Legislature(2021 - 2022)SENATE FINANCE 532

03/23/2022 09:00 AM Senate FINANCE

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Heard & Held
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Moved CSSB 81(CRA) Out of Committee
**Streamed live on AKL.tv**
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 23, 2022                                                                                            
                         9:04 a.m.                                                                                              
9:04:41 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Bishop called the Senate Finance Committee meeting                                                                     
to order at 9:04 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Senator Click Bishop, Co-Chair                                                                                                  
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
Senator Natasha von Imhof                                                                                                       
Senator Bill Wielechowski                                                                                                       
Senator David Wilson                                                                                                            
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Sana Efird, Executive Director, Alaska Commission on                                                                            
Postsecondary Education, Department of Education and Early                                                                      
PRESENT VIA TELECONFERENCE                                                                                                    
Lee Donner, Senior Managing Director, Hilltop Securities,                                                                       
Texas; Josh Bicchinella, Chair, Alaska Commission on Post-                                                                      
Secondary Education, Wasilla.                                                                                                   
SB 81     VILLAGE PUBLIC SAFETY OFFICER GRANTS                                                                                  
          CSSB 81(CRA)  was REPORTED  out of  committee with                                                                    
          six   "do  pass"   recommendations  and   one  "no                                                                    
          recommendation"   recommendation   and  with   two                                                                    
          previously published  fiscal notes: FN  3(DPS) and                                                                    
          FN 4(DPS).                                                                                                            
SB 94     EDUCATION & SUPPLEMENTAL LOAN PROGRAMS                                                                                
          SB 94 was HEARD and HELD in committee for further                                                                     
SENATE BILL NO. 81                                                                                                            
     "An Act requiring  background investigations of village                                                                    
     public safety  officer applicants by the  Department of                                                                    
     Public Safety;  relating to  the village  public safety                                                                    
     officer program; and providing for an effective date."                                                                     
9:05:08 AM                                                                                                                    
Co-Chair Bishop  relayed that it  was the third  hearing for                                                                    
SB 81. The committee had  heard public testimony on February                                                                    
28,  2022.  The committees   intention  was  to consider  an                                                                    
amendment, cover fiscal  notes, and look to the  will of the                                                                    
Olson   MOVED  to   WITHDRAW  Amendment   1,  32-LS0362\I.17                                                                    
(Radford,  3/21/22). There  being  NO OBJECTION,  it was  so                                                                    
ordered. [Secretary's  note: A MOTION to  ADOPT Amendment 1,                                                                    
and  an OBJECTION  to the  motion to  ADOPT Amendment  1 was                                                                    
made on March 21, 2022.]                                                                                                        
Senator Wielechowski  discussed FN 3, OMB  Component 3200, a                                                                    
zero  fiscal  note  from the  Department  of  Public  Safety                                                                    
(DPS).  The bill  authorized fingerprint  submission to  DPS                                                                    
for  state national  criminal  background  checks. He  cited                                                                    
that DPS  anticipated being to absorb  the additional duties                                                                    
with existing staff.                                                                                                            
Senator  Wielechowski discussed  FN 4,  OMB Component  3047,                                                                    
from  DPS  for  the  Village Public  Safety  Officer  (VPSO)                                                                    
Program. The fiscal note cited a  cost of $122,200 in FY 23,                                                                    
and $107,300 in FY 24 going  forward, and would fund a long-                                                                    
term  non-permanent  position  that  would  be  required  to                                                                    
conduct  background investigations  for  an  annual cost  of                                                                    
$100,900. The bill also required  successful completion of a                                                                    
psychological examination for a  VPSO to carry firearms. The                                                                    
cost for 50 VPSOs to  receive psychological testing in FY 23                                                                    
was  estimated to  be  $425 per  person,  or $21,250.  Going                                                                    
forward, there was  a cost of $6,375 based on  an average of                                                                    
15 new VPSOs per year.                                                                                                          
Senator Olson MOVED to report  CSSB 81(CRA) out of Committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
notes. There being NO OBJECTION, it was so ordered.                                                                             
CSSB  81(CRA) was  REPORTED out  of committee  with six  "do                                                                    
pass"   recommendations   and    one   "no   recommendation"                                                                    
recommendation  and  with  two previously  published  fiscal                                                                    
notes: FN 3(DPS) and FN 4(DPS).                                                                                                 
9:07:47 AM                                                                                                                    
AT EASE                                                                                                                         
9:09:42 AM                                                                                                                    
SENATE BILL NO. 94                                                                                                            
     "An Act relating to the education loan program and                                                                         
     Alaska supplemental education loan program; and                                                                            
     providing for an effective date."                                                                                          
9:09:42 AM                                                                                                                    
Co-Chair Bishop relayed that it  was the first hearing of SB
94.  The  committee  would  hear  a  bill  introduction  and                                                                    
sectional analysis,  take invited and public  testimony, and                                                                    
set  the bill  aside.  He listed  individuals available  for                                                                    
9:10:28 AM                                                                                                                    
SANA  EFIRD,   EXECUTIVE  DIRECTOR,  ALASKA   COMMISSION  ON                                                                    
POSTSECONDARY EDUCATION,  DEPARTMENT OF EDUCATION  AND EARLY                                                                    
DEVELOPMENT,  thanked the  committee. She  wanted to  give a                                                                    
brief  overview of  what the  bill  did and  why the  Alaska                                                                    
Student Loan  Corporation (ASLC)  and the  Alaska Commission                                                                    
on  Postsecondary   Education  (ACPE)  were   proposing  the                                                                    
legislation.   She   discussed    a   presentation   "Alaska                                                                    
Commission  on  Postsecondary   Education  (ACPE)  &  Alaska                                                                    
Student Loan Corporation (ASLC)" (copy on file).                                                                                
Ms. Efird looked at slide 2, "ACPE & ASLC Missions":                                                                            
      The Alaska Commission  on  Postsecondary  Education                                                                    
        supports  Alaskans'   access  to   and  success   in                                                                    
        postsecondary education  and  career training  after                                                                    
        high school.                                                                                                            
      The Alaska Student Loan Corporation operates  as an                                                                    
        enterprise agency  of the  State of  Alaska, funding                                                                    
        and facilitating the Alaska Student Loan Program and                                                                    
        the  related  work  of  the   Alaska  Commission  on                                                                    
        Postsecondary Education.                                                                                                
Ms. Efird spoke to slide 3, "SB 94":                                                                                            
