HB 97-AK PERFORMANCE SCHOLARSHIP: FINANCIAL AID  8:02:51 AM REPRESENTATIVE COLVER, as sponsor, said HB 97 prohibits the Department of Education and Early Development (EED) from requiring an applicant for the Alaska Performance Scholarship (APS) to also submit the Free Application for Federal Student Aid (FAFSA). The APS rewards Alaska high school students for their hard work, he stated, which is measured by coursework, grade point average, and ACT, SAT, or WorkKeys test scores. The FAFSA is used to determine a student's eligibility for federal financial aid based on the family's financial situation, he explained. He said that [HB 97] was introduced because there is no compelling state interest in gathering personal financial data to award a merit-based scholarship. 8:04:42 AM REPRESENTATIVE COLVER pointed out that this bill serves to reduce paperwork as well as protect privacy. He noted that parents in his district, who were not seeking financial aid, could not understand why they had to fill out the FAFSA. He suggested that EED "describe what their mission is in requiring that, because it sure came with a lot freight-huge fiscal notes on retooling data." He said he believed that the APS was a simple program based on merit and not a data-mining operation, but he may be mistaken. It may be difficult to move this bill because of the financial cost, but he said that going through this process may lead to streamlining education funding, so it can go into the classroom instead paying for data management. 8:07:30 AM REPRESENTATIVE SEATON recalled that the APS is not just a cash grant, but a student must apply for all other money and then the APS would fill in over a maximum of six years. If that is the case, "are we now saying that it wouldn't be a last dollar scholarship?" The scholarship would then be available regardless of whether the student had expenses to cover or not, he surmised. 8:08:48 AM DAVID SCOTT, Staff, Representative Jim Colver, Alaska State Legislature, said that the Commission on Post-Secondary Education can answer that; however, it is his understanding that the scholarship is based on merit: grades and test scores. 8:09:51 AM REPRESENTATIVE VAZQUEZ asked about the application for the APS. REPRESENTATIVE COLVER said he will provide a copy. 8:10:37 AM MR. SCOTT said that the APS is created and administered by Alaskans, and he does not think the FAFSA should be required to award a merit-based scholarship that is created by Alaskans. The constitution provides a right to privacy, "and that is something we all love and we all cherish." He said there is private financial information in the FAFSA that is not necessary in order to award a merit-based scholarship. 8:12:16 AM DIANE BARRANS, Executive Director, Alaska Commission on Post- Secondary Education, said she understands the sponsor's concern about the apparent disconnect between a merit-based scholarship and the need to use FAFSA as part of the qualifying information; however, Representative Seaton is correct in that there was no intent for the scholarship to be "walking-around money." The cost of the student's education and other available financial assistance were to be used to determine, to the extent that the student qualified for the scholarship, how much a student could receive. If a student's unmet costs were less than the scholarship amount, the student would only be awarded the unmet costs. 8:13:32 AM REPRESENTATIVE KREISS-TOMKINS asked if the APS is a hybrid of a need-based and merit-based scholarship. MS. BARRANS said the term "need-based" usually denotes a financial need demonstrated by a given family, but all scholarships are forms of financial aid. 8:14:30 AM REPRESENTATIVE SEATON questioned if passing HB 97 would create a cash benefit to students whether they attend college or not. He asked the question if the APS is merely a reward or if it is a scholarship to go toward qualified institutions. The "last- dollar" concept was incorporated into the original bill, and he asked what HB 97 will do regarding the financial liability of the state to provide money to students. MS. BARRANS said that she does not see that aspect of the program changing. She noted that FAFSA is a universal financial aid application, and about 85 percent of students use it. The FAFSA allows the state to ensure that students apply for any sort of aid that was available to them. The intent was to spend the APS funds as efficiently and effectively as possible, and it was not intended to be money that could be spent on anything other than attending a post-secondary institution, she explained. The commission is the grant administrating agency for the state, so it already receives FAFSA information. She said that without requiring students to complete yet another form, the FAFSA is an efficient means of standing up the program and getting information on students before even knowing whether they are eligible for the APS. The institutions do not learn which students are eligible for the APS until late July, so the commission would have very little time to reach out to the eligible students, make an application available, and make sure they get it in in time for the funds to be dispersed to the schools. MS. BARRANS said that using FAFSA not only accomplishes the statutory goals of having the students apply for other aid, but the form, itself, indicates that the application is for Alaska's grant and scholarships programs. It is also a means to get student addresses, she noted. The process would have to be replicated and students would need to be reeducated that the application could not be used for the APS, and, in fact, Section 2 of HB 97 actually nullifies any application. If the bill passes, there would be no application process, whatsoever, and one would need to be created through the regulatory process, which may take until 2016 or 2017. 