Legislature(2013 - 2014)
03/26/2014 10:13 AM Senate FIN
| Audio | Topic |
|---|---|
| Start | |
| HB266 || HB267 | |
| SB195 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
March 26, 2014
10:13 a.m.
10:13:18 AM
CALL TO ORDER
Co-Chair Kelly called the Senate Finance Committee meeting
to order at 10:13 a.m.
MEMBERS PRESENT
Senator Pete Kelly, Co-Chair
Senator Kevin Meyer, Co-Chair
Senator Anna Fairclough, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
James Armstrong, Staff, Senator Pete Kelly; Kristen Pratt,
Staff, Senator Anna Fairclough.
SUMMARY
SB 195 POSTSECONDARY EDUCATION LOANS/GRANTS
SB 195 was HEARD and HELD in committee for
further consideration.
CSHB 266(FIN)
APPROP: OPERATING BUDGET/LOANS/FUNDS
CSHB 266(FIN) was HEARD and HELD in committee
for further consideration.
CSHB 267(FIN)
APPROP: MENTAL HEALTH BUDGET
CSHB 267(FIN) was HEARD and HELD in committee
for further consideration.
CS FOR HOUSE BILL NO. 266(FIN)
"An Act making appropriations for the operating and
loan program expenses of state government and for
certain programs, capitalizing funds, and making
reappropriations; and providing for an effective
date."
CS FOR HOUSE BILL NO. 267(FIN)
"An Act making appropriations for the operating and
capital expenses of the state's integrated
comprehensive mental health program; and providing for
an effective date."
10:14:29 AM
AT EASE
10:14:43 AM
RECONVENED
JAMES ARMSTRONG, STAFF, SENATOR PETE KELLY, stated that a
new committee substitute (CS) was in the drafting process.
He announced that a there was a contract amendment from the
University of Alaska (UA), so the Legislative Finance
Division (LFD) was working to incorporate it with four
other contracts into one amendment. The contract amendment
would not be in the forthcoming CS.
Co-Chair Kelly queried the sources of the other contracts.
Mr. Armstrong replied that two contracts were from UA, one
was from Alaska Vocational Technical Center (AVTEC), and
one was from the Public Safety Employees Association
(PSEA).
Co-Chair Kelly handed the gavel to Co-Chair Meyer.
CSHB 266(FIN) was HEARD and HELD in committee for further
consideration.
CSHB 267(FIN) was HEARD and HELD in committee for further
consideration.
10:16:24 AM
AT EASE
10:18:14 AM
RECONVENED
SENATE BILL NO. 195
"An Act relating to the membership and authority of
the Alaska Commission on Postsecondary Education;
relating to the Alaska Student Loan Corporation;
relating to teacher education loans; relating to
interest on and consolidation of postsecondary
education loans; relating to Alaska supplemental
education loans; relating to AlaskAdvantage grants;
relating to the Alaska family education loan program;
relating to postsecondary educational institutions;
and providing for an effective date."
10:19:08 AM
Vice-Chair Fairclough explained that the legislation would
broaden the Alaska Commission membership; assessed
educational outcomes; and allowed borrowers to receive
loans solely from the Alaska Commission on Postsecondary
Education, regardless of other options. The legislation
allowed the Alaska Student Loan Corporation to offer below-
market loan terms, and to consolidate loans. The
legislation defined "half-time", "undergraduate", and
"graduate" students, and revised the "school year"
definition. The legislation increased loan limits for
students who borrowed in Alaska, and changed the post-
enrollment period from "six months" to "up to six months."
The legislation increased the grant that were available to
students, and created a revolving loan fund. The
legislation increased annual and aggregate loan amounts for
borrowers under the Family Education Loan, and amended the
definition of "on time enrollments." The legislation
modified institutional authorization exemptions of short
educational training courses, and allowed the Commission to
enter into multiple state reciprocity agreements. She
stated that she had been working with Diane Barrans from
Department of Education and Early Development (DEED) on the
legislation. She stressed that student loan debt was a
growing national problem, and Alaska's regulations had not
been recently amended. Specifically, the same loan amount
had been available for students since the 1980s. The need
for money has increased for the borrower since the 1980s.