     "An  Act relating  to the  education  loan program  and                                                                    
     Alaska   supplemental  education   loan  program;   and                                                                    
     providing for an effective date.                                                                                           
      Expands Eligibility for Alaska Refinance Loans                                                                         
       Currently eligible: Alaska residents only                                                                                
         Proposed:    previous   borrower,    cosigner,   or                                                                    
     beneficiary of an Alaska loan                                                                                              
        Proposed:  graduates  of  Alaska  high  schools  and                                                                    
     postsecondary institutions                                                                                                 
      Removes specific loan limits  from statute  for in-                                                                    
        school loans and  gives authority  to ASLC  Board to                                                                    
        set limits                                                                                                              
      Adds clarifying language that ACPE can offer future                                                                    
        student loan  borrowers  a  loan  program  with  the                                                                    
        option for immediate repayment                                                                                          
Senator Olson asked if there were problems with the loan                                                                        
program that necessitated the legislation.                                                                                      
Ms. Efird explained that the upcoming slides would show why                                                                     
the bill was needed and what the bill would do.                                                                                 
9:14:06 AM                                                                                                                    
Ms. Efird referenced slide 4, "Why is SB 94 necessary?":                                                                        
     Achieve two goals:                                                                                                         
      Respond to the needs and requests of  borrowers and                                                                    
        postsecondary institutions                                                                                              
      Maintain financial stability of the Alaska Student                                                                     
        Loan Corporation for future financial education                                                                         
        needs of Alaskans                                                                                                       
Senator von  Imhof looked at  the first bullet and  asked if                                                                    
students  were going  to banks  and being  turned down,  and                                                                    
what involvement commercial banks had in student loans.                                                                         
Ms.  Efird showed  slide 7,  "ASLC  Loan Portfolio  Runoff,"                                                                    
which  showed   a  graph  that  illustrated   the  financial                                                                    
stability  of the  state's loan  portfolio. She  pointed out                                                                    
that  the slide  showed  the financial  underpinning of  the                                                                    
bill, which  was to try  and ensure the  financial stability                                                                    
of  the corporation.  She recounted  that over  a number  of                                                                    
years  since  2010, the  loan  portfolio  had experienced  a                                                                    
runoff. She  affirmed that students  and families  in Alaska                                                                    
were borrowing  from private lenders  and other  lenders for                                                                    
education needs and paying higher interest costs.                                                                               
Senator von Imhof  thought the state was  competing with the                                                                    
private banking industry.  She used an example  of the state                                                                    
providing  car loans  at a  lower rate.  She referenced  the                                                                    
next slide,  and thought private loans  generally cost more,                                                                    
had  lower approval  rates, and  were less  transparent. She                                                                    
did  not think  the information  meant the  state should  be                                                                    
competing because  it could offer lower  rates. She pondered                                                                    
whether the situation was fair.                                                                                                 
Ms.  Efird recounted  that the  legislature established  the                                                                    
corporation  for  the  mission   and  purpose  of  providing                                                                    
education  loans   for  students  to   attend  postsecondary                                                                    
education. She  noted that  she was  working to  sustain the                                                                    
mission of the corporation and the commission.                                                                                  
Senator von  Imhof understood  that students  could go  to a                                                                    
bank, ask to be declined, and  get a decline letter in order                                                                    
to take  it to the state  and get approval for  a state loan                                                                    
at a rate that was 2 percent lower.                                                                                             
Co-Chair Bishop thought the matter could go both ways.                                                                          
9:18:13 AM                                                                                                                    
Senator Wielechowski  asked Ms.  Efird to address  the chart                                                                    
on slide 7. He asked about a loan portfolio runoff.                                                                             
Ms. Efird explained  that the graph showed  that since 2008,                                                                    
the corporation  had $700 million  in loans, and as  of June                                                                    
2019, the corporation had $213 million in loans.                                                                                
Ms. Efird advanced slide 8, "Current Strategic Challenge":                                                                      
     Since  2010,  federal   and  state  program  challenges                                                                    
     drastically   curtailed  loan   originations,  severely                                                                    
     reducing economies  of scale  and impacting  ASLC long-                                                                    
     term viability:                                                                                                            
      Elimination of Federal Family Education Loan Program                                                                   
        (FFELP) in 2010                                                                                                         
      Mortgage crisis impact on investor confidence in                                                                       
        student   loan    debt   required    more   rigorous                                                                    
        underwriting standards                                                                                                  
      Decline in college enrollment rates                                                                                    
    Federal preferred lender prohibition legislation                                                                         
      Growing culture of fear that student loans are                                                                         
        inherently bad                                                                                                          
     And more recently:                                                                                                         
      COVID Pandemic                                                                                                         
      Continued decline in enrollment rates                                                                                  
      Federal  Student    Loan    forgiveness    national                                                                    
Ms.  Efird explained  that the  portfolio runoff  related to                                                                    
the revenue  and financial bottom  line for  the corporation                                                                    
to  sustain the  finances to  provide additional  loans. She                                                                    
expanded  that  student  financial   aid  offices  were  not                                                                    
permitted  to suggest  preferred  lenders  to students,  and                                                                    
could  not share  that the  state  had a  loan program  that                                                                    
benefitted students.  She cited  research that if  a student                                                                    
had  a  full financial  package  to  attend a  postsecondary                                                                    
program,  the  student  was  more  likely  to  complete  the                                                                    
program and enter the workforce.                                                                                                
9:22:09 AM                                                                                                                    
Senator Olson  asked to go back  to slide 3. He  asked about                                                                    
the second  bullet and whether non-resident  borrowers could                                                                    
request an additional loan.                                                                                                     
Ms. Efird  wanted to  clarify that  the slide  addressed two                                                                    
