03/16/2011 08:00 AM House EDUCATION

             HB 104-ALASKA PERFORMANCE SCHOLARSHIPS                                                                         
                                                                                                                                
9:33:39 AM                                                                                                                    
                                                                                                                                
CHAIR DICK  announced that the  final order of business  would be                                                               
HOUSE  BILL NO.  104,  "An Act  renaming  the Alaska  performance                                                               
scholarship  and  relating to  the  scholarship  and tax  credits                                                               
applicable to contributions to  the scholarship; establishing the                                                               
Alaska  performance scholarship  investment fund  and the  Alaska                                                               
performance  scholarship award  fund and  relating to  the funds;                                                               
making  conforming amendments;  and  providing  for an  effective                                                               
date."   [In front  of the committee  was the  proposed committee                                                               
substitute, Version I,  adopted as the working  draft on February                                                               
9, 2011]                                                                                                                        
                                                                                                                                
9:35:44 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON directed attention  to a handout titled "In                                                               
2010,  the  House and  Senate  developed  almost identical  bills                                                               
regarding  the Merit  scholarship.   Each had  a performance  and                                                               
needs-based component."   [Included in the members'  packets]  He                                                               
noted that, in 2010, both the  House and the Senate had developed                                                               
virtually  identical  bills,  with  a needs  based  and  a  merit                                                               
component.  He explained that  the needs based scholarships would                                                               
be  extended   first,  with  distribution  of   the  merit  based                                                               
scholarships following.   He reported that in the  event of unmet                                                               
need, it had  been determined to require a  $2000 work commitment                                                               
by a  student, with 50 percent  of the balance of  the unmet need                                                               
to  be   paid  by  the   needs  based  component  of   the  merit                                                               
scholarship.   He noted that  discussion for  the non-traditional                                                               
student had  occurred, as well.   He explained the  difficulty of                                                               
incorporating the  merit based and needs-based  into the program.                                                               
He pointed out that a student  had to qualify for the merit based                                                               
scholarship in  order to apply  for the needs  based scholarship.                                                               
He shared that the Hathaway  scholarship in Wyoming was the model                                                               
for this program,  and that it had a $400  million endowment.  He                                                               
remarked  that Alaska  was last  in the  US for  participation in                                                               
college  by students  from  low income  families,  with half  the                                                               
participation of the next lowest state.                                                                                         
                                                                                                                                
9:40:55 AM                                                                                                                    
                                                                                                                                
DIANE  BARRANS,   Executive  Director,   Postsecondary  Education                                                               
Commission,  said that  the needs  based  program, if  adequately                                                               
funded,  could  serve  traditional  as  well  as  non-traditional                                                               
students with supplemental  aid.  She expressed  her concern that                                                               
the  combination   of  programs  into  one   bill  created  extra                                                               
complexity in a system that needed simplicity.                                                                                  
                                                                                                                                
9:43:50 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON moved on to  the next slide titled "Current                                                               
Needs Discussion" and  explained why the bill had  failed to pass                                                               
in  2010.   He stated  that  the proposed  funding mechanism  was                                                               
unacceptable to  the finance committees.   The  merit scholarship                                                               
was merged with another bill to  establish a task force on higher                                                               
education,  with  another  task  force to  specifically  look  at                                                               
scholarship funding.  He said  that the guidelines for the Alaska                                                               
Advantage   program  had   typically  been   for  non-traditional                                                               
students.  He noted that the  fiscal note for both bills had been                                                               
similar, about $20  million for the merit based  with another $17                                                               
million for  the needs based component.   He said the  task force                                                               
recommendation was to  fund both under one funding  source with a                                                               
needs  based component  for  the merit  scholarship,  and with  a                                                               
separate Alaska  Advantage for non-traditional students  that was                                                               
funded in the same mechanism in the House and the Senate.                                                                       
                                                                                                                                
9:48:22 AM                                                                                                                    
                                                                                                                                
MS.  BARRANS reported  that  there was  no  consensus among  task                                                               
force members  regarding the  legislative recommendation  for the                                                               
needs based supplement to the  merit program.  She cautioned that                                                               
that  there was  the  likelihood for  competition, especially  in                                                               
times  of  inadequate  funding,  if   there  was  a  needs  based                                                               
component included with the merit program.                                                                                      
                                                                                                                                
9:50:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON agreed  that there was a  tension, but that                                                               
there  was the  demand for  a merit  based program  with a  needs                                                               
based  component, and  it  had  been met.    He acknowledged  the                                                               
desire to also provide for  the non-merit students with financial                                                               
needs,  as well.   He  opined that  the Alaska  Advantage program                                                               
would  offer more  assurance to  a student  that by  working hard                                                               
they would be able to receive financial support through college.                                                                
                                                                                                                                
9:52:26 AM                                                                                                                    
                                                                                                                                
MS. BARRANS expressed understanding for  the intent to provide an                                                               
entitlement within the  merit based program, but  she opined that                                                               
this created a  dilemma for having an entitlement  for both merit                                                               
and  needs  components for  a  small  sector  of students.    She                                                               
maintained that  there was  more flexibility  from year  to year,                                                               
when dealing  with funding fluctuations, if  a smaller commitment                                                               
was made to the entitlement program.                                                                                            
                                                                                                                                
9:54:02 AM                                                                                                                    
                                                                                                                                
CHAIR  DICK explained  the three  options for  a funding  source:                                                               
Amerada Hess  fund, general fund,  or do not designate  a source.                                                               
He stated  that the task force  had been assigned to  designate a                                                               
funding source.                                                                                                                 
                                                                                                                                
9:54:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON   agreed  that   there  was  a   need  for                                                               
designated  funding.    He  pointed   out  that  a  $400  million                                                               
endowment, similar  to the funding  source for the  Hathaway plan                                                               
in  Wyoming,  was  unacceptable  to both  the  House  and  Senate                                                               
Finance  Committees.   He stated  that an  endowment of  at least                                                               
$600 million  would be necessary  if the merit  based scholarship                                                               
was combined  with either  a needs based  or an  Alaska Advantage                                                               
program.   He  pointed out  that the  task force  recommended the                                                               
funding  be  from interest  and  earnings  to specified  existing                                                               
accounts,  such as  Amerada Hess,  or from  program receipts  and                                                               
dividends from non-renewable resources.                                                                                         
                                                                                                                                
9:58:32 AM                                                                                                                    
                                                                                                                                
MS.  BARRANS  offered  her  belief   that,  from  the  governor's                                                               
perspective, state funds were state  funds, and the objective was                                                               
to  identify a  sub  fund  in the  general  fund with  investment                                                               
earnings that could support the  merit based program.  She shared                                                               
that the  governor's goal  was for  predictability to  an ongoing                                                               
funding source.                                                                                                                 
                                                                                                                                
9:59:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  explained that  the funding source  in the                                                               
proposed  committee  substitute,  Version  I, was  based  on  the                                                               
revenue sharing model  that would allow for  the continued payout                                                               
for an  additional year  beyond the first  year that  funding was                                                               
not authorized,  as a  necessary transition.   He noted  that the                                                               
task force had also identified  a constitutional amendment for an                                                               
endowment  fund, or  a separate  fund of  $600 million,  as other                                                               
possible funding sources.  He  pointed out that neither the House                                                               
nor the  Senate Finance Committee  had agreed to either  of these                                                               
funding  sources,  hence  the  revenue  sharing  model  had  been                                                               
adopted.                                                                                                                        
                                                                                                                                
10:01:13 AM                                                                                                                   
                                                                                                                                
[HB 104 was held over.]