9:11:34 AM CS FOR SENATE BILL NO. 76(HES) "An Act establishing a higher education savings program for eligible children who were placed in out-of-home care by the state; and providing for confidentiality of identifying information of a beneficiary under the program." This was the first hearing for this bill in the Senate Finance Committee. 9:11:52 AM Co-Chair Stedman commented that although this legislation would have no impact on the adult population, the benefits could be significant for future generations. 9:12:07 AM SENATOR JOHNNY ELLIS, Sponsor of the bill, testified that this proposal had been offered in previous legislatures, although had not been passed into law. The legislation before the Committee had "even stronger support" and "no known opposition." This bill would create the A.S.P.I.R.E. Program, an acronym of Alaska's Youth Succeed When People Invest Resources in Education. The pilot program was designed to connect churches, community groups, nonprofit organizations, businesses and individuals, with foster children for the purpose of providing "educational opportunities beyond high school". Senator Ellis told of the approximately 2,000 children of various ages who reside in "out of home placement" and are commonly referred to as foster children. Each year approximately 100 of those foster children "age out of the system". Foster parents could not be expected to fund the college education of these youth given the expenses these parents incur in raising the children. Nor could grandparents or other relatives be expected to establish higher education funds. Additionally, "government can't do everything." Senator Ellis stated that the education of these youth could be addressed through a "non-governmental approach". These youth have "very few educational opportunities and some pretty bad outcomes" once they reach the age of legal adulthood and are no longer served by the children's services system and move "from loving homes". Senator Ellis advised that the ASPIRE program utilized a similar program administered in the state of Missouri as a model, "as a way to connect a lot of the compassion and generosity" of the private sector. Contributors could essentially adopt youth for educational purposes. This legislation "is making use… of the award winning, brilliant, terrific 529 college savings accounts." He qualified that the aforementioned statement was somewhat misleading because the funding could be expended at any educational institute for any approved educational expense. Although administered by the University of Alaska, the funding could be utilized for any educational program in the nation. This would provide flexibility for foster children to "achieve their potential." 9:15:17 AM Co-Chair Stedman requested further explanation of how the funds contributed to this program could be expended. 9:16:04 AM GABE ACEVES, Staff to Senator Johnny Ellis, testified that once established, the funds held in these savings accounts could be expended for any form of further education. This would include not only university costs, but also vocational institutions and community college courses. 9:17:04 AM Co-Chair Stedman listed examples of vocational occupations as welders, machinists, auto and diesel mechanics and hairdressers. Co-Chair Stedman asked the portability of the savings account in the event that the designated youth opted not to further his or her education. 9:17:32 AM Mr. Aceves explained that the accounts would be administered and controlled by the State. If the youth designated on an account did not utilize the funds, the beneficiary could be changed. 9:18:10 AM Co-Chair Stedman pointed out that the accounts commonly known as 529 college savings plans are structured to allow for transferability in the event that the child does not expend the funds. Therefore, the provisions of this bill would not implement a new procedure and flexibility would be ensured. 9:18:40 AM JAMES LYNCH, University of Alaska, testified via teleconference from an offnet location that he was involved with the creation of the original University of Alaska college savings plan. Accounts established in the regular plan typically are transferable to relatives of the initial beneficiary. However, accounts established by a faith based organization or as a scholarship could be transferred to any eligible beneficiary. The portability of the ASPIRE accounts would be permitted to any institution of higher education eligible to receive federal financial aid funding. 9:20:44 AM Co-Chair Stedman understood the structure of the original 529 college savings plans is intended to allow parents, grandparents or other relatives to assist in the funding of their children's college education. 