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