that there is a medical provider's
loan forgiveness program.
MS. BARRANS answered correct. She explained that there is a
Washington, Wyoming, Alaska, Montana, and Idaho (WWAMI) Graduate
Medical Program where the state directly funds Alaska students'
participation with general funds. She specified that students in
the WWAMI Program have an obligation to work in the state in
order to receive loan forgiveness. Students that fail to comply
with loan requirements have to repay the support the state has
provided.
10:04:17 AM
CHAIR STOLTZE asked to verify that there is a medical provider
forgiveness program that is paid for with general funds rather
than the student loan program.
MS. BARRANS noted that Chair Stoltze was referencing the
Providing Support-for-Service to Health Care Practitioners
(SHARP) Program which the Legislature has funded. She explained
that the SHARP Program pays for a percentage of a student loan
if an individual works in eight different medical specialties
and works in certain underserved areas.
SENATOR WIELECHOWSKI asked what the current student loan
interest rate is and what the percentage will be if SJR 2
passes.
MS. BARRANS answered that the current student loan interest rate
is 6.7 percent. She explained that the ASLC Board annually
approves borrower benefits and noted that individuals attending
school in Alaska receive a 0.50 percent discount, resulting in
an interest rate of 6.2 percent.
She noted that financial advisors have indicated that passing
SJR 2 could result in interest rates being lowered by 1.0 to 1.3
percent.
SENATOR HUGGINS noted that the University of Alaska is looking
at homegrown-teachers that target Alaska's bush-communities and
asked if a loan forgiveness will be instituted to support the
program.
MS. BARRANS answered that supporting homegrown-teachers with a
loan forgiveness program similar to SHARP is a possibility
rather than the Teacher Education Loan that is currently being
phased out. She explained that the SHARP program has
successfully targeted underserved areas where the Teacher
Education Loan resulted in a small percentage actually in the
field teaching where the program ideally targeted them.
10:07:41 AM
SENATOR COGHILL asked how the bonding process would work if SJR
2 passed.
SENATOR MACKINNON answered that the revenue source for the
bonding service will change where a lower interest is attained
through the full faith and credit of the State of Alaska.
MS. BARRANS explained that general obligation bonds addresses
the amount of debt beyond an authorized cap. She specified that
the ASLC Program goes into the market in February or March in
order to coincide with the academic year. She said one of the
advantages of having general obligation authority is the process
will be more expedited because there will not be the kind of
labor intensive work involve with rating agencies that examine
student loan cash flow portfolios.
10:09:57 AM
SENATOR COGHILL asked to verify that general obligation bonding
will smooth out some of the cyclical issues by having a ready-
bondable system.
MS. BARRANS answered yes.
SENATOR COGHILL asked if the definition for postsecondary
education being inserted into the Constitution needs to be
flexible.
MS. BARRANS answered that the use of the funding is controlled
by the Legislature through the student loan statutes that very
explicitly set out what the loans can be used for. She noted
that student loans include vocational training that meets
certain criteria.
10:12:01 AM
SENATOR WIELECHOWSKI asked what the formula is to come up with
the current 6.7 percent interest rate.
MS. BARRANS answered that the fairly complicated formula looks
at the cost of issuance, the cost of debt which ASLC pays, and
the cost of servicing.
SENATOR WIELECHOWSKI noted that the federal interest rates are
much lower, 4.6 percent for 2014-2015. He pointed out that the
state's interest rate for students is over two points higher
than the federal interest rate, a significant difference for the
tens of thousands of dollars that students take on. He asked if
Ms. Barrans had a component breakdown the student interest rate.
MS. BARRANS answered that Congress sets the rate. She explained
that because the federal government is not financing the loans
through the financial markets, the federal government can
essentially choose to subsidize the loans to whatever extent
they choose to and that is a matter of federal policy. She said
an analogy would be if the State of Alaska funded the ASLC
Program with cash and the State of Alaska could set the rate at
whatever rate they chose to.