different loans. The  first bullets on the  slide related to                                                                    
the  Alaska  Refinance  Loans.   In  2016,  the  legislature                                                                    
authorized a  refinance program  for Alaskan  residents that                                                                    
had a student  loan with the corporation  or other education                                                                    
loans. The  corporation was  asking to  expand the  pool for                                                                    
refinancing  loans to  include non-residents.  The refinance                                                                    
loan had a lower interest  rate because of the higher credit                                                                    
criteria required for the loans.                                                                                                
Senator Olson asked about chances  for default and what kind                                                                    
of reparations could be made in the case of default.                                                                            
Ms. Efird  stated that the  refinance loan program  had been                                                                    
in existence  since 2016,  and it  had a  zero-default rate.                                                                    
She  reiterated that  there were  high credit  standards and                                                                    
requirements for  the program,  and it was  one of  the only                                                                    
loan programs  increasing for the corporation  and providing                                                                    
financial stability and revenues.                                                                                               
9:26:02 AM                                                                                                                    
Senator  Wilson asked  if a  non-resident could  be eligible                                                                    
for the loans.                                                                                                                  
Ms.  Efird stated  that the  legislation proposed  to expand                                                                    
the pool for refinance loans  for someone that was no longer                                                                    
a resident but  had a nexus and a  connection either through                                                                    
a current  Alaska student loan  or having graduated  from an                                                                    
Alaskan high school or postsecondary institution.                                                                               
Co-Chair  Bishop thought  the  bill proposed  to expand  the                                                                    
refinance loan pool and continue the zero-default rate.                                                                         
Ms.  Efird suggested  that expanding  the pool  of refinance                                                                    
loans  helped the  bottom line  for  the corporation,  which                                                                    
supported  having the  financial  stability  to provide  in-                                                                    
school students for Alaska residents only.                                                                                      
Senator  Wielechowski asked  Ms.  Efird to  provide data  on                                                                    
default rates  for the  students she  was looking  to expand                                                                    
eligibility  for. He  thought Alaskans  wanted to  encourage                                                                    
people to  stay in  the state.  He wanted  to see  hard data                                                                    
that showed the proposed change would benefit the state.                                                                        
Ms. Efird stated that the  default information that ACPE had                                                                    
on  the  refinance  loan  program  showed  a  zero  rate  of                                                                    
default. She  could not  predict a  future default  rate but                                                                    
reiterated there was high credit  criteria for the refinance                                                                    
Senator Wielechowski  was interested  in seeing  the overall                                                                    
default rates  and some projections  on how it  might change                                                                    
if out-of-state students were allowed to refinance.                                                                             
Ms. Efird agreed to provide  the information. She added that                                                                    
she had data for default  rates for in-school student loans,                                                                    
which she could also provide.                                                                                                   
Ms. Efird turned to slide  5, "What Borrowers & Institutions                                                                    
Tell Us":                                                                                                                       
         Current Alaska student loan limits have not kept                                                                    
          up with tuition inflation and no longer meet                                                                          
          financial need                                                                                                        
         Federal loans are not always less expensive than                                                                    
          Alaska loans and also do not meet financial need                                                                      
         Private loans generally cost more, have lower                                                                       
         approval rates, and are less transparent                                                                               
         Alaska loan programs fill the cost gap with low-                                                                    
          cost, high-quality loans                                                                                              
Ms. Efird  relayed that  ACPE had ASLC  had heard  from both                                                                    
students and  financial aid officers  within the  state. She                                                                    
cited that  the agency  knew that  students were  taking out                                                                    
student  loans  via other  avenues  and  were paying  higher                                                                    
interest rates.                                                                                                                 
9:30:18 AM                                                                                                                    
Ms.   Efird  considered   slide  6,   "Supporting  Financial                                                                    
     47% Percent of College Graduates with Debt                                                                                 
     (AVG Debt Amount = $26,356 | Class of 2020)                                                                                
     ACPE LOAN PROGRAM HIGHLIGHTS                                                                                               
     Created by Alaskans, for Alaskans                                                                                          
     Alaska students pay $6,400 - $20,100 LESS over the                                                                         
     life of their loan by borrowing from ACPE                                                                                  
     ACPE average loan rates are LOWER than average                                                                             
     national private fixed-rate loan                                                                                           
Ms. Efird added that student  loan debt was at the forefront                                                                    
of  ACPEs  and  ASLCs   consideration.  She emphasized  that                                                                    
student  loans must  be done  in a  responsible manner.  She                                                                    
reiterated  that research  showed that  students that  had a                                                                    
full financial package to cover  the cost of attendance were                                                                    
more  likely  to  complete their  program  and  successfully                                                                    
repay loans.                                                                                                                    
Ms. Efird  displayed slide 7, "ASLC  Loan Portfolio Runoff,"                                                                    
which showed a line graph.                                                                                                      
Senator von  Imhof thought  Ms. Efird was  doing a  good job                                                                    
representing her program and clarified  that her comment was                                                                    
philosophical. She  pondered whether the state  should be in                                                                    
the  business  of competing  with  the  private sector.  She                                                                    
questioned what  the benefit would  be if the  state offered                                                                    
the  same  rates  as  a   commercial  bank  in  Alaska.  She                                                                    
understood the  benefits of the program.  She questioned why                                                                    
the state would  not take over the  lending functions across                                                                    
the state,  and qualified  that her  comment was   tongue in                                                                    
cheek.  She cited  that there were seven banks  in the state                                                                    
that were trying  to make a living and  employed people. She                                                                    
considered  that  the state  was  taking  business from  the                                                                    
banks,  used the  Alaska Industrial  Development and  Export                                                                    
Authority (AIDEA)  as an example,  and did not think  it was                                                                    
9:33:52 AM                                                                                                                    
Senator Wielechowski asked how  many interest rates compared                                                                    
to what the state was  offering and what the private banking                                                                    
