Legislature(2011 - 2012)SENATE FINANCE 532
01/18/2012 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB104 | |
| SB86 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 104 | TELECONFERENCED | |
| + | SB 86 | TELECONFERENCED | |
| + | SB 2 | TELECONFERENCED | |
| + | SB 16 | TELECONFERENCED | |
| + | TELECONFERENCED |
CS FOR HOUSE BILL NO. 104(RLS)
"An Act renaming the Alaska performance scholarship and
relating to the scholarship and tax credits applicable to
contributions to the scholarship; relating to Alaska
Advantage education grant funding and to Alaska performance
scholarship funding; establishing an account and fund for
those purposes; making conforming amendments; and providing
for an effective date."
9:04:54 AM
Co-Chair Stedman discussed the agenda and the rules of decorum.
DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION
COMMISSION, DEPARTMENT OF EDUCATION, testified in support of the
legislation and expressed appreciation on behalf of the
administration for the bill being heard so early in the process.
She stated that the governor's original request modified the
name of the program to deal with copyright infringement and
provided a stable funding source for statewide scholarships. She
added that the governor was seeking to establish a recurring
fund source. The current bill had been modified to include
funding for Alaska Performance Scholarships (APS) and Alaska
Advantage Education Grants. She observed that Alaska Advantage
Education Grants provided the state's only needs-based financial
aid program for postsecondary education.
9:11:54 AM
Ms. Barrans discussed Sections 1 through 4, 7, 9, 13, and 16;
these sections were the program's "housekeeping components" as
they renamed the scholarship program. She informed the committee
that Section 5 clarified a new process in the event of a funding
shortfall and furthered that if a shortfall was experienced, no
new students would be accepted into the scholarship program.
Section 6 added requirements that are applicable to
postsecondary institutions seeking to participate in APS; this
section required that participating institutions must provide
mandatory counseling and insured that the courses needed for a
student to complete their program on time were available. She
related that Sections 8, 10, and 14 established the accounts, as
well as a fund into which appropriations would be made; these
sections specified that income earned on investments and
donations to the fund were permitted and also provided a funding
scheme. She looked at Sections 11, 12, and 19; these Sections
created tax credits for corporate citizens to make contributions
to the APS and Education Grant funds and also ensured that
contributions remain eligible for the credit in the years
subsequent to the sunset date.
Ms. Barrans indicated that Section 15 contained transition
language, while Sections 17 through 20 dealt with effective
dates. She noted that ideally, new requirements for institutions
would have an effective date of one year later in order to allow
institutions to meet the requirement changes. She stated that
funds were set aside by passing SB 76 the prior session and that
conforming changes to the bill were appropriate. She stressed
that "We stand ready to work with the committee to bring back a
bill that is acceptable to all parties."
9:15:40 AM
Co-Chair Stedman indicated that not everyone was familiar with
the legislation and requested an explanation of the HB 104. Ms.
Barrans explained that the bill modified a program that was put
into statute in 2009; it created a program that incentivized
Alaskans to succeed in school and score well on national exams.
The high school graduating class of 2011 was the first class of
students eligible to receive the scholarship. She said that the
original bill required that the Commission on Postsecondary
Education, the Department of Education (DEED), the Department of
Labor (DLWD), and the University of Alaska report on the
outcomes of the scholarship program; the report was due within
ten days of the start of the current session.
Ms. Barrans highlighted the upcoming report and pointed out that
approximately 2400 Alaskans were eligible in 2011 for the
scholarship, but that only a little over 900 made use of the
program. She furthered that due to the tentative nature of
funding the prior year, many students chose to attend
institutions in other states. She expounded that the
scholarships could not be used at institutions outside of the
state and noted that out of those eligible, almost as many
students attended institutions outside the state as those who
attended in-state institutions. She concluded that over time,
more trend data would be available regarding the scholarship's
eligibility and utilization.
Co-Chair Hoffman wondered how the fund would be split between
the Alaska Advantage Education Grants and APS. Ms. Barrans
replied that there was no prescribed formula for a split. She
continued that there was discussion during the prior session
regarding a formula, but that the offered bill version did not
address that aspect.
Co-Chair Hoffman stated that there was a lot of interest in the
Alaska Advantage Education Grant Fund and that legislators
wanted assurances about what portion would be allocated to that
fund. He queried if the administration had a recommended spilt.