8:20:12 AM REPRESENTATIVE VAZQUEZ asked what bill created the APS and whether committee members could get a copy, including "what you perceive to be the legislative intent." MS. BARRANS offered to ask the Legislative Information Office for legislative information. She suggested reading the statute, as well. 8:21:27 AM REPRESENTATIVE VAZQUEZ asked whether Ms. Barrans is saying that the APS is a scholarship of last resort. MS. BARRANS said, no. The Alaska Education Grant would be a grant of last resort; however, most of the APS students do not qualify for it, so if the only other source of financial aid a student has is the APS, "you could certainly use that term." CHAIR KELLER said there will be time to look at that history and noted that it was part of the governor's bill. He sees this bill as a way to discuss the legislature's intent. 8:22:49 AM REPRESENTATIVE COLVER said the APS was endowed at $400 million, and he asked what revenue was "spinning off every year." MS. BARRANS said that the Higher Education Investment Fund was established a year after the APS program was created, and the legislature set aside $400 million. She said she thinks it has a 6 to 7 percent return. It is managed as a subset of the general fund, and in June, 2014, there was $444 million in the fund. The fund is a source for both the Alaska Performance Scholarship and the Alaska Education Grant, she explained. REPRESENTATIVE COLVER asked how much has been awarded and the amount needed to administer the programs. 8:24:17 AM MS. BARRANS said the administrative costs are not paid with those funds. The Alaska Student Loan Corporation pays, she explained, and the fund has been "stepped up" each year, as additional classes graduate. In FY15, the amount for scholarships was about $11 million, and there was about $8 million for grants. She offered to provide the accumulated total spent to date. REPRESENTATIVE COLVER indicated that the fund has $19 million in outflow and "we've gained $44 million in the fund." He asked how the commission pays for the administrative costs. MS. BARRANS said the Alaska Student Loan Corporation pays for the operating costs of the commission-not the GF [general fund]. REPRESENTATIVE COLVER asked about the [fiscal note] of retooling the application evaluation, which is $144.2 million this year and then $91.7 million annually. MS. BARRANS corrected him, saying it is thousands, not millions. REPRESENTATIVE COLVER asked, "This would have nothing to do with general fund budgets … it could be funded out of revenues from the scholarship fund as a possibility, but now you're saying that this is going to come out of the budget of the Post- Secondary Education Commission?" MS. BARRANS clarified that the costs have been paid by the Student Loan Corporation, but these new costs created by HB 97 would come from the Higher Education Investment Fund. REPRESENTATIVE COLVER said it is, therefore, a covered cost for doing business to administer the loan fund. So, "we're not creating a budgetary issue; this is a fully funded, endowed program that's spinning off excess revenue." He asked if Alaska wants to use the federal form for financial aid, or "do we want Alaska to have our own form that merely identifies students' academic achievements?" As he understands, no money goes to the student but is distributed to the institution, he stated. MS. BARRANS said the funds are dispensed through the institution, which are then released to the students if they do not have unpaid fees. 8:29:01 AM REPRESENTATIVE COLVER asked about the entire process. MS. BARRANS said to qualify for the APS, a student must complete the rigorous high school curriculum, have a certain GPA, and score at minimum levels on one of the standardized tests. The determination for eligibility is made in a student's senior year, and the department has that information within its existing data collection. School districts provide eligibility information to the department by July 15, and the data is transmitted to the commission. The commission takes the eligibility information and matches it to the FAFSA data as to the student's current address. The students are notified through mail that they have qualified for the award and at what level. The students are encouraged to use an online portal where they can go in and register and monitor the status of their state financial aid. The scholarship is available to complete the cost of education that is not offered through other grants or other scholarships. The APS can replace the amount that the family would be expected to pay, so it is available before a student needs to take out a loan. 8:33:03 AM REPRESENTATIVE SEATON surmised that if a student was not required to apply to the FAFSA for Pell grants or other federal aid, it may cause more funding to be drawn from the APS. "Is that why the FAFSA is required?" MS. BARRANS said yes, that is the objective. The students should maximize the attainment of available money, including Pell