industry offered.                                                                                                               
Ms. Efird did not have data  to use as comparison. She noted                                                                    
that  the  last  slide  was a  calculation  of  the  average                                                                    
savings over the  life of a loan taken with  ACPE. She noted                                                                    
that  the  chief finance  officer  for  ASLC was  online  to                                                                    
answer  questions  if  needed. She  referenced  Senator  von                                                                    
Imhof's  comments  and explained  that  the  state tried  to                                                                    
provide financial  literacy trainings  for students,  so the                                                                    
students would understand taking  out a loan. She emphasized                                                                    
that ACPE  wanted to  only fill the  gap of  needed funding,                                                                    
and   encouraged    other   options   in    federal   loans,                                                                    
scholarships, and the Alaska Performance Scholarship (APS).                                                                     
Ms. Efird noted that for  ASLC loans, the corporation worked                                                                    
with the  educational institution to ensure  the student was                                                                    
enrolled. She noted  that an ASLC loan would  go directly to                                                                    
the school,  while a  private loan could  go directly  to an                                                                    
individual. She  explained that  the corporation  was trying                                                                    
to have checks and balances in  place to try and ensure that                                                                    
Alaskans  were not  overborrowing and  were borrowing  for a                                                                    
purpose  of completion.  She  noted that  there  was also  a                                                                    
yearly  attestation that  the student  was either  an Alaska                                                                    
resident  or an  out-of-state student  with an  intention to                                                                    
return to Alaska  and not applying for  residency in another                                                                    
9:37:18 AM                                                                                                                    
Ms.  Efird  summarized  that   with  the  statutory  mission                                                                    
provided by  the legislature, the corporation  was trying to                                                                    
provide student  funding in  a responsible  way to  help the                                                                    
borrowers to  completion. Each year, the  corporation worked                                                                    
to ensure  the students were still  working towards progress                                                                    
in completion of  the program for the next  years  loan. She                                                                    
felt the corporation had quite  a few checks and balances in                                                                    
place to  promote completion of  the students   programs and                                                                    
to help  the workforce needs  of Alaska. She added  that she                                                                    
wanted to  ensure the committee  understood that  there were                                                                    
no General Funds in ASLC, and  all the funding for the loans                                                                    
was through investment and revenue  returns on the loans and                                                                    
interest that came back to the corporation.                                                                                     
Senator Wilson asked if the  program would also provide loan                                                                    
consolidation for federal programs.                                                                                             
Ms.   Efird  answered   "yes",   and   qualified  that   the                                                                    
corporation  would also  educate  the  student to  determine                                                                    
that  the   refinancing  of  the  federal   loan  would  not                                                                    
compromise any forgiveness or federal benefits.                                                                                 
9:39:24 AM                                                                                                                    
Senator  Hoffman thought  education was  very important  and                                                                    
considered  that   many  Native  corporations   offered  low                                                                    
interest loans and grants because  of wanting its population                                                                    
to be as  educated as possible. He thought  the state should                                                                    
be doing the same, and  he supported the state entering into                                                                    
programs whether subsidized or not.                                                                                             
Senator  Hoffman   asked  if  Ms.  Efird   could  provide  a                                                                    
breakdown  of  the  ratio between  urban  and  rural  Alaska                                                                    
Co-Chair Bishop asked  for Ms. Efird to include  data with a                                                                    
breakdown of ethnicities.                                                                                                       
Co-Chair Stedman  followed up on earlier  concerns shared by                                                                    
members. He  thought it would be  nice for Ms. Efird  to put                                                                    
together  a table  with information  on loan  comparisons to                                                                    
see  what  the  federal  government and  state  were  doing,                                                                    
including interest rates.                                                                                                       
Co-Chair  Stedman  referenced  Senator von  Imhof's  concern                                                                    
about being  in competition with commercial  banks and other                                                                    
lenders. He  relayed that  he shared  the concerned  in many                                                                    
ways  but  considered  that  that   there  were  many  young                                                                    
Alaskans that  did not  have the resources  to get  any help                                                                    
from parents. He  thought there needed to be  a system where                                                                    
individuals  without resources  or help  could gain  stature                                                                    
with increased  education. He thought  the issues  needed to                                                                    
be balanced.  He mentioned family  members that not  had not                                                                    
had the  wherewithal to sign up  for a loan. He  asked for a                                                                    
geographical breakdown  of the information requested  of Ms.                                                                    
Efird.  He  asked for  more  detail  on  the chart,  and  to                                                                    
include financial history.                                                                                                      
Co-Chair  Bishop thought  the  charts would  be updated  the                                                                    
next time ACPE and ASLC were back to committee.                                                                                 
9:43:36 AM                                                                                                                    
Ms. Efird went  back to slide 8, and offered  to provide any                                                                    
additional clarification  on the loan portfolio  runoff. She                                                                    
referenced Co-Chair  Stedman's comments  about why  the loan                                                                    
portfolio  had   declined  over  the  previous   years.  She                                                                    
mentioned the  federal loan program for  states, the decline                                                                    
in enrollment, and preferred lender prohibitions.                                                                               
Ms. Efird looked at slide 9, "Financial Stability Actions":                                                                     
      Implemented Lean process improvement program with                                                                      
        cumulative savings of almost $1 million - ongoing                                                                       
      Operating budget reductions over past five years of                                                                    
        27 percent                                                                                                              
      Reduce lease costs                                                                                                     
      Implemented a refinance loan program, building a $20                                                                   
        million refinance portfolio                                                                                             
      Moved investment management to Department of Revenue                                                                   
      Management worked with DOR to review projected cash                                                                    
        flow, determine investment horizon and develop                                                                          
       investment policy based on risk/return goals.                                                                            
          o Management worked with our Financial Advisor                                                                        
             and received their positive feedback on our                                                                        
             plan to switch to DOR and DOR's model.                                                                             