She pointed out that the borrower was now borrowing at
different locations, rather than consolidating the loans in
one location. She remarked that the federal government
currently offered a much lower rate at 3.80 percent, and
the Alaska Student Loan Corporation was offering a rate of
7.30 percent. She stressed that the high rate was a
disadvantage for a student to borrow from the State of
Alaska. She felt that the legislation would allow students
greater flexibility in their loan options, and consolidate
those loans.
Co-Chair Meyer wondered why the interest rate was higher
than the national rate. Vice-Chair Fairclough replied that
the borrowing was based on a revenue stream, but that issue
was addressed in a different bill. She stated that when
loan amounts were considered, the state rolled in all of
the costs to each student. She stated that all of the
operating costs from postsecondary education were included
in the loans. She furthered that the rate for borrowing was
higher, because the revenue stream was the backing to repay
the bonds. She remarked that there were ways to reduce the
current interest rate, but all of the tools were not
currently available.
Senator Olson MOVED to ADOPT the proposed committee
substitute for CS SB 195(FIN), Work Draft 28-LS1392\N
(Mischel, 3/17/14). There being NO OBJECTION, it was so
ordered.
10:23:23 AM
KRISTEN PRATT, STAFF, SENATOR ANNA FAIRCLOUGH, explained
that the only change was on page 19, Section 46 of version
N. She stated that Section 46 was a transitional section,
and the change was requested by Diane Barrans from the
Alaska Commission on Postsecondary Education. The change
related to the Teacher Education Loan Program, and the bill
changed the funding of that loan program from the
corporation to the state. The section grandfathered in the
individuals who were already participating in the program.
Co-Chair Meyer asked if the change grandfathered in the
current participants. Ms. Pratt stated that the current
participants would be grandfathered into the program, with
their interest rates set by the corporation rather than the
commission.
Senator Olson wondered how much the change would save the
student. Vice-Chair Fairclough replied that the change
neither adds nor removes funds.
Senator Hoffman asked if the eligibility of the program
pertained only to those individuals that attend an Alaskan
university. Ms. Pratt replied that the loan was offered to
state residents and nonresidents who were enrolled in the
program at an Alaskan university.
Co-Chair Meyer remarked that he had taken issue with the
university attracting out of state students, and felt that
the bill would encourage out of state students to attend
UA.
10:27:22 AM
Ms. Pratt explained the Sectional Analysis (copy on file):
Section 1: Amends AS 14.42.015(a)
Broadens commission membership to clarify
representation by an Alaska private, nonprofit
higher education institutions' representative.
Section 2: Amends AS 14.42.015(d)
Broadens commission membership by expanding
eligibility for the student commissioner position
to include an Alaska private, nonprofit higher
education institution's student representative.
Section 3: Amends AS 14.42.030(e)
Clarifies authority for the commission and
Department of Education and Early Development to
work together to assess education outcomes of
public school students.
Section 4: Amends AS 14.42.035
Clarifies authority for the Commission and
Department of Education and Early Development to
work together to assess education outcomes of
public school students.
Section 5: Amends AS 14.42.200
Corrects misplacement of language by removing
from paragraph (5) and inserting in paragraph (6)
and clarifies specific corporation powers in
paragraphs (12), (13), and (15).
Section 6: Amends AS 14.42.205(a)
Provides that a borrower may apply for a state
supplemental education loan without first having
to exhaust all other federal or private education
loan options.
Section 7:
Conforming change to Section 6 regarding the
financing program for education loans.
Section 8: Amends AS 14.42.205(c)
Clarifies that corporation education loans are
not offered as lines of credit.
Section 9: Amends AS 14.42.210(a)
Clarifies that state education grants are not
funded by the corporation's education loan fund.
Section 10: Amends AS 14.43.210(b)
Conforming change with Section 9.
