Legislature(1999 - 2000)
04/25/2000 10:10 AM House FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 25, 2000
10:10 A.M.
TAPE HFC 00 - 136, Side 1.
CALL TO ORDER
Representative Bunde called the House Finance Committee
meeting to order at 10:10 A.M.
PRESENT
Vice Chair Bunde Representative Foster
Representative G. Davis Representative Grussendorf
Representative Austerman Representative Moses
Representative Bunde Representative Phillips
Representative Williams
Representative Mulder, Representative Therriault and
Representative J. Davies were not present for the meeting.
ALSO PRESENT
Diane Barrans, Executive Director, Alaska Postsecondary
Education Commission, Alaska Student Loan Corporation,
Department of Education and Early Development.
SUMMARY
SB 270 An Act relating to return of contributed capital,
or payment of a dividend, to the state by the
Alaska Student Loan Corporation; and providing for
an effective date.
SB 270 was reported out of Committee with a "do
pass" recommendation and with a fiscal note by the
Alaska Student Loan Corporation dated 2/11/00.
SENATE BILL NO. 270
An Act relating to return of contributed capital, or
payment of a dividend, to the state by the Alaska
Student Loan Corporation; and providing for an
effective date.
DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION
COMMISSION, ALASKA STUDENT LOAN CORPORATION, DEPARTMENT OF
EDUCATION AND EARLY DEVELOPMENT, explained that SB 270 is
the partner bill to HB 373. These two bills are identical
and would allow the Alaska Student Loan Corporation to
determine if in any year that there is a net income of $2
million dollars or more, to provide a return of contributed
capitol to the State of Alaska. The bill provides that no
less than 10% and no more than 35% of that net income may be
made available to the State. Ms. Barrons asked member's
support of the legislation.
Vice Chair Bunde inquired if that percentage would leave
enough capitol in the Alaska Student Loan Corporation for
contingency options. Ms. Barrans clarified that the Alaska
Student Loan Corporation, prior to making the determination,
would insure that loan demands were already accounted for.
Those funds are set aside and built into the cash flow. It
would be after that, the return to capitol would be made to
the State.
Representative Williams questioned the Corporation's
mission. Ms. Barrans replied that the mission is to provide
low cost, economic assistance to Alaskans seeking post
secondary education. Additionally, it is to authorize
schools to operate in the State of Alaska.
Representative Williams suggested that given the "low cost"
mission, why is the loan program making enough money to pay
some out to the State. Ms. Barrans replied that the
interest on the Alaska Student Loan Corporation is quite
low. It is between 5% and 8%. The reason that they are
able to provide contributed capitol, is that the payment
that the State originally gave to the corporation was $306
million dollars for loans. The intent is to return some of
that funding back to the State.
Representative Williams suggested that this would be a
"hidden tax" to the students. He pointed out that the
legislation would make the student loan program too high and
suggested that paying a dividend does not coincide with the
mission of the Department.
Vice Chair Bunde shared some of the thoughts voiced by
Representative Williams, however, argued on behalf of the
State which has subsidized these loans.
Ms. Barrans pointed out that there are some interest free
periods on each of the loans. As long as the student is in
school, there is zero interest charged. The actual rate
that the student pays is substantially less than the face
rate on the note. She added that the interest rate also is
substantially less than any other lending institution would
provide.
Representative Williams countered that the original
investment of $300 million dollars was to help the loan
program help the students get established. Representative
Williams did not accept that interest should be providing a
State dividend.
Representative Grussendorf pointed out that the Alaska
Student Loan Corporation had not initiated this legislation
on their own. The Legislature has been "after" some public
corporations to make good on their original investments.
Representative Williams argued that these dividends should
be used for the students. Representative Grussendorf
reiterated that the Legislative Body has been after this
money for the last ten years.
Representative Phillips inquired if the Board established
the interest rates or had the Legislature directed it.
Additionally, she inquired if it was the Legislature that
took away the "forgiveness" clause contained in the loans.
Ms. Barrans replied that forgiveness was eliminated in 1988
by the Legislature. A couple of years later, the interest
rate was changed from a fixed rate of 8%, to a formula tied
to what the corporation pays on it's bonds plus an
additional amount for program expenses and costs.
Vice Chair Bunde pointed out that the Alaska Student Loan
Program was about to "go broke" before they hired Ms.
Barrans. The Corporation has currently turned that
situation around and are now making money.
Representative Austerman agreed that passage of the
legislation is the proper thing to do. He suggested that
paying back the loans is an important part of the learning
experience for the students. A free program is not a good
idea for any student.
Representative Foster asked if funding the Alaska Scholars
Program, as recommended by the Governor, was the intended
use for these funds. Ms. Barrans commented that the funds
had not yet been earmarked.
Representative Williams recommended that the missions and
measures should be consistent for each of the departments.
He commented that the Legislature is not being consistent.
Representative Williams recommended investing more in those
students that stay in State to go to college. Vice Chair
Bunde stated that would essentially be a public policy
decision. He added that the Alaska Scholars Program would
reduce the need for in state student loans.
Representative Foster MOVED to report SB 270 out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
SB 270 was reported out Committee with a "do pass"
recommendation and with a fiscal note by the Alaska Student
Loan Corporation dated 2/11/00.
ADJOURNMENT
The meeting adjourned at 10:25 a.m.
H.F.C. 4 4/25/00 am
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