      Adopted an investment policy based on long-term                                                                        
        investment horizon/risk return goals                                                                                    
Ms. Efird described the proposed  legislation as "a piece of                                                                    
the   puzzle,"  and   relayed   that   the  commission   and                                                                    
corporation  had been  working  together  over the  previous                                                                    
five years  to provide  for the  financial soundness  of the                                                                    
corporation  through multiple  other actions.  She mentioned                                                                    
that  the  operating  budget reductions  referenced  on  the                                                                    
slide  had   included  staffing  reductions  of   almost  50                                                                    
percent. She  cited that the  refinance program  helped keep                                                                    
students in ASLCs  loan portfolio  to shore up the financial                                                                    
soundness of the corporation.                                                                                                   
Ms.  Efird  listed  other  efforts  such  as  revising  loan                                                                    
programs with  additional credit criteria and  redemption of                                                                    
outstanding bond  notes to  provide cost  reductions related                                                                    
to administering  the bonds. She cited  that the corporation                                                                    
was looking at other  internal strategies that would provide                                                                    
additional education and support for loan borrowers.                                                                            
9:47:53 AM                                                                                                                    
Senator von Imhof referenced slide  7, and thought the graph                                                                    
showed that  as of  June 2019, the  ASLC loan  portfolio was                                                                    
$213  million.  She asked  how  many  employees managed  the                                                                    
managed the portfolio at the time.                                                                                              
Ms. Efird did not have the  number at hand. She relayed that                                                                    
currently the commission had a  total of 52 Position Control                                                                    
Numbers (PCNs), and  currently had 46 that  were filled. She                                                                    
qualified that  not all the  positions were  associated with                                                                    
the loan programs. Some of  the positions administered other                                                                    
programs such  as financial aid,  APS, the  Alaska Education                                                                    
Grant,  and the  Washington, Wyoming,  Alaska, Montana,  and                                                                    
Idaho (WWAMI) Program.                                                                                                          
Senator  von  Imhof shared  that  prior  to serving  in  the                                                                    
legislature she  worked in  the banking  industry and  had a                                                                    
portfolio  of  about  $15 million.  She  estimated  that  14                                                                    
employees  could manage  $213 million.  She understood  that                                                                    
employees were  assigned to other  programs, but  the matter                                                                    
should  be considered.  She  thought 53  PCNs  seemed to  be                                                                    
quite  a  bit. She  contended  that  the PCNs  cost  General                                                                    
Ms. Efird  stated that the  funding for the  commission used                                                                    
no  General  Funds, and  the  money  came through  the  ASLC                                                                    
receipts,  which   funded  the  operating  budget   for  the                                                                    
commission,  save  for  around $500,000  (which  was  Higher                                                                    
Edcuation    Investment    Funds)   that    supported    the                                                                    
administrative costs  for APS,  the Alaska  Education Grant,                                                                    
and  WWAMI.  All  the  other   funding  in  the  budget  for                                                                    
operations and  administration was ASLC receipts.  She noted                                                                    
that the $213 million shown on  the graph on slide 7 was the                                                                    
student loan  portfolio and did not  represent the operating                                                                    
budget.  She believed  that  the  interagency receipts  that                                                                    
came  from  ASLC to  fund  programs  amounted to  around  $9                                                                    
9:51:33 AM                                                                                                                    
Senator  von  Imhof mentioned  Ms.  Efird's  reference to  a                                                                    
zero-default rate and  asked if any of  the loan refinancing                                                                    
was  part of  a work-out  program to  help with  the default                                                                    
Ms. Efird answered in the  negative. She reiterated that the                                                                    
refinance  program had  very high  eligibility criteria  and                                                                    
required no  adverse credit events on  an applicant's credit                                                                    
report.  She wanted  to do  more  research on  the topic  to                                                                    
provide a complete answer.                                                                                                      
Senator  von Imhof  wanted to  see how  the refinancing  and                                                                    
defaults  were   being  managed.  She  commented   that  the                                                                    
refinancing   customers  were    A-plus  borrowers,    which                                                                    
signified  that ASLC  was competing  with banks.  She argued                                                                    
that  if  there  were  no   defaults  in  the  program,  the                                                                    
borrowers  were  top  notch  and  a bank  would provide  the                                                                    
borrowers a loan.                                                                                                               
Ms. Efird was  not saying there was no defaults  in the loan                                                                    
program. The  no default rate  was for the  recent refinance                                                                    
program that had  been in existence since 2016  or 2017. She                                                                    
affirmed  that those  in the  refinance  program were  high-                                                                    
quality borrowers. She understood  that when the legislature                                                                    
set  the  refinance  program,  it was  to  help  ensure  the                                                                    
financial  soundness  of  ASLC  by  attracting  high-quality                                                                    
borrowers  to the  portfolio to  help support  the in-school                                                                    
student loans Alaskans needed to obtain education.                                                                              
9:54:13 AM                                                                                                                    
Ms.  Efird  advanced  to slide  11,  "Sectional  Analysis  &                                                                    
Fiscal Note":                                                                                                                   
      See Sectional Analysis in information packet                                                                           
      Zero Fiscal Note:                                                                                                      
       Positive impact to the financial stability of the                                                                        
       Anticipated increase in loan origination volume                                                                          
     would positively impact                                                                                                    
     ASLC's economies of scale                                                                                                  
       No projected increases to agency                                                                                         
Co-Chair Bishop thought  he had heard that the  ASLC was the                                                                    
last line of defense for  borrowers. He thought if borrowers                                                                    
failed to obtain a loan elsewhere, ALSC could help.                                                                             
Ms. Efird  explained that  she had been  trying to  make the                                                                    
point that a loan should be  the very last dollars a student                                                                    
received to meet unmet financial  needs. She reiterated that                                                                    
the ASLC always encouraged students  to look for free money.                                                                    
She  cited that  Alaska was  number  51 in  the country  for                                                                    
completion of  the Free Application for  Federal Student Aid                                                                    
(FAFSA),  which was  an important  part of  helping students                                                                    
meet  financial  education  needs.   The  commission  had  a                                                                    
current  initiative for  FAFSA completion.  She thought  the                                                                    
