HOUSE BILL NO. 229 "An Act relating to the Alaska higher education investment fund; and relating to the Alaska Student Loan Corporation." 9:01:37 AM Co-Chair Merrick invited the bill sponsor to the table. 9:01:52 AM REPRESENTATIVE ANDY JOSEPHSON, SPONSOR, explained that in 2012 the legislature created a higher education investment fund and populated it with Alaska Scholarship Fund. Since then, the legislature had taken out about $25 million per year. More recently the state funded Washington, Wyoming, Alaska, Montana, and Idaho (WWAMI) with dollars from the fund. 9:11:46 AM Representative Carpenter wondered how the constitutional requirement that stated that the legislature could not designate funds for a specific purpose integrated with the legislation. Representative Josephson indicated the protection of the armor would be applied to the reverse sweep. The funds would not be dedicated. Representative Josephson turned the meeting to his staff. 9:14:27 AM ELISE SORUM-BIRK, STAFF, REPRESENTATIVE ANDY JOSEPHSON, introduced the PowerPoint Presentation: "HB 229 - Protecting the Alaska Higher Education Investment Fund." She began with reviewing the sectional analysis on slide 2: Section 1- Allows the Alaska Student Loan Corporation powers needed to manage the HEIF. Section 2- Allows the Alaska Student Loan Corporation to create a subsidiary for the express purpose of administering the HEIF and related programs. Section 3- Moves the Alaska education grant account into the Alaska Student Loan Corporation. Section 4- Moves the Alaska performance scholarship award account Section 6- Establishes the Alaska Higher Education Investment Fund as a separate fund in the Alaska Student Loan Corporation. Section 8- Relates to Powers and Duties of the Commissioner of Revenue Sections 5, 7, 9, 10, 11, 12, 13 and 14- Rename the fund- Adding the word "trust." 9:16:26 AM Ms. Sorum-Birk continued to slide 3 to review the warnings and market value of the Higher Education Investment Fund. She thought everyone was aware of the performance of the fund and why it was valuable. She would not elaborate, as it was self-explanatory. She discussed the timeline of events related to the Higher education Investment Fund on slide 4. Ms. Sorum-Birk continued to slide 5. She reviewed a summary of principles from the Hickel V. Cowper case: .notdef Two main parameters: .notdef "available for appropriation" .notdef In the General Fund .notdef Relating to "available for appropriation"- "must include all funds over which the legislature has retained power to appropriate" AND "which are not available to pay expenditures without further legislative appropriation" .notdef For trust receipts the amount appropriated by the legislature IS the amount available for appropriation .notdef This category includes federal funds, funds given to the state for specific purposes by private entities AND appropriations from trust account .notdef Notably "amounts appropriated by the legislature out of other funds within executive agencies for the purpose of administering these funds, under explicit statutory authority may also be treated as a type of trust receipt" (revolving loan funds) .notdef Monies of public corporations are treated similarly to trust receipts .notdef Excludes illiquid assets, funds expendable without further legislative appropriation, or funds validly appropriate Ms. Sorum-Birk presented the notable changes that would result from the passage of the bill on slide 6: The HEIF, the Alaska Education Grant account and Alaska Performance Scholarship account are relocated out of the general fund and into the Alaska Student Loan Corporation. Allows the Alaska Student Loan Corporation to create a subsidiary specifically for managing HEIF and associated funds. Language is added to clarify that these are all "separate funds" For the scholarship and grant funds, language is added to clarify that these funds are available without further appropriation. Medical education (WWAMI) is added to the statutory uses of the HEIF. 9:22:03 AM Ms. Sorum-Birk reviewed what HB 229 would not change and offered what adjustments could be made to the legislation on slide 7: Overall structure of how the fund is currently administered under statute including the: ? 7 percent draw annually ? The division of the 7 percent draw- 1/3 to grant fund and 2/3 to the scholarship fund ? The annual draw requiring appropriation by the legislature from the HEIF to the scholarship and grant funds. Potentially friendly amendments could include ? Reassessing the amount of the draw- a smaller draw with smoothing ? Adjusting the division of the draw to ensure a portion goes to WWAM 9:23:16 AM Representative Josephson commented that friendly amendments on the slide were doable. He thought time was of the essence concerning passing the legislation. He thought it offered a road map for going forward. Vice-Chair Ortiz asked if the armor Representative Josephson described protect the appropriations made in 2015. /He thought the legislature might readdress needs in the future looking to the fund for assistance. Representative Josephson thought programs he had mentioned were good and fell under the umbrella of education. Ms. Sorum-Birk added that there were two different ways of structuring the funds. The bill would allow the legislature to maintain its control over how the monies were spent. Vice-Chair Ortiz asked why the money would need to specifically assigned. Representative Josephson indicated that the other body had a bill that indicated the HEIF was a separate account. However, he did not think it was enough of a step. By moving the fund outside of the general fund, it would not be subject to the reverse sweep provision. 9:28:33 AM Representative Edgmon noted that the state would soon be in a position where the state would be coming into additional revenues from oil. He wanted to contemplate capitalizing the fund more. Representative Josephson noted 5 percent was more sustainable. The fund had done well at 7 percent. He suggested there was no reason the bill should not be moved to the governor by Monday. 9:32:04 AM Representative LeBon asked if there was invited testimony of the bill in the current meeting. 9:32:48 AM CHAD HUTCHISON, STATE DIRECTOR, UNIVERSITY OF ALASKA, indicated the University was very supportive of the legislation. He noted President Parnell was one of the supporters. The university thought the creation of a separate fund would create stability. Mr. Hutchison relayed some statistics having to do with WWAMI and certain other grants. He noted that WWAMI was particular to the University. 9:36:49 AM Representative LeBon noted the Superior court ruled against the three students. He wondered if there was an appeal to the ruling. Mr. Hutchison replied in the affirmative. Representative LeBon wondered if the court decision would be decided in time to be reflected in the budget under consideration. Mr. Hutchison responded that the ruling would probably be too late for the current budget cycle. Representative LeBon asked if the $25 million would be the correct figure. Mr. Hutchison concurred with Representative LeBon's figure. Representative LeBon offered that a plan B could be to fund that figure and wait out the court ruling. Mr. Hutchison responded that it could be a plan B. 9:38:55 AM Representative Edgmon s wondered how the University would be impacted in terms of recruitment and retention of students at the University. He thought the legislation was a move towards stability. Representative Carpenter noted that the drafters of the state constitution felt it was important that the state not set up pools of money that would be dedicated to a specific purpose. 9:42:12 AM Representative Josephson remarked that dedicated funds had been created since statehood. Representative Edgmon appreciated the comments by Representative Carpenter. He thought it was interesting about hearing about the history of the legislature actions. Co-Chair Merrick thanked the presenters for bringing the bill forward. HB 229 was HEARD and HELD in committee for further consideration. 9:44:26 AM AT EASE 9:50:09 AM RECONVENED