Legislature(2021 - 2022)DAVIS 106
02/07/2022 09:00 AM House EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| HB229 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 229 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
HB 229-ALASKA HIGHER EDUCATION INVESTMENT FUND
9:01:20 AM
CO-CHAIR DRUMMOND announced that the only order of business
would be HOUSE BILL NO. 229, "An Act relating to the Alaska
higher education investment fund; and relating to the Alaska
Student Loan Corporation."
9:01:52 AM
REPRESENTATIVE ANDY JOSEPHSON, Alaska State Legislature, as
prime sponsor, presented HB 229. He offered a brief history of
the constitutional budget reserve (CBR), established in 1990 as
a savings mechanism to control spending. In 1994, there was an
attempt to codify the meaning of "amount available for
appropriation." Since the oil recession of 2014, the
legislature has needed to access the funds in the CBR, which
requires a two-thirds vote of both bodies to "reverse the sweep"
of funding. That did not happen in 2021; consequently funds
were swept and remain swept [into the CBR]. He explained that
historically the higher education investment fund (HEIF) was not
one of the accounts that were deemed sweepable, until 2019, when
the administration declared it was.
9:04:25 AM
REPRESENTATIVE JOSEPHSON said as a legal matter, those funds
were swept; however, he posited that "as an accounting matter,
we don't know whether that's really happened." He said
litigation was filed by the former attorney general on behalf of
four universities declaring that the money should not have been
swept. He indicated that the legal argument was that the monies
in HEIF were established with the intent that students would
have access to scholarships and other education grants.
Countering this is the successful power cost equalization (PCE)
lawsuit, which suggests the funds are broadly available for
appropriation. He explained that a benefit of the PCE counter
lawsuit is that it establishes that "it's okay for the Alaska
Legislature to create separate or special funds." He offered
examples, as listed by Judge Garten of the Alaska Supreme Court.
He explained that HB 229 attempts to do just that: place HEIF
in a separate fund. He indicated that the proposed legislation
would address the issue of insecurity over the availability of
HEIF for students, so that they can rely on the fund and be
secure about their financial means of completing their
education.
9:09:22 AM
REPRESENTATIVE JOSEPHSON said a reverse sweep is one way to
ensure the funds; however, the legislature has shown that it can
prevent the reverse sweep, which makes that method unreliable.
Another method is to change the Constitution of the State of
Alaska, which is incredibly challenging. The third option is to
pass a law to establish that HEIF is separate. The problem is,
he explained, that the funds are not there; they would have to
be recapitalized.
9:12:06 AM
REPRESENTATIVE ZULKOSKY asked how the outcome of the litigation
would impact HB 229.
REPRESENTATIVE JOSEPHSON explained that superior court decisions
are "utterly binding on whoever's in the courtroom." Beyond
that they can be persuasive. However, in this case, he said he
thinks the case was binding "on the entire class." He
proffered, "If these students win, this bill is mostly moot."
Notwithstanding that, he said it is within the legislature's
discretion to write such a law to establish that HEIF is not in
the general fund (GF) and, thus, not sweepable.
9:16:20 AM
REPRESENTATIVE PRAX asked whether the lawsuit would become moot
if HB 229 were to pass.
REPRESENTATIVE JOSEPHSON speculated what may happen.
9:17:36 AM
CO-CHAIR DRUMMOND mentioned arguments by Ms. Lindeman and noted
the use of the term "unified fund." She asked the bill sponsor
for an explanation.
REPRESENTATIVE JOSEPHSON responded that one year's appropriation
cannot be cut away from the balance; "it's all part of the
piece," as intended by the legislature. Ms. Lindeman's key
argument was that when the legislature appropriated the money
[to HEIF], it was flowing; Representative Josephson likened it
to a faucet. In response to Co-Chair Drummond, he confirmed
that the plaintiffs in the case are recipients of HEIF grant
monies in higher education.
CO-CHAIR DRUMMOND noted that Representative Josephson had said
that if HB 229 is passed, then the legislature would have to
"recapitalize this fund." She asked whether that would require
a two-thirds vote.
REPRESENTATIVE JOSEPHSON answered no because it would be "new
money." It would require a majority vote, plus the cooperation
of the governor.
9:20:43 AM
REPRESENTATIVE HOPKINS asked whether HB 229 would "take the $400
million that's in the CBR and move it over" or "take general
funds and create a new fund."
9:21:00 AM
ELISE SORUM-BIRK, Staff, Representative Andy Josephson, Alaska
State Legislature, on behalf of Representative Josephson, prime
sponsor of HB 229, answered that HB 229 deals with the structure
of the fund itself, not the recapitalization. She then gave a
sectional analysis of HB 229 [available in the committee
packet]. She explained HEIF would be moved from the GF into the
Alaska Student Loan Corporation (ASLC), which would be allowed
to create a subsidiary from the purpose of administering HEIF.