9:21:05 AM Mr. Lynch affirmed. Higher education had traditionally been funded through loans; however costs have accelerated at a significantly faster rate than income. Those students of lower economic status would qualify for financial assistance and those students of higher economic status could afford the costs. The college savings plan system is intended to address those students from middle income families. Mr. Lynch expressed that Alaskans receive discretionary income through the Alaska Permanent Fund. The dividend applications include an option to allow recipients to designate up to one- half of the dividend to a college savings plan. Approximately 66 percent of participants are from families with an annual income of less than $50,000. 9:22:57 AM Co-Chair Stedman surmised that this legislation would model the original college savings plan to allow accounts to be established for foster children by corporations and organizations. 9:23:39 AM MIKE LESMANN, Community Relations Manager, Office of Children's Services, Department of Health and Social Services, testified to the Department's involvement and support of this bill. He continued to read his testimony into the record as follows. Children that become wards of the State are sometimes not financially prepared to enroll in postsecondary educational opportunities. The ASPIRE program would create the potential for their community to assist them in that endeavor. If we believe that our children are our future, then this is very important legislation to all of Alaska. 9:24:45 AM Senator Olson referenced the sponsor statement indicating that current statutes relating to confidentiality must be amended to allow for the private contributions for education. He asked if this issue had been a problem in the past. 9:25:07 AM Mr. Lesmann elaborated that this bill would amend AS 47.10.093 to allow the Department to disclose information regarding children in State custody to the University of Alaska so accounts could be established for these children. 9:25:42 AM Senator Olson concluded therefore that confidentiality issues had not arisen. Mr. Lesmann affirmed. 9:25:46 AM Senator Ellis reaffirmed that no such problems had occurred but that the statutory change is necessary to allow the ASPIRE program to be implemented. 9:26:02 AM MICHAEL CURRAN, Program Coordinator, Office of Faith Based and Community Initiatives, Office of the Commissioner, Department of Health and Social Services, testified in support of this legislation. He detailed his credentials working in the "social justice" and "community building" fields, as a teacher and ordained priest. He shared an experience in reading an obituary for a 21-year old former student who had committed suicide. This person had been a foster child, was "bright and intelligent", aspired to be an astronomer, and who could have been accepted into any university. Instead, at the time of his death, this person was homeless and had had no opportunity to receive the education "he deserved." The ASPIRE program could have changed this. Mr. Curran characterized children as a "most precious commodity; they are our future." Foster children should have the same opportunities as a child "born in privilege" or at least in a "stable home situation". 9:30:35 AM Senator Elton asked if the account were considered an asset to the beneficiary how the existence of these funds would affect the ability of that person to secure other financial aid. 9:31:26 AM Senator Ellis indicated he would research the matter and provide a response. 9:31:46 AM Co-Chair Stedman cited language in subsection (a)(1) of Section 47.05.100 Higher education savings program, inserted by Section 1 of the bill on page 1, line 10. This provision required the program to include "a central office, dedicated to faith-based and community services, for development and marketing of the program". He requested an explanation of the envisioned office and the issues it would address. 9:32:12 AM Senator Ellis acknowledged that the provision "sounds expensive" to implement; however, the program would be located within the existing Office of Faith Based and Community Initiatives. 9:32:33 AM Mr. Aceves affirmed. The existing Office would be tasked with undertaking outreach efforts to promote the program. The Office has extensive contact with churches and social services organizations. 9:33:02 AM Co-Chair Stedman next referenced Sec.47.05.400(a)(6) on page 2 lines 9 through 11, pertaining to a procedure for monitoring success of the program. He asked the sponsor to describe the intended procedure. 9:33:39 AM Senator Ellis supported the missions and measures methodology, which applies to all State agencies. This bill does not provide specifics about the procedure that would be implemented for the ASPIRE program. However, he assumed that the number of accounts established, the amount of funds donated and the number of youth participating would be included in any assessment of the program's success. These factors would be "easy to measure". 9:34:47 AM Co-Chair Stedman suggested that the number of accounts, the appreciation of the balances of these accounts, and the amount of donations made by "corporate Alaska" could be utilized. 9:35:10 AM Senator Ellis anticipated that the Office of Faith Based and Community Initiatives would benefit from its efforts to measure success, as the program would be a "flagship" for the Office's intentions. 