Legislature(1993 - 1994)
02/23/1994 03:00 PM House HES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 139 - ASSISTIVE TECHNOLOGY LOAN GUARANTEES REP. JOHN DAVIES, Prime Sponsor of HB 139, addressed the bill. He stated that people with disabilities often have difficulties qualifying for conventional loans to purchase assistive technology. Assistive technology includes items such as hearing aids, walkers, talking computers, wheel chairs, and wheel chair lift equipment. He explained that HB 139 would set up a fund to guarantee up to 90% of a bank loan received by a qualified individual for the purpose of purchasing needed assisted technology. In addition, the state could subsidize on a needs basis or part of the interest on the loan. He said the fund would be capitalized with $100,000 of federal money, as indicated on the fiscal note. He further mentioned that there could possibly be some additions to the fiscal note if the program is reauthorized; more funds may be available in the out years. He maintained that this year's fiscal note would not be affected. He said the National Multiple Sclerosis Society, Denali State Bank, Deaf Community Services, and Access Alaska support the legislation. REP. DAVIES said that the Department of Education (DOE) estimates that there are at least 4000 people in Alaska that would benefit from the proposed legislation. He provided a committee substitute (CS) that indicated changes on page 2 where loans for businesses have been omitted. Also, on page 2, line 15, there is a provision which allows for loans to modify vehicles but not to purchase a vehicle. He further stated that page 2, line 18, establishes the loan technology committee. Number 173 CHAIR TOOHEY asked if there was any other conduit that people with disabilities could use to obtain the needed funds. REP. DAVIES replied that the bill requests that people exhaust all other possible conduits first before utilizing this program. He said one of the features of the bill is that it allows the interest rate to be brought down out of the loan funds, thereby making the loan more affordable. Number 185 CHAIR TOOHEY asked how many people in Alaska would benefit from the proposal. REP. DAVIES reiterated that the Department of Education estimates there to be 4000 eligible people. CHAIR TOOHEY asked if there were enough funds available for that number of people. REP. DAVIES said the average loan application would be for $700. He said it is a type of revolving loan as people would pay the loan back as money becomes available. CHAIR TOOHEY asked what happens when people default on the loan. REP. DAVIES responded that the funds are guaranteed by the federal government, and the loans are made by private lending institutions. He explained that other states have experienced very low default rates on these types of loan. Number 249 REP. VEZEY, after explaining the high cost to a lending institution for granting small amount loans, asked if many lending institutions are interested in the program. REP. DAVIES indicated a letter of support from Gary Roth, President and Chief Executive Officer of Denali State Bank, Fairbanks. He said Mr. Roth was very enthusiastic about the program. He further stated that the loans would be made at standard private bank rates, and if the individual could not afford the interest rate, the fund would be allowed to buy down the interest rate. Number 329 REP. VEZEY asked what the origination costs of the loans would be. REP. DAVIES said he did not know what the specific rates were. He explained that the loan is processed through a bank at standard rates. REP. VEZEY asked why there were no administrative costs listed in the fiscal note. REP. DAVIES responded that the Division of Vocational Rehabilitation, Department of Education, estimates that their existing personnel can handle the required administration. Number 390 REP. VEZEY asked how fast $100,000 would be depleted. REP. DAVIES explained that it would depend on the decisions of the committees and banks as to how many loans need to be subsidized, what the default rates are, etc. He further stated that the Clinton Administration has just reauthorized the program, requesting an additional $3 million nationwide. He said at least three to five years of federal money could be expected to go into the program, on an annual basis. REP. VEZEY asked if the $100,000 was currently available. REP. DAVIES answered yes. REP. VEZEY asked why the fiscal note was $100,000. REP. DAVIES said it represents federal receipts. Number 431 REP. G. DAVIS asked if the director referred to on page 2, line 18, was the director of the Division of Vocational and Rehabilitation, DOE. REP. DAVIES said yes. Number 441 CHAIR TOOHEY asked if there was a time frame for the program or would it go on indefinitely. REP. DAVIES said it would go on forever as long as the federal program exists. He also said that private monies are allowed into the program. He further stated that with a certain amount of federal money going into the program each year, the program would operate somewhat like a revolving loan fund. CHAIR TOOHEY asked if there would be a limit on how low the funds could become before loans would no longer be granted. REP. DAVIES said if there is no money the program does not exist. CHAIR TOOHEY asked Rep. Olberg if it would be