Legislature(2003 - 2004)
04/27/2004 09:02 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 393
"An Act relating to default on tuition, fees, and other
charges of the University of Alaska and to claims on permanent
fund dividends for tuition, fees, and other charges of the
University of Alaska that are in default."
This was the first hearing for this bill in the Senate Finance
Committee.
Co-Chair Wilken informed the Committee that this bill, which is
sponsored by the Senate Finance Committee, would authorize the
University of Alaska to garnish an individual's Permanent Fund
Dividend (PFD) for payment of defaulted tuition fees, and other
fees owed to the University. He noted that Version 23-LS1945\A is
before the Committee.
PAT PITNEY, Director of Budget Development and Institutional
Planning, University of Alaska, testified via teleconference from
an offnet site and expressed that "the University is looking for
every way to maximize its generated revenue." This bill would
implement a means through which the University could collect on
outstanding loans in a fashion similar to that utilized by the
Alaska Student Loan Corporation (ASLC) that allows it "to garnish
PFDs for past due or defaulted debt." Language in the bill would
assure that due process would be observed. This is a "safe bill"
which would allow the University to collect, in the first year,
approximately $400,000. The amount collected would decrease over
time as outstanding debt is reduced. There are approximately 1,700
individuals with outstanding University debt. Through coordinated
efforts with the Department of Revenue's Permanent Fund Dividend
Division, assurances have been established to insure that the
University's PFD garnishment attachment would align with other
Permanent Fund Dividend attachment policies.
DARWIN PETERSON, Staff to Senator Gary Wilken, Co-chair of the
Senate Finance Committee reiterated that the University debt
collection process being proposed is similar to that utilized by
the ASLC. He characterized the University's current collection
process as being "aggressive" in that five separate collection
notices are sent out over a six month period, with additional
notices offering deferred payment plans in addition to utilizing
collection agencies. However, regardless of these efforts, in
excess of one million dollars in 180-day or longer debt remains
outstanding. The University estimates that of that amount $800,000
is attributable to students who collect PFDs. In order to provide
the maximum protection to citizens, the proposed methodology would
specify that extensive notification, warning, and an appeals
process must be implemented prior to garnishing an individual's
PFD.
Mr. Peterson estimated that half of the $800,000 original debt
could be collected the first year were this program implemented,
and that in subsequent years, $100,000 could be collected annually.
The proposed legislation would provide the University "one
additional avenue" through which to collect, rather than "write
off", debt.
SHARON BARTON, Director, Permanent Fund Dividend Division,
Department of Revenue, stated that the legislation being proposed
is "straight forward" and would not present any implementation
obstacles. The Division would experience an initial one-time
expense related to computer reprogramming to allow the University
garnishment.
Senator Bunde questioned how University tuition could be
delinquent, as he understood that tuition is typically collected in
advance.
Ms. Pitney affirmed that the University's policy is that students
pay up front; however, she allowed that the delinquency process is
intensive in that when the financial committee reviews students who
are past due in their payments a multitude of factors are at play
such as students being delinquent due to anticipated financial aid
that does not occur; students who "have an intent to pay" that does
not transpire; and essentially the students "are looked at and
accepted as a risk that follows through at some point." She opined
that the one million dollar delinquency total, out of a $60 million
dollar total, "relatively speaking is a small amount." Being able
to collect $400,000 of the one million dollar total would be worth
the endeavor. She noted that in addition to tuition delinquencies,
other delinquent charges included in the total include such things
as dorm room damages and parking fees.
Senator Bunde encouraged the University to strengthen its tuition
bad debt collection policy as holding students responsible for
their obligation is part of the learning experience. He recalled
that financial aid checks often identify both the student and the
school in order to insure that the funds would be spent
appropriately.
Senator Bunde questioned the appropriateness of placing the
garnishment of PFDs for University delinquencies ahead of
garnishments for domestic violence delinquencies and Alaska Court
matters, as denoted in the payment priority list denoted in Section
2 of the bill on page two, beginning on line nine.
SFC 04 # 95, Side B 09:49 AM
Ms. Pitney responded that the rationale for placing the University
garnishment as number four of eight is that this would place the
University's garnishment behind that of the Alaska Student Loan
Corporation. This rationale was the impetus for its placement.
Senator Bunde pointed out that there "would be potential costs to
the State" were the University to maintain the number four position
on the garnishment priority list, as such things as Court ordered
fines would be secondary to the University's garnishments.
Co-Chair Wilken characterized the University's placement on the
priority list as being "somewhat objective."
Ms. Pitney agreed.
Co-Chair Green questioned why this legislation is necessary, as she
understood that, in addition to an agency of the State being able
to collect such things as child support debt from an individual
through the PFD garnishment process, anyone could garnish anything
for a proven debt through the legal process.
Co-Chair Green also questioned whether the University's collection
in this manner is appropriate or whether the University's fiscal
note, dated April 23, 2004 is correct as it indicates that it would
cost $400,000 to collect $400,000.
Ms. Pitney responded that the fiscal note might not be correctly
presented, as the intent of the University would be to add one
staffing position to develop the collection program the first year.
The associated expense, she continued would amount to $100,000 of
the anticipated $400,000 revenue in FY 05. The $300,000 revenue
balance, she stated, would be distributed to other University
components. In subsequent years, the cost of managing the program
would be minimal.
Co-Chair Wilken understood therefore that the fiscal note depicts
that, in FY 06, it would cost $30,000 to collect $350,000.
Ms. Pitney concurred that that is the intent.
Co-Chair Green opined that the fiscal note should be re-worked, as
the intent is not properly reflected.
Co-Chair Wilken stated that the fiscal note would be re-worked.
Co-Chair Green restated her earlier argument that due to language
in Section 2, subsection (b) on page two, beginning on line 26, the
University is already qualified to garnish an individual's PFD as
it is an agency of the State.
Ms. Pitney clarified that the language does not apply to the
University as it, like the Alaska Student Loan Corporation, is
recognized as a separate entity rather than an agency of the State.
Therefore, she clarified that the language in Section 2, subsection
(b)(4) is required to allow the University, as a separate entity of
the State, to collect outstanding debt via the PFD garnishment.
(4) claims on defaulted tuition, fees, and other charges of
the University of Alaska under AS 43.23.073;
Ms. Barton could not speak regarding whether or not the language
would be required; however, she noted that this legislation would
provide the University the authority to garnish up to 100-percent
of an individual's PFD rather than "80-percent which is standard
for other garnishments not included under this exemption."
Co-Chair Green understood therefore that absent this legislation, a
maximum of 80-percent could be garnished.
Ms. Barton affirmed.
Senator B. Stevens understood therefore that the entities specified
in Section 2, subsection (b) would be entitled to garnish 100-
percent of a PFD, and that those not listed could collect up to a
maximum of 80-percent.
Senator B. Stevens voiced confusion to the comment that the
University would not qualify as an agency of the State under the
language on line 26 of Section 2, subsection (b).
Co-Chair Wilken expressed that clarification would be forthcoming
regarding whether or not the University could be recognized as an
agency of the State.
Senator B. Stevens asked for confirmation that the priority listing
pertaining to garnishments would be conducted in the order
reflected in Section 2, subsection (b).
Ms. Barton stated that a clarification of the intent of the
priority listings would be forthcoming.
Co-Chair Wilken ordered the bill HELD in Committee in order to
further address the fiscal note concern, the agency status concern,
and the priority list ranking order concern.
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