students  were leaving  federal  dollars on  the table  that                                                                    
would help  students either not need  a loan or need  a much                                                                    
smaller loan.                                                                                                                   
9:56:52 AM                                                                                                                    
Senator von Imhof  thought Ms. Efird had stated  that a loan                                                                    
should be  the last money  a student should  get, regardless                                                                    
of the origin.                                                                                                                  
Ms. Efird qualified that the  best loan for the student with                                                                    
the lowest repayment is the best option.                                                                                        
Senator von Imhof agreed with  Ms. Efird. She reiterated her                                                                    
concerns about  the state competing  with banks.  She agreed                                                                    
that students  and families should  seek the  cheapest money                                                                    
but  questioned   whether  the  state  should   be  the  one                                                                    
providing  the  cheapest  money. She  referenced  her  three                                                                    
years  on   the  school  board.  She   emphasized  that  she                                                                    
supported education, but  she also supported the  state as a                                                                    
whole.  She  thought  if  the  state  was  to  move  forward                                                                    
economically and  have new businesses,  lending institutions                                                                    
had to part of it.                                                                                                              
Ms. Efird discussed a Sectional Analysis (copy on file):                                                                        
     Section  1: Amends  AS  14.43.122(b), Consolidation  of                                                                    
     loans, by  expanding the  population eligible  to apply                                                                    
     for  Alaska  Refinancing   Loans  to  include  previous                                                                    
     Alaska  borrowers   and  graduates  from   Alaska  high                                                                    
     schools  and  postsecondary  institutions, as  well  as                                                                    
     current Alaska residents.                                                                                                  
     Section   2:  Amends   AS   14.43.173(a),  Loan   award                                                                    
     maximums; use  of loan award,  by eliminating  the loan                                                                    
     maximums  in  statute  and  providing  for  the  Alaska                                                                    
     Student  Loan  Corporation  (Corporation)  to  set  the                                                                    
     annual loan maximums.                                                                                                      
     Section   3:  Amends   AS   14.43.173(b),  Loan   award                                                                    
     maximums; use  of loan  award, by  eliminating lifetime                                                                    
     loan  maximums   in  statute  and  providing   for  the                                                                    
     Corporation to set lifetime loan maximums.                                                                                 
     Section   4:  Amends   AS   14.43.173(d),  Loan   award                                                                    
     maximums; use  of loan award, with  a conforming change                                                                    
     to allow  the Corporation to  set loan limits  for both                                                                    
     half-time and full-time loans.                                                                                             
Ms. Efird noted that Section  2 through Section 4 were about                                                                    
taking  the loan  limits out  of statute  and providing  the                                                                    
ASLC Board the ability to set the loan amounts.                                                                                 
10:01:37 AM                                                                                                                   
Senator Wielechowski  went to page  1, line 11 of  the bill,                                                                    
which  talked  about  a  previous  borrower,  co-signer,  or                                                                    
beneficiary. He  asked how a beneficiary  was different than                                                                    
a borrower.                                                                                                                     
Ms. Efird thought  the line would apply  to family education                                                                    
loans. A loan could be taken out by a parent.                                                                                   
Co-Chair  Bishop asked  for Ms.  Efird  to get  back to  the                                                                    
committee   with    the   information    regarding   Senator                                                                    
Wielechowski's question.                                                                                                        
Senator  Wielechowski referenced  Section 2  and Section  3,                                                                    
and loan award  maximums. He wondered about  the prudence of                                                                    
opening up the limit to  an unlimited amount. He wondered if                                                                    
increasing  the  amount  would   cause  there  to  be  fewer                                                                    
available  dollars  for  other students.  He  pondered  that                                                                    
increasing award  maximums with inflation might  be a better                                                                    
Ms.  Efird relayed  that  the  corporation board  considered                                                                    
continuing  to have  the amounts  in statute  and increasing                                                                    
the loan  amounts. After discussion,  the board  had decided                                                                    
that there  would be a  public-informed discussion  with the                                                                    
ASLC board to determine the  amounts on an annual basis. She                                                                    
described research  on in-state tuition rates  and work with                                                                    
financial aid  offices to determine unmet  need for students                                                                    
to make informed decisions on annual loan amounts.                                                                              
Ms.  Efird  continued   to  address  Senator  Wielechowski's                                                                    
question. She reminded of the  checks and balances that were                                                                    
in   place  for   loan  certification   through  educational                                                                    
institutions and other things  to keep loan amounts balanced                                                                    
against the true needs of students.                                                                                             
10:04:50 AM                                                                                                                   
Senator  Hoffman  noted  that  the  bill  proposed  to  give                                                                    
additional  responsibilities to  the  ASLC  Board and  asked                                                                    
about its composition  on a regional basis. He  asked if the                                                                    
board was ratified by the legislature.                                                                                          
Ms.  Efird relayed  that the  corporation board  was set  in                                                                    
statute and was comprised  of the commissioners or designees                                                                    
from the Department of Revenue;  the Department of Commerce,                                                                    
Community  and  Economic   Development;  the  Department  of                                                                    
Administration; and two members  from ACPE. She believed the                                                                    
two  ACPE members  were  public and  were  appointed by  the                                                                    
governor. There were five members of the board.                                                                                 
Senator  Hoffman  asked if  any  of  the five  members  were                                                                    
residents of rural Alaska.                                                                                                      
Ms. Efird  relayed that there  was currently a  vacant seat.                                                                    
She believed  there was a current  commission member sitting                                                                    
on the  corporation board.  She offered to  get back  to the                                                                    
committee with the information.                                                                                                 
Senator  Wilson   noted  that  the  previous   committee  of                                                                    
referral  had added  a required  report to  the legislature,                                                                    
which  he did  not  necessarily support.  He  asked if  ACPE                                                                    
delivered  an   annual  report  that  would   accomplish  an                                                                    
evaluation of loan benefits.                                                                                                    
Ms.  Efird affirmed  that  ACPE did  provide  an Almanac  of                                                                    
Higher Education,  which would be coming  to the legislature                                                                    
