SB 33-POSTSECONDARY SCHOLARSHIPS  CHAIR ELTON announced consideration of SB 33. He noted for the record that one of the committee members, Senator Stevens, has been invited to speak at the School Board Association at 8:30 a.m.; so he will have to leave this meeting early. NICK MOE, aid to Senator Johnny Ellis, presented the sponsor's statement. He thanked Chair Elton for hearing the bill and apologized for Senator Ellis, who is in transit and unable to attend. Senator Ellis is sponsoring this bill, which they refer to as the "Alaskan Achievers Incentive Program," because an educated and prepared workforce is critical to the success of Alaska's future. Postsecondary institutions in Alaska provide hundreds of programs at campuses across the state with degrees and certificates geared to meet the current needs of Alaska; however affordability of these institutions is a growing concern among students and families. If a family thinks college is unaffordable, a student has little incentive or expectation for success and is more likely to drop out. The Alaskan Achievers Incentive Program creates a scholarship fund for those students who achieve a B average or better in the school in which they are enrolled and demonstrate unmet financial need through filing for the Free Application For Federal Student Aid (FAFSA). The scholarship award cannot be less than $1,000 or more than $20,000, or for more than five years. If the fund is too small to award all applicants, priority will be given to students who demonstrate the most unmet financial need. The fund will be managed by the commissioner of revenue and administered through the Alaska Commission for Postsecondary Education; the commissioner of revenue will identify the five percent of the fund available for scholarships each year. MR. MOE reported that the Taylor Plan is in full support of this bill. The Anchorage Assembly also passed a resolution supporting it and the Coalition of Student Leaders helped draft the original language. More than 30 states have adopted similar measures and Senator Ellis believes this is the right time to reduce college and high school drop out rates, stimulate Alaska's economy by building our own workforce and create the scholarship fund. He provided a brief sectional analysis. 8:07:57 AM In Section 1, page 1, lines 4 through 14, lay out the objectives and purpose of the program. Section 2, page 2, establishes the fund. · Lines 1-8 provide that the Alaska Commission on Postsecondary Education will administer the program. · Lines 9-13 establish the minimum and maximum awards. · Lines 14-17 identify the priority for students with the most unmet financial need. · Lines 19-31 set out the requirements for eligibility, which continue on page 3, lines 1-3. The student must be an Alaskan resident, must submit an application, demonstrate a financial need of not less than $4000 and be accepted in a degree or certificate program at a qualifying institution. · Page 3, lines 4-9 establish the fund as an endowment that consists of appropriations, donations and earned income. · Page 3, lines 10-22 place management of the fund with the commissioner of revenue and provide for the appropriation of available funds. Section 3 provides for the transitional period during which it will not be possible to calculate a multi-year average balance. The fund will be averaged over a three year period and the five percent appropriation taken from that average; during the transitional period it will not be possible to calculate the multi-year average balance on the newly-created fund. MR. MOE mentioned that the members' bill packets contain a copy of the "Report Card" on postsecondary education in Alaska [created biennially by The National Center for Public Policy and Higher Education], which shows that Alaska rated an F in affordability and participation in 2008. It also shows that annual personal income in the state would be about $2 billion higher if more students attained a higher education. SENATOR DAVIS joined the meeting. 8:11:54 AM SENATOR HUGGINS asked Mr. Moe if any consideration has been given to a loan-forgiveness provision to encourage recruitment of educators for Alaska MR. MOE answered that they have not discussed that. SENATOR HUGGINS encouraged Senator Ellis to consider it. 8:12:51 AM SENATOR STEVENS asked Diane Barrans of Postsecondary Education, who prepared the fiscal note for this bill, how the legislature would go about funding it. 8:13:32 AM DIANE BARRANS, Executive Director, Alaska Commission on Postsecondary Education (ACPE), Department of Education and Early Development, Juneau, AK, responded that there isn't a ready source of funds she can point to as an earmark. Discussions with Senator Ellis's aid indicated that they were speculating there may be money available in one of the federal economic stimulus bills that could be used to capitalize the program. The language in the [stimulus] bill is rather vague; it did reference funds for higher education, but it is still not clear to what purposes those funds can be put. 8:14:19 AM SENATOR STEVENS asked how stable the ACPE program is. MS. BARRANS answered that repayment performance has been good over the past few years, but the default rates rise to in excess of 10 percent after 4 to 5 years in repayment; so although the program has been operating in a sound manner, it faces serious challenges with the rising cost of funds and the condition of the capital market. SENATOR STEVENS asked Ms. Barrans to give the committee an idea of what she expects the impact of the national economic condition to be on the program. 