Section 11: Amended by adding a new section (d) to AS
14.42.210
Moves corporation power to offer below-market
loan terms. Provision currently limited to the
supplemental education loan (see AS
14.43.205(c)(2)).
Section 12: Amended by adding a new section to AS
14.42.215
Clarifies that corporation sets the interest
rates on loans it finances.
Section 13: Amends AS 14.42.240(c)
Permits corporation's trust indenture to govern
the size of its capital reserve.
Section 14: Amends AS 14.42.240(g)
Conforming change with Section 13.
Section 15: Amends AS 14.42.250
Incorporates the term "perfected", a term of art
for uniform commercial code purposes as
recommended by the corporation's bond counsel.
Section 16: Amends AS 14.43.120(b)
Updates the name of an institutional
accreditation organization.
Section 17: Repeals and reenacts AS 14.43.122
Clarifies corporation authority to offer
consolidation loans to state residents. Removes
option for joint consolidation of married
borrowers.
Section 18: Amends AS 14.43.160(4)
Clarifies definition of "half-time student" for
undergraduates and adds a definition for graduate
students.
Section 19: Amends AS 14.43.160(5)
Revises school year definition to align with
state fiscal year and to conform to standard
education lending year.
Section 20: Amends AS 14.43.170
Clarifies that, subject to the annual loan
limits, a borrower may receive loans up to the
amount of their unmet cost of education without
regard to other loans that may be available,
leaving the choice up to the consumer.
Section 21:
Provides for applicability of institutional
standards for participation in state education
loan programs.
Section 22: Amends AS 14.43.172(a)
Updates reference to federal education loans.
Section 23: Amends AS 14.43.172(g)
Updates reference to federal education loans.
Section 24: Amends AS 14.43.173(a)
Clarifies corporation funds the loan and revises
upwards the annual maximum loan amount a person
may borrow.
Section 25: Amends AS 14.43.173(b)
Revises upwards the aggregate maximum borrowing
limit to conform to Section 24.
Section 26: Amends by adding a new section (d) to AS
14.43.173
Clarifies that the commission determines the
amount a loan applicant may borrow based upon
their enrollment status and not to exceed costs
of attendance.
Section 27: Amends AS 14.43.175
Amends maximum length of a post-enrollment
deferment period.
10:31:35 AM
Co-Chair Kelly remarked that the previous language said
that the borrower must begin to repay six months following
the completion of the loan. He wondered if the new language
changed anything. Vice-Chair Fairclough replied that the
commission recommended that the outside number be six
months, rather than that the start date at six months.
Co-Chair Kelly wondered if the commission was going to
examine the student's job situation, and require the
student to immediately repay the loan. He felt that a
recent college graduate may not have the immediate
resources to pay the loan in that timeframe. Ms. Pratt
replied that the language was "up to six months", and would
not require the student to enter into full repayment, as
they would have in the current language. She stated that
the change allowed for more opportunity to pay solely the
interest rate, until the six months was met. She remarked
that the issue would probably need to be outlined in
regulation, and deferred to Ms. Barrans for more
information.
Co-Chair Kelly felt that perhaps that issue did not need to
be a part of the legislation.
Vice-Chair Fairclough remarked that the issue was a policy
decision.
Ms. Pratt continued to discuss the Sectional Analysis:
Section 28: Amends AS 14.43.400
Simplifies name for ease of use and
identification as a state funded grant.
Section 29: Amends AS 14.43.405(a)
Conforming to Section 28-program name change.
Section 30: Amends AS 14.43.410(a)
Conforming to Section 28-program name change;
incorporates by reference commission's existing
authority to promulgate program regulations.
Section 31: Amends AS 14.43.415(c)
Permits the commission to set grant terms and
conditions. Directs the commission to establish
annual grant maximums relative to a student's
enrollment status.
Section 32: Amends AS 14.43.420(a)
Revises upwards the annual grant maximum.
Section 33: Amends AS 14.43.420(c)
Revises upwards the aggregate grant amount a
person may receive to conform to Section 35.