in   the  following   month.  She   agreed  that   the  loan                                                                    
information  could be  incorporated  into  the almanac,  and                                                                    
that the commission was not opposed to providing a report.                                                                      
Senator  Wilson  felt that  the  legislature  had asked  for                                                                    
several  reports  that went  unused.  He  did not  want  the                                                                    
commission to have an onerous burden.                                                                                           
Co-Chair  Bishop  asked  if any  of  the  suggested  changes                                                                    
proposed in  the bill were  brought forward by  students and                                                                    
Ms. Efird  answered "yes," and  relayed that  the commission                                                                    
was  responding  to what  it  had  heard from  students  and                                                                    
financial aid offices.                                                                                                          
10:08:55 AM                                                                                                                   
Ms. Efird continued to address the Sectional Analysis:                                                                          
     Section 5:                                                                                                                 
     Amends AS  14.43.175, Repayment of loans,  by providing                                                                    
     for  the Alaska  Commission on  Postsecondary Education                                                                    
     to offer  future student loan borrowers  a loan program                                                                    
     with immediate repayment requirements.                                                                                     
     Section 6:                                                                                                                 
     Establishes an effective date of July 1, 2021 (FY2022)                                                                     
Ms. Efird  noted that currently student  loans were deferred                                                                    
when students  were in school,  and when  students graduated                                                                    
or  completed an  education program  had  six months  before                                                                    
beginning  a repayment  program. The  proposed bill  section                                                                    
would offer  an option for immediate  repayment, which would                                                                    
save interest  costs over the life  of the loan, as  well as                                                                    
help  a  student  build credit.  She  thought  the  proposed                                                                    
change  would  help students  get  in  the habit  of  making                                                                    
repayments and  make it less  likely students  would default                                                                    
on the  loan. She  added that there  were two  amendments to                                                                    
the  bill from  the  Senate Education  Committee that  would                                                                    
require a report to be submitted to the legislature.                                                                            
Co-Chair  Stedman  had  a  question  about  pre-payment.  He                                                                    
understood that it was not  possible to block the payment of                                                                    
loans, and that borrowers could repay loans at any time.                                                                        
Ms.  Efird  affirmed that  borrowers  could  choose to  make                                                                    
repayment  at  any  time,  and   the  provision  was  merely                                                                    
clarifying language.  She continued  that the  Department of                                                                    
Law (DOL)  had provided language  to put the provision  in a                                                                    
promissory note.                                                                                                                
Co-Chair   Stedman  thought   that   the  provision   seemed                                                                    
redundant.  He understood  that  it might  have  to do  with                                                                    
federal law.                                                                                                                    
Ms.  Efird  believed  Co-Chair   Stedman  was  correct.  She                                                                    
relayed that  the commission  had been told  by DOL  that it                                                                    
could not  include the provision for  immediate repayment in                                                                    
a promissory  note for the  loan program. The  provision was                                                                    
to provide for the specific option.                                                                                             
10:13:04 AM                                                                                                                   
Senator Wielechowski  asked about  the demand for  the loans                                                                    
and if the state had the funding to meet the demand.                                                                            
Ms. Efird affirmed the  commissions  projections showed that                                                                    
the state  had funds for  the current demand. She  noted the                                                                    
decline in  loan origination and an  increase an origination                                                                    
for  refinance  loans.  She reminded  that  additional  loan                                                                    
origination   would  increase   revenue  generated   through                                                                    
Senator Wielechowski  had concerns  about Section 3  and the                                                                    
loan  cap, which  was  currently  $56,000 for  undergraduate                                                                    
programs  and $60,000  for graduate  programs. He  mentioned                                                                    
private schools  costing hundreds  of thousands  of dollars.                                                                    
He  shared  his  concerns  about  the  state  getting  in  a                                                                    
position to have to deny opportunity  for more kids to go to                                                                    
schools like  the University of  Alaska (UA)  and increasing                                                                    
opportunities  for  people  of   privilege  to  go  to  more                                                                    
expensive  schools.   He  was  concerned   about  completely                                                                    
removing  the  cap.  He wondered  about  the  University  of                                                                    
Alaska's position on the bill.                                                                                                  
Ms. Efird noted that there was  a letter of support from the                                                                    
University  of Alaska  in member's  packets (copy  on file).                                                                    
She reiterated that the commission  had heard from financial                                                                    
aid  offices that  there was  a  need to  increase the  loan                                                                    
amounts because the loans were  not meeting the gap of funds                                                                    
needed to complete the full financial package.                                                                                  
Senator Hoffman asked  if Ms. Efird had  information on loan                                                                    
approval rates in the current year and past years.                                                                              
Ms. Efird answered in the  affirmative and agreed to provide                                                                    
the information.                                                                                                                
Senator  Olson  asked about  the  spread  between rural  and                                                                    
urban students   approval rates.  He recounted that  when he                                                                    
had been in the loan program it was a difficult process.                                                                        
Ms. Efird agreed to provide the information.                                                                                    
Senator von  Imhof asked about  a hypothetical  student that                                                                    
requested  a $10,000  loan, and  wondered if  the commission                                                                    
tracked  whether  the  amount  was  all  the  student  could                                                                    
qualify for  or if the amount  was all that was  needed. She                                                                    
thought the information could be relevant.                                                                                      
Ms.  Efird  was not  certain  she  had the  information  and                                                                    
agreed to get back to the committee.                                                                                            
10:17:28 AM                                                                                                                   
AT EASE                                                                                                                         
10:17:55 AM                                                                                                                   
LEE  DONNER, SENIOR  MANAGING DIRECTOR,  HILLTOP SECURITIES,                                                                    
TEXAS (via teleconference), relayed that  he was head of his                                                                    
firms   student   loan  practice.  He  explained   that  his                                                                    
organization served as financial  advisors for the ASLC, and                                                                    
additionally  were  financial  and  municipal  advisors  for                                                                    
other  not-for-profit student  loan corporations  around the                                                                    