Further, the Alaska education grant account and Alaska
performance scholarship award account would be moved into ASLC.
9:23:21 AM
MS. SORUM-BIRK, in response to Co-Chair Drummond, offered her
understanding that under HB 229, HEIF would continue to be
managed by the Department of Revenue "in much the same manner
that it's already managed."
9:24:11 AM
MS. SORUM-BIRK, in response to a question from Representative
Prax, explained that ASLC is the entity already attached to both
the Alaska performance scholarship and the Alaska education
grant; ASLC deals with these things in its capacity as the
Alaska Commission on Postsecondary Education (ACPE). She
concluded that that is why the bill sponsor thought ASLC would
be a logical place to put [HEIF].
9:26:17 AM
REPRESENTATIVE HOPKINS noted that in 2017 the legislature took
an ad hoc draw from the higher education fund to support
payments to the Public Employees Retirement System (PERS) and
the Teachers Retirement System (TRS). He asked whether HB 229
would allow future legislatures "to make an ad hoc draw from the
fund itself."
REPRESENTATIVE JOSEPHSON surmised that it would, and he deferred
to Ms. Sorum-Birk for further response.
MS. SORUM-BIRK said she thinks Representative Josephson is
correct, and she offered further illustration.
9:28:18 AM
CO-CHAIR DRUMMOND remarked that the ad hoc draw was an overdraw
but "grew and recovered." She suggested a percent of market
value (POMV) needs to be included as part of the structure of
"how we draw on this account," and this could be subject for
another discussion.
9:29:12 AM
MS. SORUM-BIRK showed a depiction of the market value of HEIF
throughout the years, which reflects the dip just mentioned, as
well as substantial returns in 2021, which boosted the value of
the fund. She emphasized the value of a structured draw. In
response to Representative Prax, she said she did not have
information regarding the average performance of the fund since
2013. She continued by giving a history of HEIF, which was
created by the Twenty-Seventh Alaska State Legislature and
capitalized with $400 million. She noted the times when there
were ad hoc draws. She said HEIF was meant to be a trust, but
trust is not in the name. In 2021, the three-quarter vote to
reverse a sweep did not happen.
9:33:48 AM
CO-CHAIR DRUMMOND noted that in 2015, monies to libraries were
actually put to broadband capacity in schools. She also noted
that of the funds that were given to PERS and TRS, she thinks
most went to TRS; however, monies going to PERS, she opined,
were outside the scope of the fund.
9:34:25 AM
MS. SORUM-BIRK noted that Hickel v. Cowper is the only Alaska
case that addresses the CBR sweep and what it takes to spend
from the CBR. One parameter outlined in the case is that
anything available for appropriation or in the GF, or both, is
subject to the sweep provision. She defined "available for
appropriation" as "all funds over which the legislature has
retained power to appropriate, and which are not available to
pay expenditure without further legislative appropriation." She
reiterated that trust receipts are treated differently; that
includes federal funds, funds given to the state for specific
purpose, and appropriations from trust accounts. She mentioned
a footnote that suggests monies of public corporations should be
treated similarly to trust receipts, which is why the bill
sponsor wants to move HEIF into ASLC. She named some
exclusions. She said one question in a current case is whether
or not the funds are "already validly appropriated." So, the
question is whether the $400 million were validly appropriated
when the legislature declared in 2012 that the $400 million was
for a scholarship account.
9:37:18 AM
MS. SORUM-BIRK remarked on notable changes that would be made
under HB 229. She said the higher education investment account,
the Alaska education account, and the Alaska performance
scholarship account would be relocated from the GF into ASLC.
The bill would allow ASLC to create a subsidiary specifically
for managing the higher education investment [capital] and
associated funds. She pointed out that the Alaska Housing
Capital Corporation was established in April 2006, under Senate
Bill 232, with an appropriation of $300 million for the purpose
of funding capital projects, with the intent that the monies be
transferred in the same year to subsidiaries. The subsidiary
was created under the Alaska Nonprofit Corporation Act. She
remarked, "They say placement of funds within a corporate
subsidiary exempts them from the annual sweep of funds available
into the CBR."
CO-CHAIR DRUMMOND proffered that because the $400 million was
appropriated in 2012 but not put into a separate subsidiary fund
means it is not allowed to "have that status" but "this bill
proposes to do that."
MS. SORUM-BIRK confirmed that is correct. She said HB 229 also
includes language clarifying that "these are all separate
funds." The bill states that scholarship and grant funds are
available without further appropriation, which they already are,
but the bill sponsor wanted that point clarified under HB 229.