SENATOR MACKINNON pointed out that most students are referred to
the federal program to access lower interest rates first, the
state's program second, and the private sector third. She noted
that the private sector's interest rates depend on what
educational career the student is pursuing.
MS. BARRANS agreed with Senator MacKinnon. She pointed out that
the Federal Stafford Loan is also available for students, but
the interest rate is 0.50 percent higher than the state's rate
at 7.21 percent. She added that the ASLC Program also makes
students and parents aware of the Family Education Loan as well
as the Supplemental Education Loan. She revealed that when the
instate discount is factored in, the state's loan options are
1.0 percent below the federal rate.
10:15:58 AM
SENATOR HUGGINS asked Ms. Barrans to explain President Obama's
proposal to offer education at community colleges.
MS. BARRANS answered that the proposal is in the President's
budget. She detailed that the proposal comes with "strings"
attached so the entire concept is not free, but the proposal
would reduce cost.
SENATOR HUGGINS asked for an explanation of how the "strings"
attached to the program will affect Alaska's students.
MS. BARRANS answered that she has not done the analysis nor has
she spoken with the University of Alaska.
SENATOR HUGGINS stated that he is not supportive of the
President's concept with the attached "strings." He asked if
Alaska has a community college campus that will meet the
concept's definition.
MS. BARRANS answered yes. She said Prince William Sound
Community College and most other campuses that primarily offer
associates or lower credentials would qualify. She noted that
there are income contingent provisions that are in the
President's proposal where students would not qualify if their
family incomes reach certain levels.
10:18:23 AM
SENATOR MACKINNON noted that she has a son with a student loan
debt in Alaska. She said she did not think that she will be
positively impacted because her son intends to pay off his
student loan debt by 2019.
CHAIR STOLTZE inquired if a student's degree is taken into
account when assessing a student loan.
SENATOR MACKINNON replied that there is an education component
of the student loan program where monthly payments are
calculated based upon a student's career choice.
CHAIR STOLTZE noted that the data provided from the calculation
was strictly informational.
SENATOR MACKINNON replied yes.
SENATOR WIELECHOWSKI asked what the cost breakdown was for the
6.7 percent rate. He asked what the three components are that
make up the percentage.
MS. BARRANS explained that the board annually sets the interest
rate that is derived from the three components.
SENATOR WIELECHOWSKI asked if ASLC is a breakeven operation or
if money is returned to the general fund.
MS. BARRANS answered that there have been dividends that ASLC
has paid to the state. She noted that ASCL has not paid a
dividend to the state since 2009. She explained that ASLC's goal
is to do just enough better than breaking even to keep the
organization in the black.
10:21:26 AM
SENATOR WIELECHOWSKI asked if Ms. Barrans had any sense of how
the state's interest rate compares with other states.
MS. BARRANS answered that the state's interest rates are quite
comparable to other states, but noted that Texas is the
exception with a program that is funded through general
obligation bonds. She pointed out that Texas actually has loans
that range from a 0.0 percent to 5.5 percent.
SENATOR WIELECHOWSKI asked if the Texas model is something
Alaska could replicate.
MS. BARRANS answered that replicating a program similar to Texas
would seem unlikely due to the state's current financial
climate. She explained that Texas has built their large fund
source over a 40 year period. She noted that Texas is seriously
looking at ending their 0.0 interest rate.
SENATOR COGHILL asked what the cost of debt is for ASLC.
MS. BARRANS answered that ACPS actually services the loans for
the ASLC and there are costs associated with servicing. She
revealed that other than servicing, the other costs include the
interest paid on the debt and the onetime cost of issuance for
the bond council rating agency fees.
CHAIR STOLTZE announced that the committee will hear public
testimony.
10:24:29 AM
LANCE STEVENS, President, Juneau Chamber of Commerce, Juneau,
Alaska, Supports SJR 2. He said the Juneau Chamber of Commerce
feels that any opportunity to increase the participation in
continuing education increases the ability to hire and recruit a
qualified workforce. He asserted that driving down student debt
servicing costs increases the opportunity for repayment, lowers
default rates, and sets individuals up for long term success.
