Legislature(1997 - 1998)
02/20/1997 03:04 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 121 - WINN BRINDLE SCHOLARSHIP LOAN Number 0026 CHAIRMAN BUNDE announced the first item on the agenda, HB 121, "An Act relating to A.W. Brindle memorial scholarship loans; and providing for an effective date." REPRESENTATIVE BILL WILLIAMS, Sponsor of HB 121, read from his sponsor statement. He said HB 121 was introduced to attract more Alaskan students to a career in the Alaska seafood industry. As we all know our seafood industry is facing many challenges and will face many more challenges in the future. To ensure that Alaska will be able to overcome these challenges we need highly trained fisheries experts. The A.W. (Winn) Brindle memorial scholarship program offers financial aid to students who are pursuing higher education in fisheries related programs. REPRESENTATIVE WILLIAMS said, currently, the Winn Brindle memorial scholarship program has over $1.5 million available for loans. At latest count, approximately $316,000 has been utilized by the students. He said 81 percent of these loans are to students enrolled in colleges located within the state of Alaska. The loan program offers forgiveness of loan principle to those students who return to Alaska and put their degrees to work. Today, Winn Brindle loan recipients receive forgiveness of 10 percent of the loan principal up to a maximum of 50 percent of the loan principal. REPRESENTATIVE WILLIAMS said under HB 121, a recipient would receive forgiveness of one-fifth of the loan principle for each one-year period during the first five years following graduation with a maximum of 100 percent. The scholarship recipient must still be employed full time in Alaska in a fisheries related field as defined in Alaska statute. The five other memorial scholarship loans that the state has established have a one-fifth year forgiveness clause. It is his belief that by using the payback provisions of the program we can attract more students to study fisheries related programs. This in turn will give the state a valuable resource of trained professionals to address the future challenges the fishing industry will undoubtedly face. Number 0284 MIKE MAHER, Director of Student Financial Aid, Alaska Commission on Postsecondary Education, was next to testify. He said the Winn Brindle Memorial scholarship program was established in 1986, funded by private donations and contributions from fisheries businesses. In return for these contributions these businesses get tax exemption. Scholarships are provided for full time undergraduates or graduate studies in fisheries, fisheries science, fisheries management, seafood processing, seafood technology and other fisheries related programs. The program's present structure provides a fairly large balance in the fund which he thought was closer to $2 million that $1.5 million. He said presently a 5 percent interest begins to accrue when the student ceases to attend the program. Repayment of the principle and interest begins six months thereafter. Recipients are eligible for up to 50 percent forgiveness if they return to Alaska and work in a fisheries related field. Number 0392 MR. MAHER said, in essence, HB 121 provides for an interest free loan for the life of the loan. Future borrowers, obtaining the benefit, would only pay the principle. This piece of legislation hadn't gone before the postsecondary education commission or anything related to loan programs because there are not a lot of loan programs right now and the last commission meeting was prior to the beginning of the session. The commission has not taken a stance on HB 121. It is his belief that they will probably be neutral because as an agency they are neutral on it. Number 0446 MR. MAHER said contributions have declined slightly over the last three or four years while the program is growing. In fiscal year 1995 there were only six recipients and in the present year there are 34 recipients. Presently, no loan caps are in place which has been a concern of the commission. A student can borrow up to the amount of the budget for books and tuition for the particular program they attend. In some instances this amount exceeds the amounts of the regular Alaska student loan program. The concern is that there is an allowance for a few individuals to borrow a significant amount of money who potentially might have problems paying that money back. MR. MAHER said, "Our estimate in our fiscal note, although there would be no cost to the agency as a result of this legislation, would just be downstream when those that borrow beginning July 1, in the next school cycle would come into repayment on their loans, which could be three to four years downstream, what would be a small amount of interest lost. Our best guess there was about $16,000 a year, to start out with, and we couldn't be very accurate on that figure given the variables of the number of participants in the program, the forgiveness benefit that we have no control over, we don't know who will apply or receive that benefit. So, it is a small loss in revenue stream of about $16,000 downstream." He said they are supportive of getting more money out into this area and have thrown out a great deal more information to colleges, vocational centers around the state to present information and get more people into the program. Number 0578 CHAIRMAN BUNDE clarified that there are no general funds involved in the