Ms. Barrans responded that there was a discussion about a one-
third/two-thirds split.
9:19:35 AM
Co-Chair Hoffman wondered if the administration felt that the
$400 million set aside would be adequate under a one-third/two-
thirds split. Ms. Barrans replied that the funding was adequate.
She stated that the utilization rates for the scholarship had
been determined based on a proxy, but indicated that the rates
had been adjusted based on actual experiences that year. The
adjusted rates were slightly lower and were reflected in the
updated fiscal notes. She deferred to the Department of Revenue
(DOR) for a discussion regarding what income could be generated
off of the $400 million allocation.
Senator Thomas queried what kind of marketing was in place to
promote the scholarship program. Ms. Barrans replied that the
Commission on Postsecondary Education had been working closely
with DEED and the governor's office to coordinate the marketing.
There was a staff person at DEED who was charged with
disseminating information about the program to the schools,
counselors, principals, and superintendents. The commission used
direct marketing approaches. Information from DEED and the
Permanent Fund Division was used to identify and target students
in order to send information about the program directly to them.
The commission's outreach staff, based in Anchorage, gave public
service announcements that were targeted at students who were
planning for college. She added that the program had no
operating funds and did not have a specific marketing budget.
9:22:37 AM
Senator Ellis expressed concern that rural students could not
realistically access the courses needed to qualify for merit
scholarships. He queried if any changes could be made to HB 104
to address the realistic access of rural students to the courses
needed to compete for scholarships. Ms. Barrans responded that
Commissioner Hanley from DEED was in the room and that he might
want to respond to the question personally. She interjected that
she did not believe the statutory language had been altered to
affect that change. She furthered that data showed that students
from small, remote areas were making it into the program, but
acknowledged that it was more of a challenge for rural students
to qualify. She spoke about the need to make the required
courses "readily available" to all students.
Co-Chair Hoffman asked if an analysis had been done comparing
qualifying students from rural versus urban districts. Ms.
Barrans responded that the analysis was included in the report.
Ms. Barrans stressed that federal privacy laws prevented them
from reporting small graduating classes where the number was
below an established threshold. Reporting on very small numbers,
such as two or three, could lead to the students being
identified as individuals. In order to satisfy federal
requirements, the commission was required to "roll up numbers"
to a district or region level in schools where the graduating
class was too small.
9:26:30 AM
Senator Thomas queried if the increases in the tuition had
prompted any discussion in the administration about increasing
scholarship funding levels. Ms. Barrans replied that the
administration had not had a discussion regarding funding
levels. She indicated that the scholarship levels were fixed to
the 2010-2011 tuition and would have less "buying power," but
added that the dollar levels were set in statute and could be
changed.
Senator Egan wondered how many needs-based requests they had
been receiving. Ms. Barrans replied that they had received about
4400 applicants that year and were able to fund just over 2000
with education grants. Based on the current application volume,
just under $7 million would be needed to fund all student
applicants.
Senator Egan asked if the number of funded students represented
just less than half of the applicants. Ms. Barrans replied that
Senator Egan was correct.
Senator Olsen expressed the importance of a good education. He
noted that HB 104 seemed to put rural school districts at a
disadvantage. He indicated that he would have a hard time
supporting this type of legislation until rural and urban
students were on more equal footing and emphasized to Co-Chair
Stedman that he had "some pretty strong feelings" on the issue.
9:29:34 AM
Co-Chair Stedman stressed the importance of using the sign-up
sheet if you would like to testify on a bill. He listed the five
updated fiscal notes as follows: two zero fiscal notes from DOR,
Treasury and Tax Division, one zero fiscal note from DEED, and
two fiscal impact notes from the Alaska Commission on
Postsecondary Education. One note from the Alaska Commission on
Postsecondary Education contained a $2 million dollar increment
for APS while the other reflected a $3.996 million request in
administration and operating costs. Both fiscal notes included
increasing out-year cost estimates. He mentioned that one of the
fiscal notes had been received that morning and was new to him.
ROBYNN WILSON, AUDIT SUPERVISOR, TAX DIVISION, DEPARTMENT OF
REVENUE (via teleconference), introduced herself and stated that
she was available for questions. Co-Chair Stedman inquired what
the tax credit's net effect was on the state's credit mechanism.
Ms. Wilson replied that HB 104 did not change the amount of
credit available, but it added a category under which an
education credit could be claimed.