SENATOR HUGGINS noted that some states with large industrial
bases have companies that buyout student loans. He asked if
Alaska has programs that buyout student loans.
MR. STEVENS noted that the Juneau Chamber of Commerce offers
class reimbursement within its organization for classes that are
business oriented. He specified that students pay upfront and
reimbursement is based on achieving a certain qualifications. He
said what Senator Huggins referred to is more industry specific.
10:28:04 AM
MIKE COONS, representing himself, Palmer, Alaska, stated that
student loans negatively impact taxpayers and harms students'
and parents' credit ratings. He opined that there needs to be
more encouragement for Alaska's parents to save more money
rather than borrowing. He inquired if the Alaska student loans
can be used at colleges outside of the state. He added that
students who attend colleges outside of Alaska tend not to
return. He noted that the 6.6 percent default rate was
substantial and asked what the specific default rate was for
veterans.
10:32:57 AM
CHAIR STOLTZE noted that he shares a lot of the same personal
values with Mr. Coons about personal responsibility and being
debt free.
He noted that Ms. Barrans had testified in the past that
Alaskans who did not return to the state actually had a higher
repayment rate than students who remained in Alaska.
MS. BARRANS acknowledged that Chair Stoltze was correct.
CHAIR STOLTZE added that the state needs to strive to correct
the default percentage for instate students.
10:34:23 AM
DAVID NEES, representing himself, Anchorage, Alaska, noted that
he is concerned about amending the Constitution to bond for
something that is not real property. He stated that he is
worried that additional programs might be considered to receive
lower interest rates from the state. He asked what the current
default rate was. He pointed out that the current loan program
pays for 90 percent or 100 percent of the ACPE's budget. He
inquired if a lowered loan rate program will ultimately be paid
for from the state's general fund.
10:36:48 AM
MS. BARRANS reiterated that the current student default rate is
6.6 percent on the outstanding portfolio. She pointed out that
the default rate will continue to decline because a higher
credit requirement has been in place for the last several years.
She said the structure from the proposed bill should have no
effect in the way ACPE's activities are funded. She stated that
ACPE does not expect to shift any of its supported cost to the
general fund and costs will continue to be paid from ASLC's
receipts.
10:38:00 AM
CHAIR STOLTZE stated that he suspects the bill will receive more
scrutiny in the Senate Finance Committee.
SENATOR HUGGINS asked if ACPE has wage garnishment authority.
MS. BARRANS answered yes. She said the Legislature has given
ACPE the authority by statute to issue administrative wage
garnishments. She stated that wage garnishment is another tool
that ACPE uses on a regular basis. She added that ACPE also
garnishes Permanent Fund Dividends (PFD). She revealed that ACPE
is third in line for PFD garnishment after child support and
court ordered restitution.
CHAIR STOLTZE announced that seeing no additional requests,
public testimony is closed.
SENATOR WIELECHOWSKI asked after garnishment procedures, what
default percentage is actually not recovered.
MS. BARRANS replied that she can provide write-off information.
She noted that some write-offs occurs due to death or total
disability.
CHAIR STOLTZE asked if the ASLC oversees its default
collections.
MS. BARRANS answered that ACPE does instate collections and a
third party collection agency is used to pursue some instate and
out of state collections.
CHAIR STOLTZE asked what percentage ACPE collects from its
defaulters.
MS. BARRANS answered that 15 percent is considered a good rate
for badly-aged debt.
10:41:59 AM
SENATOR COGHILL moved to report SJR 2, [29-LS0010\W], from
committee with individual recommendations and attached fiscal
note(s).
10:42:19 AM
CHAIR STOLTZE announced that seeing no objection, SJR 2 moved
out of committee.
CHAIR STOLTZE noted that the committee meeting did not have time
to address Ballot Measure No. 2 (13PSUM) - An Act to Tax and
Regulate the Possession of Marijuana.
10:43:45 AM
There being no further business to come before the committee,
Chair Stoltze adjourned the Senate State Affairs Standing
Committee hearing at 10:43 a.m.