Legislature(1997 - 1998)

02/04/1998 09:00 AM Senate HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
            SB 241 - POSTSECONDARY SCHOOL TAX CREDIT                           
SENATOR LEMAN, sponsor of SB 241, explained the legislation                    
establishes equity between regionally accredited and nationally                
accredited institutions.  He thought the lack of equity was                    
probably an oversight by the Legislature when the issue was last               
addressed in 1991.  There are nationally accredited institutions               
within the State of Alaska that do not meet the letter of the law              
for regional accreditation; the Department of Revenue will not                 
grant the same tax benefits provided to regionally accredited                  
institutions unless the law is changed.                                        
ELMER RASMUSSEN testified via teleconference from California and               
agreed with Senator Leman's testimony.  He stated he has been a                
supporter of the Alaska Bible College for many years; his last                 
donation was $100,000 over three years to build dormitories.  The              
Alaska Bible College recently learned it is not a qualified                    
institution to receive tax deductible donations under the higher               
education act because it is not regionally accredited.  Mr.                    
Rasmussen said he spoke with Bill Sheffield about the distinction,             
because the original bill was enacted during his administration.               
Mr. Sheffield did not recall any reason for the distinction.  Mr.              
Rasmussen supports the bill because he would like to see the Alaska            
Bible College be eligible for tax deductible donations.                        
SENATOR LEMAN noted this particular change of law will not affect              
Mr. Rasmussen personally but will affect other taxpayers in the                
State, such as oil companies and banks.  MR. RASMUSSEN said                    
individuals do not pay State income tax, but corporations do; this             
legislation will help the Alaska Bible College receive support from            
Number 389                                                                     
LORALEI MEIER, staff to Senator Leman, explained in 1987 a tax                 
credit program was established to encourage funding for direct                 
instruction, research, education support purposes, etc.  In 1991,              
two amendments were made: one expanded the available credits; the              
second restricted participation to regionally accredited schools.              
SB 241 allows nationally accredited schools to participate in this             
tax credit program as well.  The intent of the amendments was to               
restrict participating institutions to those with regional                     
accreditation to establish a standard for participating                        
institutions.  Accreditation between regionally and nationally                 
recognized institutions is very comparable.  The Alaska Commission             
on Postsecondary Education does not make any distinction when                  
administering student loans.                                                   
SENATOR ELLIS asked why the Alaska Bible College does not apply for            
regional accreditation.  MS. MEIER replied it prefers the national             
accrediting association because it has like mindedness regarding               
the direction this institution wants to take.                                  
SENATOR ELLIS asked which national accrediting association the                 
Alaska Bible College belongs to.  MS. MEIER answered it belongs to             
the Accrediting Association of Bible Colleges.  SENATOR ELLIS asked            
if there is a regional version of that organization.  MS. MEIER                
said not to her knowledge, but said she would find out.                        
SENATOR ELLIS noted the institutions referred to in the bill are               
New Concepts Beauty School, Charter College, Career Academy and the            
Alaska Bible College.  He asked Ms. Meier to find out the national             
accrediting organizations for those institutions as well.                      
SENATOR ELLIS thought the Legislature made that decision in 1991               
based on discussions about constitutional concerns, religious                  
affiliations, and private versus public institutions.                          
Number 431                                                                     
SENATOR LEMAN said the decision to restrict was not made                       
inadvertently and it was probably well known that three                        
institutions were qualifying under regional accreditation: Alaska              
Pacific University, Sheldon Jackson College, and the University of             
Alaska.  He recalled that the discussion revolved around setting               
standards for institutions to be eligible for the tax credit                   
program.  It may have been the intent of representatives of those              
institutions that it be limited, but he did not believe it was                 
based on arguments of constitutionality because two of those                   
institutions have religious affiliations.  At the time he had not              
explored the different mechanisms involved in regional and national            
accreditation but has since learned that they accomplish                       
essentially the same thing as long as they use comparable                      
SENATOR ELLIS asked which accreditation program is more rigorous.              
MS. MEIER said the difference between the two is not based on                  
difficulty, but on different ways of going about it.  Regional                 
accrediting associations base their accreditation on regional                  
issues while national accrediting associations are more focussed on            
general issues.                                                                
SENATOR LEMAN stated the standards required by the Accrediting                 
Association of Bible Colleges are comparable to those of the                   
regional accreditation associations.  He thought the Alaska Bible              
College might not have regional accreditation due to the cost.                 
Number 476                                                                     
BOB BARTHOLOMEW, Assistant Director of the Income and Excise Tax               
Division, Department of Revenue, offered to answer questions                   
related to the fiscal note.  He noted page 4 of the fiscal note                
contains a range from zero to $130,000 in loss of revenue.  The                
division had to make assumptions to come up with an estimate, so               
used that range.  Projecting whether new corporations would add to             
the pool of contributions to colleges or whether current corporate             
donors would shift their contributions was difficult.                          
MR. BARTHOLOMEW informed committee members a second tax bill, SB
140, deals with the current tax credit program and raises the                  
$200,000 limit in the amount that can be contributed to individual             
colleges.  It also allows a tax credit for contributions to K-12               
public schools.  The intent was to expand the dollar amounts that              
can be contributed to higher education, and to expand the pool of              
eligible schools to include K-12 public schools.                               
CHAIRMAN WILKEN asked Mr. Bartholomew about the amount of the                  
fiscal note  for SB 140.  MR. BARTHOLOMEW said it was based on the             
growth of donations experienced by educational institutions when               
the two-tier system was established.  SB 140 establishes a third               
tier so the Department of Revenue projected $2 million would go to             
education instead of the general fund.  The total contributions                
made would be $4 million, since only 50 percent of the contribution            
can be taken as a tax credit.                                                  
SENATOR LEMAN believed a tax credit program is a good approach                 
because it encourages contributions to educational institutions                
from those who might not otherwise contribute.                                 
SENATOR ELLIS encouraged Chairman Wilken to schedule SB 140 so that            
these issues can be addressed comprehensively.  He asked Senator               
Leman if he had considered using a graduated tier for these kinds              
of contributions.  SENATOR ELLIS believed there is a higher                    
compelling state interest to encourage tax credits by private                  
individuals to the University of Alaska, Alaska Pacific University             
and Sheldon Jackson College, than there is to the New Concepts                 
Beauty School.  He said he is sure it is a fine school but there is            
probably a greater public benefit to encouraging tax credits to the            
other institutions of higher learning.  He thought it unwise to put            
all of those institutions on equal footing in terms of the tax                 
credit, when a loss of state revenues will result.  He asked that              
the issue be discussed more comprehensively and that SB 140 be                 
discussed in the committee because the Legislature is the body to              
make the tough decisions on the public purpose of tax credits.                 
SENATOR LEMAN stated he would welcome broadening this program to               
include K-12 education, if that would enhance the chance of getting            
legislative support and support from the Administration.  Regarding            
which institutions should get the tax benefit, he thought large                
taxpayers evaluate the broad support in their organization, and                
make contributions accordingly, so it becomes a self-policing                  
mechanism.  For example, ARCO probably tries to determine what                 
institution its employees support the most and then contributes to             
that institution.                                                              
SENATOR ELLIS asked CHAIRMAN WILKEN what his intentions were                   
regarding SB 241.  CHAIRMAN WILKEN answered he intends to hold SB
241 and re-read SB 140.  He recalled two concerns he originally had            
with SB 140; the first was the fiscal note, the second was that                
donors wanted to specify which public school their donation went               
to, and that created problems.                                                 

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