Section 34: Amends by adding a new section (d) to AS
14.43.420
Enables the commission to designate grant awards
as state match in the event federal funds for
education grants are available and require such
match.
Section 35: Amends by repealing and reenacting AS
14.43.620(a)
Clarifies that the revolving loan fund for
Teacher Education Loans is administered by the
commission.
Section 36: Amends by adding a new section to AS
14.43.620
Conforms to Section 35-loans to new borrowers may
only be made if sufficient funds are available.
Section 37: Amends AS 14.43.640
Clarifies that the commission sets the Teacher
Education Loan interest rate on loans financed
from the fund established in Section 35.
Section 38: Amends AS 14.43.740(a)
Increases upwards the annual and aggregate loan
amounts available to a borrower under the Family
Education Loan.
Section 39: Amends AS 14.43.750(a)
Clarifies that to be eligible for the Family
Education Loan, both the borrower and student
must be Alaska residents.
Section 40: Amends AS 14.43.915(a)
Conforms to Section 30-program name change;
permits the administrative costs of the state
grant program to be paid from the education grant
account.
Section 41: Amends AS 14.43.990
Amends general definitions to incorporate "on-
time" enrollment status.
Section 42: Amends AS 14.48.030(b)
Modifies the institutional authorization
exemption of short education or training courses
by increasing the maximum number of days or total
hours of a course.
Section 43: Amends AS 14.48.050
Clarifies that the commission may enter into
multi-state reciprocity agreements for the
purposes of regulating the delivery of education
and training programs in Alaska.
Section 44: Amends AS 14.48.165(b)
Limits the mandatory meningococcal immunization
notice requirement to students who are physically
present on an institution's campus.
Section 45: Repeals AS 14.43.120(f), 14.43.120(v),
14.43.174, 14.43.410, 14.43.415(b), 14.43.620(b), and
14.43.740(g)
Repeals AS 14.43.120(f) and (v) and 14.43.174 relating
to setting of loan interest rates which are governed
by AS 14.42.200(9);
repeals AS 14.43.410 to remove reference to defunded
federal grant program; repeals AS 14.43.415(b), grant
prioritization for certain programs of study; repeals
AS 14.43.620(b), eliminating the use of corporation
funds for Teacher Education Loans; and,
repeals AS 14.43.740(g), by which the commission was
authorized to set Family Education Loan limits in
regulation-those limits will now be aligned with the
general state education loan limits (as per Section
41, AS 14.43.740(a)).
Section 46: Transition Section
Commission to set Teacher Education Loan interest
rate upon enactment. Corporation to set interest
rates before enactment of this bill.
Section 47: Revisor's Instructions
Grant administrators retain existing regulations
until new act is implemented.
Section 48: Effective Date
The provisions in this bill are effective
immediately.
10:36:56 AM
Co-Chair Meyer wondered if Ms. Barrans was en route to
Juneau. Ms. Pratt replied that she was currently on an
airplane headed to Juneau.
Co-Chair Meyer asked if Ms. Barrans would be available to
address the committee the following day. Ms. Pratt replied
in the affirmative.
Co-Chair Meyer noticed that the definition of a full-time
student had changed. Vice-Chair Fairclough responded that
the commission recommended that those definitions be
included in the bill.
Ms. Pratt explained that "on time" was 15 credits, and
"full time" was 12 credits.
Co-Chair Meyer queried the default rate of the student
loans. Ms. Pratt deferred to Ms. Barrans, but stated that a
previous meeting had outlined the default as between 5 and
8 percent. She stated that the rate had recently decreased,
after an increase in 2008.
Co-Chair Meyer wondered if the procedure for determining
the grant and loan amounts was made through working with
Ms. Barrans. Ms. Pratt indicated in the affirmative.
Co-Chair Meyer CLOSED public testimony.
Vice-Chair Fairclough explained that she felt that the
current fiscal note was higher than necessary. She remarked
that she was hoping that DEED would release a smaller
fiscal note, and hoped to have that by the following day.
SB 195 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:41:26 AM
The meeting was adjourned at 10:41 a.m.
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