9:32:03 AM
Senator Olson wondered if there had been indication that the
private sector wanted to participate in the tax credit program.
Ms. Wilson responded that they had not yet received the tax
returns that would report private sector participation.
Senator Olson furthered that he assumed there was a study
regarding possible private sector participation. He wondered
whether the state would fully fund the program. Ms. Wilson
indicated that DOR did not have a study regarding private sector
participation and furthered that as HB 104 was written, the
state would be fully funding the program.
9:33:36 AM
AT EASE
9:34:19 AM
RECONVENED
Co-Chair Stedman expressed his surprise that no one had signed
up to testify on HB 104.
Co-Chair Hoffman had a question in reference to a fiscal note
prepared by Diane Barrans. He noted that from FY 13 to FY 18,
the number of students entering the program was anticipated to
grow by 35 percent and that the expected payout of the fund will
increase from $6.9 million to $9.6 million. He queried how the
fund would be managed to address the increase in payouts and
whether the fund would be adequate if no additional dollars were
added.
Ms. Barrans asked for clarification on which fiscal note Co-
Chair Hoffman was referring to. Co-Chair Hoffman replied that he
was referring to the fiscal note that the Office of Management
and Budget (OMB) noted as number 2738.
Co-Chair Hoffman reiterated his question. Ms. Barrans replied
that her discussions with DOR led her to believe that
investments from the fund would be based on expected pay outs
and that investment decisions would be aimed at insuring that
the fund was able to cover the costs. She deferred to Jerry
Burnett for a more detailed answer.
Co-Chair Hoffman noted that a high rate of return would be
needed to offset increases in student payouts.
9:37:42 AM
Co-Chair Stedman asked for an explanation of the $400 million
set aside for the fund and wondered what revenue might be earned
off that allocation, including projected shortfalls or
surpluses.
JERRY BURNETT, DIRECTOR, ADMINISTRATIVE SERVICES DIVISION,
DEPARTMENT OF REVENUE, replied that when the bill was originally
introduced, the $400 million was to be invested in a fund with
an annual real rate of return of 5 percent. He stated that the
fund was to be inflation proofed and would earn 7.75 to 8
percent in the current market place. The fund was projected to
earn $20 million the first year and would grow each year. He
noted that "we're looking at less than $20 million in those
first years". DOR would consider the program's costs and would
customize an asset allocation designed to build the fund, based
on the $400 million allocation and the expected future payments.
He observed that the $400 million had earned interest throughout
the year in the general investment fund and that as a result,
the Alaska Housing Capital Corporation had more than the initial
allocation available.
9:39:29 AM
Co-Chair Hoffman queried what interest rate the fund had earned
during the first 6 months. Mr. Burnett replied that he was
unsure, but that he could get that information. He added that
over the past several years, the fund had earned 3 to 4 percent.
He reiterated that the allocation would be customized based on
the future needs of the fund and remarked that fiscal the note
in the packet indicated that based on the house bill's language,
the money would have to be left in the general investment fund.
Co-Chair Hoffman queried if the $400 million would grow by the
anticipated 35 percent between FY 13 to FY 18 in order to meet
the expected payout. Mr. Burnett responded that he believed the
$400 million allocation could potentially earn enough to meet
the payout in FY 18 and expounded that in order to meet the
payouts, DOR could customize an asset allocation that had a
lower probability of loss.
Co-Chair Stedman requested that DOR come back to the committee
with a forecast projecting the initial $400 million input,
including expected withdrawals and payouts. He specified that
the forecast should go through FY 18 or whatever fiscal year DOR
was comfortable projecting to. He observed the similarity to the
Power Cost Equalization program, where the payouts had reached 7
percent and erosion of the principal was a concern. He continued
that the fund could become part of a larger discussion when
oversight was done on various pools of funds.
9:42:27 AM
Co-Chair Hoffman queried if the interest earned from the $400
million was going to pay for the first year of operating
expenses or if additional money would be requested. Mr. Burnett
replied that he made no assertions about how the program would
be funded during the first year and elaborated that because the
$400 million had been earning interest in a segregated fund that
kept its earnings, there was more than $400 million available.
He added that the appropriation to fund was only $400 million.
Senator Ellis queried if students who get GED's qualify for the
merit based scholarship programs and wondered how the program
dealt with students from tumultuous backgrounds, like those
attending military academies and alternative high schools. Ms.