8:15:54 AM DIANE BARRANS said they are currently considering what steps they could take to provide alternative deferments, forbearances and the like; they do expect their borrowers to feel the effects of the economic downturn. People who are showing good-faith efforts to repay their debt may find themselves cash poor; so the division is looking at ways to prevent delinquency from rising, although to some extent it is inevitable. As to other changes, they have not been able to issue bonds in the market for over a year. They last successfully issued bonds in 2007. The market for the type of bonds they issued between 2002 and 2007 disappeared in the wake of the sub-prime mortgage fall-out, so they are working on strategies to successfully issue bonds at a low cost. They also expect to look at their credit criteria for loans that are not federally guaranteed, to make sure the loans they are issuing are usable as collateral for bonds. CHAIR ELTON said Ms. Barrans has touched on some significant issues that the committee will be getting into in the near future. He added that her use of the term "cash poor" was very good; he thinks the commission also has some challenges in terms of being cash poor. 8:18:17 AM SENATOR HUGGINS asked Ms. Barrans what amount of bonding the commission is looking at. DIANE BARRANS said they hope to bond for about $100 million in the next successful issue. Their federally guaranteed loan volume has increased over 50 percent, which is attributable primarily to other lenders leaving the program for economic reasons. SENATOR HUGGINS asked Ms. Barrans to refresh his memory about the loan-forgiveness program the division used to offer for educators. DIANE BARRANS confirmed that the Teacher Education Loan Program still exists; it is a very small program and the loans are 100 percent forgivable. To be eligible, a student must have graduated from high school in Alaska, be nominated to participate by one of the rural school districts and must commit to teach in one of the qualifying schools after graduation. The program has not been very successful. Fewer than one in five students actually complete their degree in teaching and go on to teach in eligible schools; most go on to repay their loans. 8:20:17 AM SENATOR HUGGINS asked if she would provide him with any information she might have on what is contributing to the failure rate of that program. CHAIR ELTON noted for the record that the Department of Revenue had provided the committee with another fiscal note, which includes $25,000 in contractual costs. Deputy Commissioner Burnett was on hand to answer questions. 8:20:57 AM CHAIR ELTON said four people have signed up to testify by teleconference and the committee has only about 10 minutes to hear their testimony. 8:21:26 AM SAICHI OBA, Associate Vice President, Student and Enrollment Services, University of Alaska, Fairbanks, AK, said the university supports this bill. They have worked with The Coalition of Student Leaders this year and last; President Hamilton has sent a letter to Representative Gara supporting this bill and all needs-based financial aid the state can provide. 8:22:03 AM KARL WING, Student Body President, Anchorage Representative for The Coalition of Student Leaders, University of Alaska Anchorage (UAA), Anchorage, AK, thanked the committee for considering this bill and said that students are passionate about finding alternatives to help them stay in Alaska; this bill is one way to keep Alaska's best students in the state. Recently, the coalition approached the Anchorage municipality, which formulated a resolution endorsing SB 33 and HB 94. Students believe in this legislation and would really appreciate the legislature's support. 8:23:37 AM RYAN BUCHHOLDT, Student Senator, Union of Students, UAA, Anchorage, AK, is also a student who has to work full time in order to pay for college. Many students are forced to do that in order to pay the rising costs of tuition, books, housing and food. This reduces the amount of time they have to devote to their studies, which results in lower grades and/or a complete lack of sleep, as well as delaying graduation. He confided that he should have graduated last year, but because he has not been able to devote full time to his education, he won't graduate for two years. This bill not only provides the opportunity for a college education to those who could not otherwise afford it, but keeps them here in Alaska to help staunch the "brain drain" and add to a well-educated workforce. There is an economic benefit to the state, as most studies show that a person with a four year degree earns approximately a million dollars more over the course of his life [than a person with less education]. 8:25:40 AM DANA THOMAS, Professor of Statistics, Assistant Provost, University of Alaska Fairbanks (UAF), Fairbanks, AK, supports this bill. He pointed out that Alaska has the lowest college participation rate in the nation among low income families; it is 51 out of 51 when the District of Columbia is included. It is clear that low income families generally appear to be spending their permanent funds on the basic needs of the family and not saving for their children's college education. What would the committee members do for their families, he asked, if they earned less than $20,000 per year; where would that money go? MR. THOMAS said the University of Alaska Fairbanks conducts an independent study called the " National Survey of Student Engagement," which indicates a much higher percentage of students working than in other institutions nation wide; it is well known that students who work more than 20 hours per week have a significantly lower graduation rate. UAF freshman retention is comparable to some of the best liberal arts schools in the nation at about 75 percent, but the graduation rates are low compared to other schools. A detailed study by UAF's institutional research shows that students drop out when they have accumulated about $10,000 in debt. Clearly, cost is an issue and this needs-based support, which is also largely based on merit, is the right direction to go. 8:28:00 AM SENATOR HUGGINS asked if Mr. Thomas is familiar with the new GI Bill. MR. THOMAS said he is; it is a wonderful new addition. SENATOR HUGGINS asked if Mr. Thomas would compute a projection of the number of students who could benefit from a transfer of benefits from that GI bill. MR. THOMAS said he would look into it. 8:28:31 AM STEPHANIE ASHLEY, Student Body President, Juneau representative to the Coalition of Student Leaders, University of Alaska Southeast (UAS), Juneau, AK, supports SB 33. She will graduate this year with over $54,000 in loan debt. She was slightly over the qualifying income for a Pell grant; so she did not qualify for any federal grants. This bill, based on merit and financial need, is something she would definitely have taken advantage of and she strongly supports this legislation. 8:30:11 AM CHAIR ELTON closed public testimony on SB 33 and held the bill in committee.