Winn Brindle scholarship loan program. He said there is already a forgiveness program and clarified that the change in forgiveness would not impact postsecondary education in administering the loan. Number 0603 REPRESENTATIVE JOE GREEN said, "That you're indicating that you are dropping, you're increasing the forgiveness, you're doubling in effect and 50 to 100 percent in a five year period if they come back to work to attract more people and yet this indicates that between '95 and now you've gone from 6 to 34 applicants. That's under the existing program? That's a pretty significant increase and so I'm not quite sure is there, am I missing something on the statements?" Number 0642 CHAIRMAN BUNDE clarified that they have quite a chunk of capital that is not being used. MR. MAHER said there is money in the fund and the program is growing with more and more people becoming interested in it with the 50 percent forgiveness. The mere fact that it could go to interest free will attract more people. The closest loan program to it now would be the family education loan program which is where a co-signor or a family member takes out a loan on behalf of a student which has an interest rate of 5 percent whereas other loans are 8.9 percent. Number 0696 REPRESENTATIVE GREEN asked what effect would occur to the 34 recipients who are beneficiaries of this loan program. He asked if they would be retroactively included in this forgiveness program. Number 0723 MR. MAHER said with an effective date of July 1, 1997, it would not have an effect on the previous recipients unless they went back to school or if they were in mid-stream, meaning that they had completed two years and then the next year, after July 1, they would qualify. They would have sort of a mixture in their loan, but it wouldn't be anything that couldn't be handled. Number 0749 REPRESENTATIVE TOM BRICE said he qualified for a limited amount of forgiveness in his student loans. He said a process is set up where the accounting isn't something that you have to think about. Number 0786 REPRESENTATIVE BRIAN PORTER asked if someone wants to go to college for a four year fisheries program, is the money allocated annually to the institution. Number 0801 MR. MAHER said the money is allocated directly to the institution and the individual, both of them need to sign. The institution is getting the funds and the funds then get signed over to the individual. He said they usually back out their budget (indic.-- paper shuffling) to the things the institution needs up-front. Number 0823 REPRESENTATIVE PORTER referred to the student who would be effected, if HB 121 were passed, during his sophomore or junior year. He would have 50 percent of his forgiveness for the first two years and 100 percent potential forgiveness for the second two years. Number 0844 CHAIRMAN BUNDE referred to the decreasing amount of contributions to the loan fund and the impact on increasing the forgiveness amount to 100 percent. He asked if they had speculated on the life of the loan program. Number 0866 REPRESENTATIVE WILLIAMS said in discussions, with some of the larger contributors of $40,000 or more, they found that these contributors didn't mind increasing the forgiveness. Their only question was whether or not anything would happen to the tax exemption. They were reassured that the tax exemption would stay in place. He said he hoped that this program was ongoing with contributors continuing to donate money to it. Number 0907 CHAIRMAN BUNDE said we don't want to empty the loan program and then some time in the future not have the program available. Number 0915 REPRESENTATIVE PORTER said this program, of the six listed, is the only one that has a 50 percent provision. All the rest of them have what it is you're seeking, a 100 percent provision. Number 0927 MR. MAHER said, concerning overall loan programs, the teacher scholarship loan program still has a 50 percent forgiveness. That program is for teachers who come back to Alaska and teach in rural areas. Number 0955 CHAIRMAN BUNDE said the sponsor statement refers to the five memorial scholarships and, with the exception of the Winn Brindle loan program, they all have 100 percent forgiveness. Number 0960 MR. MAHER did not believe that any of those programs had any money or any contributions in a number of years. He said the Winn Brindle loan program is the only program that is solvent and growing. Number 0973 REPRESENTATIVE BRICE asked if the teacher scholarship loan program was funded through the state or through private contributions. Number 0983 MR. MAHER said that program is funded through corporate receipts and through the sale of bonds which are non-general funds. Number 0993 REPRESENTATIVE VEZEY said, "all of these loans under 1443-305, I guess or 250 rather, they are funded through tax creditable contributions or tax deductible contributions?" Number 1011 MR. MAHER said they are funded through tax deductible contributions. He said he has always just heard it referred to as tax exempt donations and has never looked into that side of it as it has not had an effect on their agencies. Number 1056 CHAIRMAN BUNDE said it is the policy of the committee to hear proposed legislation one day, give the members a chance to look at it and research some of these questions. He said HB 121 would be before the committee on Tuesday, February 25, 1997, for final action.
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