grants and state grants, in addition to the APS. 8:34:17 AM CHAIR KELLER asked if the Higher Education Investment Fund ever operates in excess, putting money back into the general fund. MS. BARRANS noted that the Department of Revenue manages that fund, and there is no mechanism for overflow money to the general fund. The fund has only been in existence for four years, and it is very unpredictable what future draws will be. There is a brief history with the APS. About 32 percent of each graduating class tends to be eligible, but the number of eligible students who use it fluctuates. If there is a jump up in its use, the financial demands will increase, and there needs to be more time to calculate average expenses, she said. 8:36:13 AM REPRESENTATIVE DRUMMOND asked which institutions the APS can be used for. MS. BARRANS said all University of Alaska campuses and six or seven others, which she offered to provide. The APS can only be used in Alaska. 8:37:14 AM REPRESENTATIVE COLVER asked what triggers the request for the FAFSA application. MS. BARRANS said the FAFSA information already comes to the commission as the state's grant administrating agency. It receives the information for any Alaska resident or anyone planning to attend an Alaska institution. REPRESENTATIVE COLVER said, obviously, some students would not fill out the FAFSA so there would be a trigger when they qualified for the APS. He asked what that data base "looks like." MS. BARRANS said she does not know exactly, but a substantial majority of students have already completed that form before the commission receives the eligibility information. There is a campaign informing students that they need to file the FAFSA by the end of June. Because of funding availability, the deadline extends to December, so students can continue to apply. 8:39:58 AM CHAIR KELLER said that he hopes the school districts are listening. Financial counselors at different schools have the responsibility to communicate this to the students, and, in Representative Colver's case, a Valley resident "just missed" the deadline. He noted that the students need to be informed. MS. BARRANS said that, for the first time, the commission partnered with the University of Alaska to help identify students who fell into that category of being eligible but had not completed the FAFSA. 8:41:13 AM REPRESENTATIVE SEATON noted that, under the regulations, there is a process for institutions that cannot receive federal funds, and he asked about those institutions. MS. BARRANS said there are a few technical institutions that have not received accreditation. 8:42:07 AM REPRESENTATIVE VAZQUEZ asked for information on legislative intent by March 23. "If you're correct on the legislative intent, I think it sheds a whole new light on this bill." She was under the impression that only the students' performance was looked at, and the APS would be based solely on that. MS. BARRANS clarified that in terms of a student's eligibility, the APS is based solely on meeting the merit-based requirements. The question is to what extent does a student have unmet educational costs that can be covered. That is not determined by the FAFSA; the school's financial aid office determines what amount of unmet costs the student has, she stated. In most cases, students have unmet costs, and it is very rare for the APS to be reduced. 8:45:00 AM REPRESENTATIVE COLVER said there are two fiscal notes on the bill, and he asked to hear from the Department of Education. 8:46:17 AM LES MORSE, Deputy Commissioner, Department of Education and Early Development, said that, regarding the fiscal notes, EED was looking at the most efficient means to collect information that FAFSA now provides. There may be a way to combine the two fiscal notes, but there needs to be more dialogue with the sponsors. He said the FAFSA collects student contact information that the department does not have, so that would be a new data collection system, along with the eligibility for students. "Every time we add an element to our data collection, it costs us approximately $40,000 in programing," he said, and the new system would have about four different elements. The remaining costs in the fiscal note include the outreach and manuals. It would be a one-time cost, but there would still be some ongoing expenses experienced by the commission, he stated. REPRESENTATIVE COLVER surmised that just the student addresses need to be added and transmitted to the commission. MR. MORSE said the student contact information would be the new element to collect, and "we would pull the eligibility information from the July 15 report that all districts do for other reporting requirements … so the APS information would all be collected together." All of the districts would have an additional report due in late May or June, he added. REPRESENTATIVE COLVER asked if the FAFSA tracks student information through a student ID or a Social Security number. MR. MORSE said he cannot not speak to the FAFSA "and all of its requirements," but EED only uses a student ID number. REPRESENTATIVE COLVER said the FAFSA will use the Social Security numbers, and somewhere there is a linking factor between the department data base and the FAFSA data base. 8:52:45 AM MR. MORSE said that the EED information can generally be matched based on gender, date of birth, and name. 8:53:22 AM CHAIR KELLER announced that HB 97 would be held over.