CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 186(HES) "An Act relating to a University of Alaska post- secondary education savings program, to the Alaska Higher Education Savings Trust, and to the Alaska advance college tuition savings fund; and providing for an effective date." SENATOR T. KELLY as prime sponsor came forward to testify on SB 186. He stated that because of recent tax legislation passed by Congress, which was a new IRS rule designed to encourage individual savings for higher education, over 40 states have enacted or are in the process of establishing tax deferred savings programs. He added that this legislation continues a long Alaska tradition of supporting higher education by making timely improvements to its current advanced college tuition payment program and establishing a second tool called the Alaska Education Savings Trust. He explained that the program would continue to be administered by the University of Alaska and would require no new general fund expenditures. He pointed out that there was a proposed Committee Substitute before the Finance Committee of which he recommended the adoption. He noted a small technical change to the CS that would not allow someone who is in arrears in child support payments to establish a trust until they have paid this debt. Co-Chair Torgerson stated that he would not be offering amendment number one, which was suggested by the sponsor since it is included in the CS on page two, line two. He added that the other clarification on the exemption from child support payments is on page four, line 16. Tape: SFC - 99 #26, Side B, 10:55 am. ANN ALLEN, TIAA-CREF, [organization's full name not given] testified via teleconference from New York, supported this legislation. She stated that her organization manages similar programs in nine other states. She added that her organization's core business is pension plans for higher education and managing tuition savings account plans. BOB MANLEY, Estate Planning and Tax Attorney, with Hughes, Thorsness, Powell, Huddleston & Bauman, LLC testified via teleconference from Anchorage, stated that he has practiced in this related field for 25 years. He noted that he is part of an informal group of estate and tax attorneys who work pro bono by assisting with technical aspects of legislation. He pointed out that he was not testifying on behalf of any organization and he voiced his support of this legislation. He added that it has significant income tax, estate tax and money management advantages to Alaskans. JIM LYNCH, Interim Vice President of Finance, University of Alaska testified via teleconference from Anchorage, stated that he serves on the Executive Board for the college savings programs and he is the principal drafter of the Advances College Tuition Program for the University. He offered that as part of his role on the Executive Board, he did participate in the drafting of section 529 and he argued the exempt status of the University's program before the national office of the Internal Revenue Service. He noted that he supports this bill. Senator Wilken referred to page three, line 24 of version "V" of the committee substitute and suggested that the Committee insert the word "all" before the word administrative. He thought that the Committee envisioned this program to be self-supporting. He pointed out by inserting this word; the Committee clearly defines for the future, that the Committee expects the participants to pay all administrative fees. Senator Wilken made a motion to adopt version "V" of SB 186. Hearing no objection, it was so moved. He then made a motion to move amendment number two as proposed. Hearing no objection, amendment number two was so moved. Senator Wilken referred to page four, line four, he clarified this section that spoke to the funds on deposit not being considered by the University in regards to eligibility of state funded scholarships. He pointed out that if this was a needs based scholarship, he thought that they should take into account funds on deposit. He thought this section was in need of clarification in how this part of the bill relates to needs based scholarships. Mr. Lynch responded that the intent of this section was not to affect need based scholarships. He added that they could include the language "the state may not limit eligibility for state funded need based scholarships." He added that right now the state has no funded programs for this type of scholarships. Co-Chair Torgerson clarified that they should insert "need based" between funding and scholarship on page four, line five. Senator Wilken made a motion to move amendment number three allowing for on page four, line five, "except for needs- based scholarships" at the beginning of section (e). Hearing no objection it was so moved. Senator Wilken made a motion to move SB 186, version 1- LS1084\V with individual recommendations and attached fiscal note from the Department of Revenue. Senator P. Kelly added that the Department of Revenue fiscal note was dropped after the first Committee Substitute was drafted. He stated that there was no fiscal impact through the Department of Revenue. He continued that at one time they administrated the college pre-paid tuition program and they no longer do this. ADJOURNED Co-Chair Torgerson, hearing no objection to the motion as stated, SB 186 was MOVED FROM COMMITTEE. He adjourned the meeting at 11:05 a.m. SFC-00 SS1 (1) 02/11/00