Legislature(1997 - 1998)

02/20/1997 03:04 PM House HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               HOUSE HEALTH, EDUCATION AND SOCIAL                              
                  SERVICES STANDING COMMITTEE                                  
                       February 20, 1997                                       
                           3:04 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative Con Bunde, Chairman                                            
 Representative Joe Green, Vice Chairman                                       
 Representative Al Vezey                                                       
 Representative Brian Porter                                                   
 Representative Fred Dyson                                                     
 Representative J. Allen Kemplen                                               
 Representative Tom Brice                                                      
 MEMBERS ABSENT                                                                
 All members present                                                           
 COMMITTEE CALENDAR                                                            
 *HOUSE BILL NO. 121                                                           
 "An Act relating to A.W. Brindle memorial scholarship loans; and              
 providing for an effective date."                                             
      - HEARD AND HELD                                                         
 HOUSE JOINT RESOLUTION NO. 18                                                 
 Proposing an amendment to the Constitution of the State of Alaska             
 relating to changing the rate of a tax or license that supports a             
 dedication of its proceeds.                                                   
      - HEARD AND HELD                                                         
 (* First public hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HB 121                                                               
 SHORT TITLE: WINN BRINDLE SCHOLARSHIP LOAN                                    
 SPONSOR(S): REPRESENTATIVE(S) WILLIAMS                                        
 JRN-DATE     JRN-DATE             ACTION                                      
 02/10/97       292    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/10/97       292    (H)   HES                                               
 BILL:  HJR 18                                                               
 SPONSOR(S): REPRESENTATIVE(S) IVAN                                            
 JRN-DATE     JRN-DATE             ACTION                                      
 01/29/97       164    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/29/97       164    (H)   STA, HES, JUD, FINANCE                            
 02/04/97              (H)   STA AT  8:00 AM CAPITOL 102                       
 02/04/97              (H)   MINUTE(STA)                                       
 02/06/97              (H)   STA AT  8:00 AM CAPITOL 102                       
 02/06/97              (H)   MINUTE(STA)                                       
 02/11/97              (H)   STA AT  8:00 AM CAPITOL 102                       
 02/11/97              (H)   MINUTE(STA)                                       
 02/12/97       305    (H)   STA RPT  CS(STA) NT 4DP 1DNP 1NR                  
 02/12/97       305    (H)   DP: JAMES, HODGINS, DYSON, IVAN                   
 02/12/97       305    (H)   DNP: VEZEY                                        
 02/12/97       305    (H)   NR: BERKOWITZ                                     
 02/12/97       305    (H)   FISCAL NOTE (GOV)                                 
 02/12/97       305    (H)   REFERRED TO HES                                   
 WITNESS REGISTER                                                              
 REPRESENTATIVE BILL WILLIAMS                                                  
 Alaska State Legislature                                                      
 Capitol Building, Room 524                                                    
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-3424                                                    
 POSITION STATEMENT:  Sponsor of HB 121                                        
 MIKE MAHER, Director of Student Financial Aid                                 
 Alaska Commission on Post Secondary Education                                 
 1893 Fritz Cove Road                                                          
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 789-0224                                                    
 POSITION STATEMENT:  Testified in support of HB 121                           
 REPRESENTATIVE IVAN IVAN                                                      
 Alaska State Legislature                                                      
 Capitol Building, Room 418                                                    
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-4942                                                    
 POSITION STATEMENT:  Sponsor of HJR 18                                        
 TOM WRIGHT, Legislative Assistant                                             
   to Representative Ivan                                                      
 Alaska State Legislature                                                      
 Capitol Building, Room 418                                                    
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-4942                                                    
 POSITION STATEMENT:  Testified in support of HB 121                           
 ACTION NARRATIVE                                                              
 TAPE 97-12, SIDE A                                                            
 Number 0000                                                                   
 CHAIRMAN CON BUNDE called the House Health, Education and Social              
 Services Standing Committee meeting to order at 3:04 p.m.  Members            
 present at the call to order were Representatives Bunde, Porter,              
 Kemplen and Brice.  Representative Dyson arrived at 3:05 p.m. and             
 Representatives Green and Vezey arrived at 3:07 p.m.                          