9:35:53 AM Co-Chair Stedman opined that some youth were not prepared to begin postsecondary education immediately after graduating from high school and wait until they are 23 years of age. He noted the deadline for beneficiaries to participate would be the age of 30 years. He asked what changes would be made to a fund established for a person who does not attend an institute of higher education by the age of 31 years. Mr. Aceves responded that at age 30, the beneficiary would be changed. Mr. Lynch, the Division of Legal and Research Services, and himself, determined this age to be appropriate. The existing college savings plan provides that a beneficiary could retain the account indefinitely; however, the intention for the ASPIRE program would allow for other beneficiaries to participate in the event the original beneficiary opted against doing so. Mr. Aceves qualified that many youth transitioning from foster care are not prepared to immediately continue their education. Many are attempting to establish themselves "in regular life". 9:38:04 AM Co-Chair Stedman understood the regular "529's" are subject to a federal requirement that the beneficiary must begin participation by the age of 30 years. 9:38:20 AM Mr. Aceves deferred to Mr. Lynch who Mr. Aceves recalled testified to a previous committee that the original college savings plan accounts could be held "forever". 9:38:55 AM Co-Chair Stedman stated he would review the issue. 9:39:18 AM Co-Chair Stedman asked if donors would have options to specify a beneficiary or make a donation that could be utilized to assist multiple foster children. 9:39:51 AM Senator Ellis relayed this issue was addressed with the program administered by the state of Missouri. In some instances corporations donate a large amount to the program to be utilized for unspecified foster children. Other accommodations could be made in the ASPIRE program for a donation to be specified for a child of certain circumstances, such as a girl from Rural Alaska who was a victim of abuse and neglect. In other instances, a donor could know a child directly and choose to specify contributions to that beneficiary. Mr. Aceves continued that this issue was discussed extensively with the Department and the decision was reached to establish a procedure to allow a donor to direct contributions to a specific child. In most cases, churches and other organizations would unlikely have direct relationships with specific children and therefore donations would be to unnamed beneficiaries. Beneficiaries would be selected by administrators based on the age of the child and length of time before transition from State custody. Additionally, a mechanism would allow for anonymous donors. 9:42:09 AM Co-Chair Stedman directed attention to the fiscal note providing for a $41,400 appropriation to be expended on set up costs and marketing efforts. 9:42:34 AM Senator Ellis stated the amount was not significant, but would be necessary. In consultation with the Office of Faith Based and Community Initiatives, he determined that the costs could not be absorbed within the existing budget. Funding would be required for the program to be successful. Of the amount requested, $20,000 would be utilized for "additional staff time" and the remainder would be expended on "small print", television and radio "package" to advertise the program. 9:43:58 AM Co-Chair Stedman suggested that information on the program also be provided by the University of Alaska. 9:44:20 AM Senator Ellis stated he would approach the University for inclusion of ASPIRE information on its website. 9:44:33 AM Senator Thomas understood that the funds would be disbursed directly to the postsecondary education institution rather than to a third party. Mr. Aceves detailed that the State would serve as the holder of the account with the University of Alaska disbursing the funding to other institutes. 9:45:10 AM Co-Chair Stedman asked if the funds could be utilized to pay tuition costs and purchase books and other materials. Mr. Aceves affirmed and added that housing and other living expenses would qualify as well. Senator Ellis assured that the funds could not be used by the beneficiary to host a "big party". 9:45:25 AM Senator Olson asked the accreditation requirements of a postsecondary education institute qualified to accept these funds and whether a private institution that does not receive federal funding would qualify. 9:46:07 AM Mr. Aceves responded that a qualifying institution must qualify to receive federal financial aid for its students. This is unrelated to federal funding appropriated directly to an institution. 9:46:57 AM Co-Chair Hoffman offered a motion to report SB 76, 25-LS0443\M, from Committee with individual recommendations and accompanying and new fiscal notes. There was no objection and CS SB 76 (HES) was REPORTED from Committee with zero fiscal note #1 from the University of Alaska, and a new fiscal note dated 3/22/07 for $41,400 from the Department of Health and Social Services. AT EASE 9:47:23 AM / 9:52:01 AM