She noted that HB 229 also adds WWAMI [the University of
Washington School of Medicine's multi-state medical education
program for Washington, Wyoming, Alaska, Montana, and Idaho,
pronounced "whammy"] to the statutory uses of HEIF. She
mentioned a 7 percent draw and deferred to Ms. Efird.
9:41:39 AM
SANA EFIRD, Executive Director, Alaska Commission on
Postsecondary Education, confirmed that up to this point there
has been enough in the fund to cover WWAMI. She added that it
would need to be determined whether that would continue to be
the case. In response to a hypothetical question from Co-Chair
Drummond, she said over the last three years there has been
$11.75 million available for the Alaska performance scholarship,
and last year only about $9.3 million of that total was
expended. What is not spent "lapses," which Ms. Efird explained
means that it stays in the fund. In response to another
question, she said up until last year, the loan repayments from
WWAMI students have been going back to the GF; however, last
year's budget bill contained language that allowed those
payments to go back to HEIF.
9:46:16 AM
MS. SORUM-BIRK listed that which HB 229 would not change: the
overall structure of how the higher education fund is
administered under statute; and the overall structure of how the
fund is administered. She commented on potential amendments to
HB 229: adding "trust" to the name of HEIF; reassessing the
amount of the draw; and adjusting the division of the draw to
ensure a portion goes to WWAMI.
CO-CHAIR DRUMMOND speculated another amendment could be to
ensure that the money paid back from those WWAMI graduates that
choose not to practice in Alaska goes into HEIF.
9:49:06 AM
REPRESENTATIVE JOSEPHSON noted there had been debate about that
topic, and he expressed his concern that "we move with
alacrity." He characterized the provisions of HB 229 as layers
of armor that would shield the funds.
9:50:46 AM
REPRESENTATIVE HOPKINS expressed concern about setting an amount
for the draw, since tuitions and attendance change over time.
He asked for clarification regarding lapsed funds.
REPRESENTATIVE JOSEPHSON recalled Ms. Efird had said the funds
were directed back into HEIF last year.
MS. SORUM-BIRK noted that it was the WWAMI fund that was
designated last year; the other funds do lapse back into HEIF
regularly. In response to a follow-up question, she said she
thinks that is in statute but would have to check to be certain.
9:52:54 AM
CO-CHAIR STORY stated the importance of keeping interest rates
high, and she asked whether there would be oversight of the
investment rate structure.
9:54:25 AM
MS. SORUM-BIRK indicated she had learned that the Department of
Revenue (DOR) has taken over "investments" for the student loan
corporation, and she expressed her hope that HEIF "would still
be managed by DOR."
9:55:04 AM
REPRESENTATIVE PRAX asked the bill sponsor whether he had
requested a formal opinion on HB 229 from Legislative Legal
Services.
9:55:21 AM
REPRESENTATIVE JOSEPHSON answered that he had not. He pointed
to "the Hickel decision" and "the Garten trial decision" as
providing "a fair amount" of knowledge regarding the legal
implications of the proposed legislation.
9:55:53 AM
CO-CHAIR DRUMMOND announced that HB 229 would be held for
further consideration following a recess of the committee.
HB 229-ALASKA HIGHER EDUCATION INVESTMENT FUND
3:33:27 PM
CO-CHAIR DRUMMOND announced that the final order of business
would be a return to HOUSE BILL 229, "An Act relating to the
Alaska higher education investment fund; and relating to the
Alaska Student Loan Corporation."
3:33:56 PM
CHAD HUTCHISON, Director of State Governmental Affairs,
University of Alaska, testified in support of HB 229. He spoke
about instability in funding and the importance of scholarships
and grants for students, as well as the need for medical
students in Alaska. He spoke about support for HEIF, including
from the Board of Regents. He echoed the need for speed when it
comes to moving this legislation. He mentioned Hickel v. Cowper
and said he thinks the track that Representative Josephson is on
is "a wide one." He confirmed the importance of separating the
fund in ASLC.
3:37:39 PM
MR. HUTCHISON listed the following current statistics related to
Alaskans under the umbrella of HEIF: 2,807 Alaskans receiving
the Alaska performance scholarship, totaling $9.3 million; 2,680
Alaskans receiving the needs-based Alaska education grant,
totaling $5.7 million; and 80 WWAMI students, totaling $3.2
million. He emphasized the importance of WWAMI. He offered to
answer questions and noted that Mr. Harrington, the legal
counsel for the University of Alaska, was also available to
answer questions.
3:41:32 PM
REPRESENTATIVE HOPKINS asked whether the university joined the
law suit.