 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             
 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            
 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            
 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                  
 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                 
 HJR 18 - DEDICATED FUNDS: RATE MAY BE CHANGED                               
 Number 1110                                                                   
 CHAIRMAN BUNDE announced the next item on the agenda was HJR 18,              
 Proposing an amendment to the Constitution of the State of Alaska             
 relating to changing the rate of a tax or license that supports a             
 dedication of its proceeds.                                                   
 Number 1120                                                                   
 REPRESENTATIVE IVAN IVAN, sponsor of HJR 18, read from the sponsor            
 statement.  He said the resolution proposes an amendment to Article           
 IX, Section 7 of the state constitution.  The current article                 
 allows for the dedication of funds for a specific purpose as long             
 as it existed by April 24, 1956.  This resolution would allow a               
 changing of a rate of a tax or license of which the proceeds are              
 dedicated to a special purpose.  This proposed amendment would be             
 placed before the voters at the next general election, if approved            
 by the legislature.                                                           
 REPRESENTATIVE IVAN said he introduced this resolution because of             
 the differing opinions represented by the attorney general's office           
 and Legal Services in regards to the dedication of a tax increment            
 to a specified purpose.  In order to avoid litigation, especially             
 if the proceeds of the tobacco tax are to be placed into the school           
 fund or if the legislature changes any other tax rate or license              
 fee, into which proceeds are to be placed into a dedicated fund,              
 this resolution could be a solution to resolve that potential                 
 REPRESENTATIVE IVAN said in the resolution's first committee of               
 referral, House State Affairs Standing Committee, an amendment was            
 adopted to make the amendment retroactive to October 1, 1997.  This           
 retroactivity coincides with the effective date of the tobacco tax            
 as proposed by CSHB 1(STA).                                                   
 Number 1218                                                                   
 CHAIRMAN BUNDE asked what other dedicated funds would be impacted             
 by HJR 18.                                                                    
 Number 1225                                                                   
 REPRESENTATIVE IVAN said he did not have a list in front of him,              
 but the other funds were discussed in the House State Affairs                 
 committee.  He believed the fish and game fund would be impacted.             
 Number 1242                                                                   
 TOM WRIGHT, Legislative Assistant to Representative Ivan, said the            
 only funds he knew that were still in existence, which are                    
 considered dedicated, are the school fund and the fish and game               
 Number 1274                                                                   
 REPRESENTATIVE PORTER said the opinion that says we might not be              
 able to raise the tobacco tax and put that money into a dedicated             
 fund came from a 1959 attorney general's opinion.  He asked if an             
 opinion had been sought from the current attorney general.                    
 Number 1295                                                                   
 MR. WRIGHT said the 1956 opinion was the one that the attorney                
 general's office referred to in the State Affairs committee, the              
 Attorney General Opinion, Number 7.  He said there have been                  
 Attorney General Opinions, Numbers 7, 9 and 14, which have all                
 spoken to the same issue and said basically the same thing.                   
 Number 1314                                                                   
 REPRESENTATIVE PORTER clarified that the current attorney general             
 agrees with the 1956 opinion.                                                 
 Number 1336                                                                   
 REPRESENTATIVE VEZEY said the fisherman's fund for the relief of              
 injured fisherman is a fund that pre-existed statehood.  Those were           
 the only three funds of which he was aware.  He expressed confusion           
 as to why those funds that pre-existed statehood and still exist as           
 a dedicated fund can't be found.                                              
 Number 1350                                                                   
 CHAIRMAN BUNDE said HJR 18 would be held until next Tuesday,                  
 February 25, 1997, when it would be heard again.                              
 There being no further business to conduct, CHAIRMAN BUNDE                    
 adjourned the meeting of the House Health, Education and Social               
 Services Standing Committee at 3:26                                           

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