prudent to not grant loans until the fund has been replenished. REP. OLBERG responded no. He explained that the funds are to guarantee a bank that they will be repaid. CHAIR TOOHEY asked if, once the amount is encumbered, no more loans would be granted. REP. OLBERG agreed and said that the entire $100,000 could be encumbered without any problems. CHAIR TOOHEY said that nothing would be encumbered over the $100,00 amount. REP. OLBERG commented not if the loans are to be guaranteed. Number 498 REP. BRICE said that as payments are received on the loans the amount would be replenished accordingly. REP. OLBERG, as a former colleague of Gary Roth, spoke to Mr. Roth's professionalism and expertise. He stated that the program must have a great deal of merit if Mr. Roth was endorsing it. Number 525 REP. DAVIES said the committee that the director shall establish will include a representative of a financial institution. The committee would establish the percentage of money that may be used for subsidizing interest rates. Number 546 RUPE ANDREWS, Representative, American Association of Retired Persons (AARP), testified in support of HB 139. He stated that the state legislative committee is in full support of the proposal. He said the bill would ensure access to quality living for all generations, not just senior citizens. CHAIR TOOHEY asked if senior citizens would be using the program. REP. DAVIES said there are no age restrictions. (CHAIR TOOHEY stated for the record that Rep. Olberg arrived at 3:08 p.m., Rep. Kott arrived at 3:23 p.m., and Rep. Brice arrived at 3:10 p.m.) Number 589 STAN RIDGEWAY, Deputy Director, Division of Vocational Rehabilitation, Department of Education, testified in support of HB 139. He stated that within the Division of Vocational Rehabilitation there is a program called Assistive Technologies of Alaska. He said assistive technology is the mechanism that allows federal funds to the state to fund the loan program. He said President Clinton had just signed the reauthorization for the federal program, and with that information he foresees the program being funded for the next five years with a minimum of $100,000. He said it was good leverage to make loans with. Mr. Ridgeway said the program is not a revolving loan, it's a loan guarantee. He further stated that the $100,000 that would be set aside in the treasury would be a guarantee to back the loans. He indicated that there were several ways for the loans to be leveraged. He explained there is an estimate that the $100,000 would leverage approximately $750,000 in loans, depending how much money the loan committee would set aside to buy down interest rates. He said there are 42 other states with the program, and three states are fully funded by the federal government. He said the banks would incur either the same cost or less to make the assistive loans. He indicated that most states have a limit of $5000 on the loans. Number 583 REP. VEZEY commented that if $100,000 is leveraged for $750,000 in loans, the state could be responsible for $650,000 in defaulted loans. He said it's either a loan guarantee or not. MR. RIDGEWAY agreed, saying that one of the possibilities on loan guarantee is that part of the $100,000 could be used to buy "an insurance policy that would guarantee those loans." He said the committee could decide to loan $100,000 against $100,000 for the first year. REP. VEZEY asked if Mr. Ridgeway had any experience with loan insurance. MR. RIDGEWAY answered that he had a report that he could extract that information from. REP. VEZEY commented that Alaska has had such a terrible loss experience with loan insurance that he did not think loan insurance policies would be available at a reasonable cost. Number 759 REP. G. DAVIS stated if all the money was allocated and there were no defaults, it would be conceivable that the $100,000 could accumulate up to $500,000. REP. DAVIES concurred. Number 777 CHAIR TOOHEY asked the pleasure of the committee. REP. VEZEY asked if the bill was before the committee for amendment. After some discussion, Rep. Vezey moved to adopt the committee substitute for HB 139. CHAIR TOOHEY, hearing no objections, said the CS for HB 139 was so moved. Number 799 REP. VEZEY said the CS should be amended to ensure that the state would not be responsible for any defaults on loans. CHAIR TOOHEY suggested that Rep. Vezey and Rep. Davies get together to address that issue and that the bill would be brought up again at a future time. REP. BRICE suggested that the bill be passed out of committee to the Finance Committee. He felt that financial decisions would be better made there. REP. VEZEY said to amend the bill would take a total of two days. REP. BRICE recommended sending the amendment on to Finance. Number 853 REP. KOTT said he would work with Rep. Vezey on the amendment and offer the amendment to the Judiciary Committee, the next committee of referral. REP. G. DAVIS concurred with Rep. Kott. Number 874 CHAIR TOOHEY asked the pleasure of the committee. REP. G. DAVIS made a motion to pass the CS for HB 139 out of committee to the Judiciary committee with attached fiscal notes and individual recommendations. CHAIR TOOHEY, hearing no objections, declared the bill was so moved. She then brought HB 451 to the table.
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