Barrans replied that students would be required to obtain a high
school diploma in order to qualify.
Senator McGuire inquired if the current meeting was the last
hearing on HB 104. Co-Chair Stedman stressed that this was the
first hearing on HB 104 and that more hearings would be held.
9:45:27 AM
Senator McGuire requested that Ms. Barrans give further
explanation of what led to HB 104 and what it accomplished. She
stated that the bill would not be the scholarship for every
Alaskan, but that it was an opportunity for exceptional
students. She continued that special options could be explored
to help rural students and indicated an interest in hearing how
Louisiana had dealt with their rural townships. She stated that
Galena's student program was a model that could be used to
create a program for Alaska's rural students and stressed the
need to enable rural districts to bring students into
compliance, rather than having rigid standards to qualify for
scholarships. She expressed her approval of the intent of HB 104
and a desire to work with DOR through the process. She added
that declining production of the Trans-Alaska Pipeline System
(TAPS) would tighten the state's budget and force the state to
make choices. She indicated that funding might not always be
there for certain programs and that it was DEED's job to "sell"
the program to the legislature.
Ms. Barrans pointed out that HB 104 was not the bill that
created the program. There were many hearings on the original
bill and the legislature had put the program into statute the
prior year. She emphasized that the program had been operating
less than a year and stressed the benefit of several years of
progress before making substantive changes to the program. The
legislation was intended to change the program's name and to
fund the program. She urged that it was important to give the
program time to operate before attempting to fix it and related
that the program was intended to help students make the right
decisions early. She acknowledged that the program was not the
end solution, but that it was a good starting place.
Senator Olson noted that DOR expected to be able to achieve the
7.75 to 8 [percent] interest rate. He wondered what mechanisms
were in place to insure that qualified children were not
overlooked if the expected interest did not accrue. He furthered
that his real question was if DOR was setup to use the funds
that were already in place. Mr. Burnett replied that he was
unable to answer because DOR needed to examine models for future
funding in order to establish an asset allocation for that
purpose. He added that the program could be set up as an
endowment or as fixed income investments that were based on
timing.
9:51:56 AM
Co-Chair Stedman noted that the committee would await the
analysis that Mr. Burnett had referred to and observed that in
the future the committee would look at a multi-year period,
rather than using a six month period and extrapolating it
further out. He announced that the Permanent Fund and the
retirement system would be reviewed in the committee at a later
date. He pointed out that there would be a presentation on the
growth in the Gross Domestic Product (GDP) relative to debt
levels; the presentation would give them a "better feel for what
we can expect out of the performance of our pile of assets that
we've set aside, our cash."
Senator Thomas asked for a written explanation of Ms. Barrans'
response to Senator Egan's question. Ms. Barrans agreed to
provide the information.
9:53:38 AM
House Bill 104 was HEARD and HELD in committee for further
consideration.
9:53:59 AM
AT EASE
9:54:20 AM
RECONVENED
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 104 - CSHB104(EDC)Sectional ACPE 3 21 11.pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |
| HB 104 - SBOE Letter on APS Resolution to HEDC.pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |
| HB 104 NEW Sectional (RLS).pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |
| HB104 AWIBAPSResolution.pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |
| SB 86 AARP Support.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 86 |
| SB 86 OLTCO letter of support.PDF |
SFIN 1/18/2012 9:00:00 AM |
SB 86 |
| SB 86 Sectional Analysis.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 86 |
| SB 86 Sponsor Statement.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 86 |
| SB 86 summary of changes 4-15-11.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 86 |
| CS SB 2 Support Letters.PDF |
SFIN 1/18/2012 9:00:00 AM |
SB 2 |
| CS SB 2 DMV Letter.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 2 |
| CSSB 2 Sponsor Statement.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 2 |
| SB 2 Explanation of Changes.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 2 |
| SB 2 Special Request Plates-Fact Sheet.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 2 |
| SB 86 Support Letter-Office of Long Term Care.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 86 |
| SB 86 Support Letter-ACoA.pdf |
SFIN 1/18/2012 9:00:00 AM |
SB 86 |
| HB 104 ACPE Letter.pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |
| HB 104 APS Outcomes Report.pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |
| HB 104 DOR Response.pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |
| HB 104 Rodell to SFC 1-30-2012.pdf |
SFIN 1/18/2012 9:00:00 AM |
HB 104 |