HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE January 19, 1993 3:00 p.m. MEMBERS PRESENT Rep. Cynthia Toohey, Co-Chair Rep. Con Bunde, Co-Chair Rep. Gary Davis, Vice Chair Rep. Tom Brice Rep. Pete Kott Rep. Irene Nicholia Rep. Harley Olberg Rep. Al Vezey MEMBERS ABSENT Rep. Bettye Davis, excused COMMITTEE CALENDAR Overview from the Department of Education WITNESS REGISTER Jerry Covey Commissioner Alaska Department of Education 801 W. 10th St., Suite 200 Juneau, Alaska 99801-1894 Phone: 465-2800 Allan Barnes Executive Director Alaska Commission on Postsecondary Education P.O. Box 110505 Juneau, Alaska 99811-0505 Phone: 465-2165 Mary Lou Madden Assistant Director Alaska Commission on Postsecondary Education P.O. Box 110505 Juneau, Alaska 99811-0505 Phone: 465-2165 ACTION NARRATIVE TAPE 93-2, SIDE A Number 000 CO-CHAIR CON BUNDE called the meeting to order at 3:04 p.m., noting members in attendance. He announced that the purpose of the meeting would be to hear an overview of the Department of Education. Number 025 JERRY COVEY, commissioner, Alaska Department of Education (DOE), said the department, with 450 employees around the state, consumes more of the state operating budget than any other department. While the DOE is known for dealing with school district programs, teacher certification, curriculum and centralized correspondence, Mr. Covey explained, it also administers state libraries in Juneau and Anchorage, state museums in Juneau and Sitka, and the state archives. He noted the department's vocational rehabilitation function, based around the state, occupies the majority of departmental employees. Number 068 (Chair Bunde noted Rep. Nicholia's arrival at 3:05 p.m.) MR. COVEY stated the DOE'S centralized correspondence course, which predates similar programs run by individual school districts. He described the Mt. Edgecumbe High School boarding school in Sitka, which was a Bureau of Indian Affairs school before it began operating in 1985 as a state school, now serving approximately 300 Alaska students. He mentioned the Alaska Vocational Technical Center in Seward, a successful postsecondary vocational school, which has been operating since 1968. MR. COVEY referred to a chart describing the department's organization. (A copy of the chart is on file in the committee room.) MR. COVEY said the DOE is governed by a board which, while appointed by the governor, nonetheless has the authority to act independently of, and sometimes in opposition to, the governor. MR. COVEY described the department's recent year-long initiative to solicit public input for a plan to make changes in the state educational system. He stated that a long and costly effort has resulted in a package of three bills designed: 1) to change educational programs; 2) to change the instructional unit foundation formula; and 3) to change capital projects. He said the educational system's interconnectedness required a comprehensive package to overcome resistance to change. MR. COVEY predicted the three-bill package represented unprecedented opportunities to make beneficial changes to the state's educational system, and he expressed a willingness to work with the committee to modify the package to the committee's satisfaction. Public support from the program would help guide the committee as it considers the bills, he said. Number 212 CHAIR BUNDE thanked Mr. Covey for his presentation, especially the acknowledgement that the process is on-going, which would give the state's many self-proclaimed educational experts an opportunity to be heard. He delayed further questions on the bills until they were presented for later committee presentations. Number 231 REP. NICHOLIA asked Mr. Covey when he would make his presentation on the proposed bills resulting from the Alaska 2000 project he described. MR. COVEY responded that the bills would be ready by the end of the week, and he would make his presentation at the committee's invitation. CHAIR BUNDE said he would schedule such a meeting at a mutually convenient time. Number 242 MR. COVEY, at Rep. Nicholia's request, promised to make background information available to the committee in advance. He also told the committee that the department intended to propose other changes to educational regulations and would seek committee input into such changes. Number 252 MR. COVEY ended his presentation by reiterating the combined power of the public and the talent in his department. Though recent past efforts have failed to make this combination, he said, he expressed a belief that it is possible and once begun, would result in rapid action. Number 284 CHAIR BUNDE welcomed Mr. Allan Barnes, executive director of the Alaska Commission on Postsecondary Education, and invited him to begin his presentation. MR. BARNES said the commission has 14 members, including: one member each from the state House of Representatives and the state Senate; several public members; two members of the state Board of Regents; and representatives from proprietary schools. MR. BARNES said the commission has three major functions: 1) consumer protection, in which it monitors newspapers to detect and notify law enforcement officials of potentially fraudulent claims for schools in the state; 2) institutional authorization, working with approximately 130 educational institutions, many of them private institutions such as trade schools; and 3) student financial aid. Financial aid is the commission's largest task, MR. BARNES said. It includes the student loan program, including: regular student loans, full time loans, and primary education loans. The financial aid element also contracts for federal student loans for the approximately 2,000 students receiving such loans, he stated. Financial aid also manages a grant program for low-income students, jointly funded by the federal government and by state operating funds, he explained. Financial aid also manages the Western Interstate Commission on Higher Education professional exchange program, and it is the principle conduit for the Washington, Alaska, Montana Idaho medical exchange program with the University of Washington. MR. BARNES said student loans are generated by the Alaska Student