MR. HUTCHISON answered no, just the four students, but the
university is watching intently. He deferred to Mr. Harrington
as to whether the University Foundation filed an amicus.
3:42:35 PM
ANDY HARRINGTON, Associate General Counsel, University of
Alaska, stated neither the University of Alaska nor the
University Foundation has filed an amicus brief in the case, but
the foundation is trying to help with the cost of
representation.
MR. HUTCHISON, in response to Representative Hopkins, discussed
the issue of capacity as it relates to WWAMI.
3:45:22 PM
REPRESENTATIVE PRAX asked about the timing of oral arguments in
the case and whether a date has been indicated when the court
would issue an opinion.
MR. HUTCHISON said the law suit was filed just three weeks
prior, the oral argument would be tomorrow, and the projected
timing of the decision is February 22, which could be considered
an expedited process. In response to a follow-up question, he
addressed the issues of equity and return on investment for the
state. In response to further query, he clarified there are
grants and loans involved in the programs, and he said the
university believes there is good return on investment; however,
ultimately the legislature decides which benefits the state
receives. He told Representative Prax he would do his best to
provide information regarding how the university documents the
return on investment.
3:52:52 PM
CO-CHAIR DRUMMOND clarified that HB 229 does not propose to
comingle the funds.
3:54:33 PM
MS. EFIRD told Representative Prax there are two separate
entities. There was an appropriation that set up ASLC, and she
offered her understanding that it was $400 million at one time.
She said HEIF was also set up with an appropriation of $400
million by legislature. She concluded that under HB 229, ASLC
would manage those separately. In response to a follow-up
question, she clarified that the amount to ASLC is not $400
million now.
3:56:54 PM
MS. SORUM-BIRK reviewed that the proposed legislation would not
create any new programs; its focus is on perpetuating the
existing HEIF by separating it to ensure it is not subject to
the CBR sweep provision.
3:57:34 PM
CO-CHAIR DRUMMOND pointed to the performance results of HEIF
previously highlighted in Ms. Sorum-Birk's presentation. She
noted that this last year, HEIF performed better than the Alaska
permanent fund did. The dollars swept into the CBR do not earn
much 1 to 2 percent, at best. She echoed Representative
Josephson's previous remark that time is of the essence.
3:58:35 PM
CO-CHAIR STORY remarked that HB 229 would help to grow Alaska's
workforce. She asked about the percentage of workers that go
out of state to train and do not come back, and indicated the
goal is to keep students in state. She discussed the
uncertainty of students whether they will receive the money they
have earned, and she asked about the University of Washington's
take on this issue.
MR. HUTCHISON answered he thinks it is "an open question," since
there is litigation happening and other legislation in play. In
response to a follow-up question regarding how much WWAMI
students pay, he explained that it is "a phased model."
4:02:29 PM
MR. HUTCHISON responded to questions from Co-Chair Drummond. He
said he would find out how many WWAMI students come from the
other states involved. In response to another question, he
offered that there are versions of [HEIF] in other states, the
details of which he would provide. To another question, he said
the Alaska education grants are based on need and cover all
opportunities, not just limited to the university system.
CO-CHAIR DRUMMOND expressed interest in receiving a list of
programs for which students are using the funds received.
4:08:37 PM
REPRESENTATIVE PRAX remarked on students that leave Alaska for
university educations.
CO-CHAIR DRUMMOND commented on the funds that can be used by
those students.
REPRESENTATIVE HOPKINS suggested HB 229, and refinancing loans,
as ways to get students to come back.
4:10:00 PM
MS. EFIRD, in response to a question from Representative
Gillham, clarified that both the Alaska performance scholarship
and Alaska education grant have to be used in the state of
Alaska at an institution authorized by ACPE. A student could
[use the funds] to attend Northern Industrial Training, for
example, and the student would not go through the University of
Alaska to do so.
4:12:14 PM
CO-CHAIR DRUMMOND opened public testimony on HB 229. After
ascertaining there was no one who wished to testify, she closed
public testimony.
CO-CHAIR DRUMMOND set an amendment deadline for Thursday at
noon.
4:13:00 PM
CO-CHAIR DRUMMOND announced that HB 229 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 229 Sectional Anaylsis 1.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 Complete Committee Packet.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 FN EED ACPE 01.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 Sponsor Statement 1.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 Supporting Document- ADN Article Student Lawsuit 1.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 Supporting Document- APM 2019 Article 1.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 Supporting Document- APS Outcomes 2021 1.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 Supporting Document- Fund Source Report 1.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 Supporting Document-LFD Funds Subject to Sweep 2019 1.20.22.pdf |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |
| HB 229 version A.PDF |
HEDC 2/7/2022 9:00:00 AM |
HB 229 |