HOUSE BILL NO. 404 An Act relating to the Alaska Commission on Postsecondary Education; relating to the Alaska Student Loan Corporation; relating to bonds of the corporation; relating to loan and grant programs of the commission; relating to an exemption from the State Procurement Code regarding certain contracts of the commission or corporation; making conforming changes; and providing for an effective date. DIANE BARRANS, EXECUTIVE DIRECTOR, POSTSECONDARY EDUCATION COMMISSION, DEPARTMENT OF EDUCATION, noted that she has previously requested support for agency initiatives. In 2001, Alaska Student Loan Corporation (ASLC) requested approval to redefine its role in becoming Alaska's full service financial aid assistance and postsecondary education planning agency. The Legislature has consistently exhibited bipartisan support for ASLC mission to promote postsecondary participation and success by Alaskans. Ms. Barrans requested support for the current legislation, HB 404. The Commission and Corporation, having successfully implemented the AlaskAdvantage suite of programs and services for Alaskans, seeks support for the next step of organizational growth. Ms. Barrans outlined the legislation's objectives: · To broaden the scope of the Corporation's bonding authority to include the ability to bond for the general benefit of the State. · To contribute to statewide efforts to use assets as efficiently as possible, the corporation has developed a plan to return a substantial portion of the capital originally given. The change is requested to insure that the capacity to return contributed capital back to the State; there would be a variety of means to do that. · To provide the Commission with greater flexibility in offering loan consolidation options to borrowers. Current statutes limit the way in which, the Commission can offer consolidation and certain customers, who have borrowed from both the discontinued loan program and the AlaskAdvantage loans, and hence, cannot currently be served through consolidation. · At the recommendation of the Department of Law, the bill will clarify the Commission's ability to administratively issue liens in the collection of defaulted education loans and set out the due process for appealing such an action by the Commission. · To provide an exemption from the State Procurement Code for certain services related to guaranteeing and disbursing education loans. Under the current business structure for education loans, a lender must be prepared to conduct business with the guarantors and disbursing agents preferred by the schools participating in the loan programs. Ms. Barrans commented on the corporation's activities leading up to developing the "Return of Capital" plan. In 2001, the corporation managers and financial advisors began planning to modify the education loan programs' financing structure. In order to do so, they identified assets within the original master trust indenture. Because of substantial improvement in portfolio performance that could be identified as excess above the asset to debt coverage level required by the terms of the 1988 master indenture. In 2002, in tandem with the implementation of the AlaskAdvantage Programs, a new master trust was created using the cash and assets transferred from the 1988 Trust. Out of the 2002 Trust, the Alaska Student Loan Corporation (ASLC) has noted intent to continue the issuance of bonds to finance core programs. The Return of Capital plan is designed to continue capturing the "excess" from the 1988 Trust, without waiting until 2018 when the final outstanding bonds are paid off. Representative Stoltze asked about the procurement code model. Ms. Barrans explained that the exemption requested by the Commission, would allow doing business with school business partners. In order to follow the State procurement code with the dispersing agent, they would go through the RFP process. It might be disadvantageous to continue using "paper checks" with an agent who won the contract. She stated that in respect to the guarantee agency, no cost is paid out of hand. Under the federal education loan model, receipt of income on the loan volume provides a federal government guarantee. That business relationship would be a "poor fit" for the procurement code and the services would be used but not paid for. Co-Chair Harris commented on the federal receipt fiscal note. Ms. Barrans clarified that was correct for operating funds, however, there is a capital fund amount requested to purchase the software to administer the State grant program. Vice Chair Meyer noted concern with $85 thousand dollars being spent on software. Ms. Barrans pointed out that number was approximately $15 thousand dollars less than the Corporation has been able to find. She stressed that the type of database that is being developed for State agencies to administer grant programs is very expensive to build. Discussion followed between Ms. Barrans and Vice Chair Meyer regarding the software capabilities of that program and the complexities of the process. Representative Foster MOVED to report CS HB 404 (HES) out of Committee with individual recommendations and with the fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 404 (HES) was reported out of Committee with "individual recommendations" and with zero note #1 by the Department of Administration, zero note #2 by the Department of Community & Economic Development, zero note #4 by the Department of Labor and Workforce Development and fiscal note #5 by the Department of Community & Economic Development.