Loan Corporation, which began in 1987, and which has five members: the commissioners of the departments of Administration, Revenue, and Commerce and Economic Development; and two members of the Commission on Postsecondary Education. Mr. Barnes explained that the corporation generates money by issuing and selling bonds. In 1992 the board authorized issuance of $47 million in bonds for student loans, which, along with previous loan repayments, creates the money available for student loans. For the first time, in 1993, there will be no general funds used for student loans, he said. MR. BARNES noted approximately 70 of the 89 commission staffers work on student loans; approximately 10 in awarding loans; and approximately 60 of them in collecting the $530 million in outstanding loans. There are 160,000 active loans, with default rates of seven percent per year, and about 12 percent cumulatively, compared to the national federal default rate averaging about 20 percent, he said. He explained the disparity by saying more of Alaska's loans are made to middle class students, while the federal loans are often made to low income students and to some borrowers who might not intend to repay them. MR. BARNES identified several issues facing the commission. They included: improved communication with borrowers by telephone regarding loan delinquencies; the legitimate garnishment of permanent fund dividends of delinquent borrowers; and capital improvements in the loan program's records retrieval and telephone system. He predicted the committee would hear complaints about the loan callers and promised help in answering them. He noted that ten temporary workers have finished their three weeks' training and are ready to begin work in communications. Number 350 CHAIR BUNDE thanked Mr. Barnes and praised the loan program for offering educational opportunities to the state's students. He expressed concerns that the student loan program had attracted fraudulent educational institutions interested more in collecting tuition from the loans than in offering instruction, and he encouraged Mr. Barnes to pursue such frauds. Number 366 CHAIR BUNDE asked whether the loan division had considered allowing loan recipients to repay their obligation in part through public service. MR. BARNES said the division had not, because they must repay the entire amount of the bonds issued, and any shortfall would have to be made up with state general funds. Number 377 CHAIR BUNDE asked how the commission achieves its low loan default rate and how it might be lower still. MR. BARNES said the loan program is run like a business, tracing defaulters and telephoning them to request payment or face collection proceedings. Defaults got out of hand in the mid-1980s, Mr. Barnes explained, prompting the commission to employ three private collection agencies, in Anchorage, Fairbanks and Juneau, which are paid a percentage of their collections. The commission will garnish wages and will go after bank accounts and, except in case of bankruptcy or medical emergency, rarely write off bad loans. REP. BRICE inquired as to the rate of loans made. MR. BARNES answered that the rate of student loan issuance peaked at 17,000 loans in 1986, the last year the 5 percent forgiveness program was in effect. About 13,500 loans are issued each year, with an annual growth rate of about 2 percent. MR. BARNES answered another question from Rep. Brice, saying that the commission collects $4 million per month in loan repayments, most of which is committed to repay the bondholders. Mr. Barnes said the commission may make loans to students out of previous loan repayments and from issuance of new bonds. Number 400 REP. TOOHEY asked why some educational programs in the state must be 12 weeks in duration before students can qualify for student loans, when the instructional program might cover only eight weeks' worth of material. MR. BARNES answered that state regulations allow certification of shorter courses, but require a minimum of eight to 10 weeks of instruction before it qualifies as an approved school for student loan purposes. Mr. Barnes also referred the question to his assistant director. Number 415 MARY LOU MADDEN, assistant director of the Alaska Commission on Postsecondary Education, said state regulations require an educational program to be equivalent to half-time college level instruction, or to require a certain amount of instructional time, to qualify for student loan. Number 422 REP. DAVIS praised the worth of the student loan program, but said he believed other states take advantage of the Alaska student loan program. He proposed a reciprocity agreement with other states, requiring those states to charge lower residents' tuition rates to students paying tuition with Alaska student loans. Number 437 MR. BARNES responded that the desire of Alaska students to attend certain schools in Washington, Oregon or other states creates a disincentive for such schools to offer any reductions in tuition. He offered to investigate the possibility of such an agreement, but doubted he would succeed. He noted that undergraduate students participating in the Western Interstate Commission on Higher Education program are charged one and a half times the residential tuition rate, instead of the higher nonresident fees, at schools outside of Alaska. Number 452 REP. NICHOLIA noted she had occasion in the past, during eight and a half years as a programs administrator for higher education, to deal with the student loan program and commission counselors. She expressed hope that improvements in the commission's communications would eliminate long delays in communicating with the commission's loan officials. Number 462 MR. BARNES said the commission began issuing monthly bill statements to borrowers a year ago, which averted significant problems associated with the previous system of payment coupons and created an increasing demand for communications with the commission. ADJOURNMENT Number 480 CHAIR BUNDE announced that background information on the committee's overview for the Department of Health and Social Services was available in the committee room. CHAIR BUNDE adjourned the meeting at 3:36 p.m.