Co-Chair Bishop asked if Mr. Donner supported the bill.                                                                         
Mr. Donner  answered affirmatively. He offered  to expand on                                                                    
his support with respect to each of the bill components.                                                                        
Ms. Efird asked Mr. Donner to provide his testimony.                                                                            
Mr. Donner  spoke to the  proposed expansion  of eligibility                                                                    
criteria for the refinance program.  He cited ALSCs  problem                                                                    
with the  scale of the  states  loan program  post-2010 with                                                                    
the  elimination  of  the   Federal  Family  Education  Loan                                                                    
Program, which had  reduced the volume of  loans. The volume                                                                    
was  further  reduced  by   the  corporation  tightening  up                                                                    
eligibility  criteria in  order to  lower default  rates. He                                                                    
contended that  the expansion  of eligibility  would conform                                                                    
with federal  tax law and  all other state agencies  and 501                                                                    
C-3 programs did. He cited  that Alaska had the only program                                                                    
in the  country that further  shrank the eligible  pool, and                                                                    
expanding the definition  would give the ASLC  a very slight                                                                    
increase  in  loan  volume  to  help  offset  the  declining                                                                    
portfolio size.                                                                                                                 
10:22:02 AM                                                                                                                   
Mr. Donner  addressed the  proposal to  move the  setting of                                                                    
loan  limits from  statute to  the ALSC  board. He  asserted                                                                    
that  the provision  would not  eliminate  loan limits,  but                                                                    
rather simply changed  who set the loan  limits. He asserted                                                                    
that  having the  loan limits  embedded in  statute made  it                                                                    
take  too long  to  go through  the  legislative process  to                                                                    
amend loan  limits to  respond on-the-ground  conditions. He                                                                    
contended  that  the  corporation  board  was  in  a  better                                                                    
position   to   know   whether  the   loan   limits   needed                                                                    
modification. There would still  be a governing body setting                                                                    
the loan limits.                                                                                                                
Mr.  Donner continued  that  the only  other  state to  have                                                                    
embedded loan  payments in statute  was the State  of Texas,                                                                    
and that was because the  student loan program was funded by                                                                    
General Obligation  Bonds issued by the  state, while Alaska                                                                    
funded loans with its existing  portfolio. He thought it was                                                                    
entirely appropriate to set loan  limits at the board level,                                                                    
which was  faster, and the  board was better informed  as to                                                                    
the needs of the education community.                                                                                           
Mr. Donner addressed the proposed  option to begin immediate                                                                    
payment. He  acknowledged that any borrower  could repay any                                                                    
of the corporations  loans at  any time. The provision would                                                                    
allow a  borrower to elect  voluntarily to make a  loan that                                                                    
required payments  from the  outset, such  as 30  days after                                                                    
origination. He  cited that  the provision  was more  than a                                                                    
clarification and  would create an option  for borrowers. He                                                                    
noted that studies  showed that loans that had  some form of                                                                    
repayment from  the beginning resulted in  lower delinquency                                                                    
rates.  He summarized  that  all  three proposed  provisions                                                                    
were  net   positives  for   the  program,   its   financial                                                                    
underpinnings, and the borrowers.                                                                                               
10:25:27 AM                                                                                                                   
JOSH   BICCHINELLA,  CHAIR,   ALASKA  COMMISSION   ON  POST-                                                                    
SECONDARY EDUCATION, WASILLA  (via teleconference), spoke in                                                                    
support of  the bill. He  had served as campus  president of                                                                    
Charter College  for the previous  five years. He  wanted to                                                                    
share perspectives  he had heard  in the past five  years at                                                                    
Charter College. He had repeatedly  heard that students were                                                                    
challenged when making the decision  to pursue the ASCL loan                                                                    
or the  Alaska Supplemental Educational Loan  because of the                                                                    
statutory limits.  He thought much  had changed  in economic                                                                    
trends in  the previous  ten years and  mentioned inflation.                                                                    
He asserted  that the  current statutes  had unintentionally                                                                    
adverse actions towards students  pursing loans. He believed                                                                    
that  the bill  would  expand access  for Alaskans  pursuing                                                                    
education  at  home  and  would  help  achieve  the  states                                                                     
educational growth  goals. He  echoed Mr.  Donners  comments                                                                    
about the board being better  able to better assess borrower                                                                    
10:28:14 AM                                                                                                                   
Co-Chair Bishop OPENED public testimony.                                                                                        
10:28:39 AM                                                                                                                   
AT EASE                                                                                                                         
10:28:55 AM                                                                                                                   
Co-Chair Bishop CLOSED public testimony.                                                                                        
Senator Wilson  asked about  refinance loans  and qualifying                                                                    
for a higher amount loan than was needed for the balance.                                                                       
Ms. Efird  stated that for  refinance loans, the  amount was                                                                    
only to cover current  loans. The corporation required proof                                                                    
of the outstanding loan balances needed to be refinanced.                                                                       
Senator Wielechowski asked if there had been any opposition                                                                     
to the bill from the Alaska Bankers Association or banker                                                                       
Ms. Efird answered in the negative.                                                                                             
Co-Chair Bishop set the bill aside.                                                                                             
SB 94 was HEARD and HELD in committee for further                                                                               
Co-Chair Bishop discussed the agenda for the afternoon                                                                          
10:31:47 AM                                                                                                                   
The meeting was adjourned at 10:31 a.m.                                                                                         

Document Name Date/Time Subjects
SB 94 - Explaination of Changes v. A to B 5.13.21.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 ACPE - Resolution to Support SB 94 HB114 04.08.21.pdf SFIN 3/23/2022 9:00:00 AM
HB 114
SB 94
SB 94 - Sectional Analysis.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 ASLC Resolution to Support SB 94.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 Charter College - Letter of Support 3.2.21.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 Hilltop Securities SB 94 HB 114 memo.pdf SFIN 3/23/2022 9:00:00 AM
HB 114
SB 94
SB 94 SFIN ACPE 2022 (Final).pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 Support Letter to Senator Holland from UA State Director Hutchison 3 4 2021.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 3.23.2022 (S)FIN Hearing ACPE Follow-Up.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 2020 Cohort Default Rates Report.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 2021 ASLC Financial Statements.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 ACPE - Loan Portfolio (replacement document).pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 ASLC - Geographic Location of Loan Borrowers.pdf SFIN 3/23/2022 9:00:00 AM
SB 94
SB 94 Direct Loan Default Rate.pdf SFIN 3/23/2022 9:00:00 AM
SB 94