Legislature(1993 - 1994)

02/23/1994 03:00 PM HES

Audio Topic
* first hearing in first committee of referral
+ 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                 
  Number 173                                                                   
  CHAIR TOOHEY asked if there was any other conduit that                       
  people with disabilities could use to obtain the needed                      
  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                   
  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                             
  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                   
  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                     
  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                   
  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                  
  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.                             

Document Name Date/Time Subjects