HOUSE HEALTH, EDUCATION AND SOCIAL SERVICES STANDING COMMITTEE March 21, 1995 2:08 p.m. MEMBERS PRESENT Representative Cynthia Toohey, Co-Chair Representative Con Bunde, Co-Chair Representative Gary Davis Representative Norman Rokeberg Representative Caren Robinson Representative Tom Brice MEMBERS ABSENT Representative Al Vezey COMMITTEE CALENDAR HB 65: "An Act establishing a loan guarantee and interest rate subsidy program for assistive technology." PASSED OUT OF COMMITTEE * HB 216: "An Act establishing the Alaska education technology program; and providing for an effective date." HEARD AND HELD * HB 257: "An Act relating to student loan programs, interstate compacts for postsecondary education, and fees for review of postsecondary education institutions; and providing for an effective date." PASSED OUT OF COMMITTEE (* First public hearing) WITNESS REGISTER DANIELLA LOPER, Administrative Assistant Representative Porter's Office Room 118, State Capitol Juneau, AK 99801 Telephone: (907) 465-4930 POSITION STATEMENT: Provided sponsor statement for HB 65. EARL CLARK, Staff member Southeast Alaska Independent Living (SAIL) 9163 Parkwood Juneau, AK 99801 Telephone: (907) 789-9665 POSITION STATEMENT: Testified in support of HB 65. STAN RIDGEWAY, Director Division of Vocational Rehabilitation Department of Education 801 W. 10th Juneau, AK 99801 Telephone: (907) 465-6932 POSITION STATEMENT: Testified in support of HB 65. JOE SHEARHORN, Officer, Northrim Bank; Chair, Alaska Banker's Association 3111 C Street Anchorage, AK 99503 Telephone: (907) 562-0062 POSITION STATEMENT: Testified in support of HB 65. JANIE LEASKE, Vice-president, Community Development; Director, Community Reinvestment Act National Bank of Alaska Northern Lights Boulevard & C Street Anchorage, AK 99503 Telephone: (907) 267-5700 POSITION STATEMENT: Testified in support of HB 65. ROD MOURANT, Administrative Assistant Representative Pete Kott's Office Room 432, State Capitol Juneau, AK 99801 Telephone: (907) 465-3777 POSITION STATEMENT: Provided sponsor statement for HB 216. VICKIE KELLY, Representative Craig Schools P.O. Box 800 Craig, AK 99921 Telephone: (907) 826-3274 POSITION STATEMENT: Testified in support of HB 216. CHICK BECKLEY, Director of Technology Aleutians East Borough School District P.O. Box 429 Sand Point, AK 99661-0429 Telephone: (907) 383-5222 POSITION STATEMENT: Testified in support of HB 216. TESS LANUM, Vice-President North Star Parent-Teacher Association (PTA) P.O. Box 3165 Kenai, AK 99611 Telephone: (907) 776-5575 POSITION STATEMENT: Testified in support of HB 216. SKIP VIA, Teacher and Technology Specialist Fairbanks North Star Borough School District P.O. Box 25128 Ester, AK 99725 Telephone: (907) 479-4934 POSITION STATEMENT: Testified in support of HB 216. SUE HULL, Representative Alaska PTA 1630 Washington Drive Fairbanks, AK 99709 Telephone: (907) 479-5729 POSITION STATEMENT: Testified in favor of HB 216. CAROL MEARES, Legislative Chair Fairbanks District Council PTA P.O. Box 9 Fairbanks, AK 99725 Telephone: (907) 479-3247 POSITION STATEMENT: Testified in support of HB 216. LARRY WIGET, Director of Government Relations Anchorage School District 4600 DeBarr Road Anchorage, AK 99510 Telephone: (907) 262-2255 POSITION STATEMENT: Testified in support of HB 216. KAREN JORDAN, Technology Coordinator Juneau School District; Representative, Alaska Society for Technology Education 11575 Mendenhall Loop Road Juneau, AK 99801 Telephone: (907) 789-1803 POSITION STATEMENT: Testified in support of HB 216. KATHI GILLESPIE, Representative Anchorage School Board 2741 Seafarer Loop Anchorage, AK 99516 Telephone: (907) 345-5335 POSITION STATEMENT: Testified in support of HB 216. DR. JOE McCORMICK, Executive Director Alaska Commission on Postsecondary Education 3030 Vintage Boulevard Juneau, AK 99801-7109 Telephone: (907) 465-6740 POSITION STATEMENT: Testified in support of HB 257. GILLIAN HAYES, Executive Assistant to Dr. McCormick Alaska Commission on Postsecondary Education 3030 Vintage Boulevard Juneau, AK 99801-7109 Telephone: (907) 465-6740 POSITION STATEMENT: Testified on HB 257. JERRY SHRINER, Special Assistant Office of the Commissioner Department of Corrections 240 Main Street, Suite 700 Juneau, AK 99801 Telephone: (907) 465-4640 POSITION STATEMENT: Testified on HB 257. PREVIOUS ACTION BILL: HB 65 SHORT TITLE: ASSISTIVE TECHNOLOGY LOAN GUARANTEES SPONSOR(S): REPRESENTATIVE(S) PORTER, Davies, Brice, Brown, Mackie, B.Davis, Finkelstein, Kubina, Kott, Elton, Foster, Ivan, Robinson, Nicholia JRN-DATE JRN-PG ACTION 01/06/95 37 (H) PREFILE RELEASED 01/16/95 37 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/95 38 (H) L&C, HES, FIN 01/26/95 147 (H) COSPONSOR(S): BRICE,BROWN,MACKIE 01/26/95 147 (H) COSPONSOR(S): B.DAVIS,FINKELSTEIN 01/26/95 147 (H) COSPONSOR(S): KUBINA 01/27/95 162 (H) COSPONSOR(S): KOTT, ELTON 01/30/95 180 (H) COSPONSOR(S): FOSTER, IVAN 02/06/95 256 (H) COSPONSOR(S): ROBINSON 02/10/95 321 (H) COSPONSOR(S): NICHOLIA 02/22/95 (H) L&C AT 03:00 PM CAPITOL 17 02/23/95 464 (H) L&C RPT 4DP 02/23/95 465 (H) DP: KOTT,ROKEBERG,SANDERS,MASEK 02/23/95 465 (H) FISCAL NOTE (DOE) 03/09/95 690 (H) SPONSOR: PORTER 03/09/95 690 (H) FIRST COSPONSOR: DAVIES 03/21/95 (H) HES AT 02:00 PM CAPITOL 106  BILL: HB 216 SHORT TITLE: EDUCATION TECHNOLOGY PROGRAM SPONSOR(S): REPRESENTATIVE(S) KOTT,Brown JRN-DATE JRN-PG ACTION 03/01/95 530 (H) READ THE FIRST TIME - REFERRAL(S) 03/01/95 531 (H) HES, FINANCE 03/21/95 (H) HES AT 02:00 PM CAPITOL 106  BILL: HB 257 SHORT TITLE: POSTSECONDARY EDUCATION PROGRAMS/LOANS SPONSOR(S): HEALTH, EDUCATION & SOCIAL SERVICES JRN-DATE JRN-PG ACTION 03/15/95 742 (H) READ THE FIRST TIME - REFERRAL(S) 03/15/95 742 (H) HES, FINANCE 03/21/95 (H) HES AT 02:00 PM CAPITOL 106 ACTION NARRATIVE TAPE 95-24, SIDE A Number 000 CO-CHAIR CON BUNDE called the meeting of the House Health, Education and Social Services standing committee to order at 2:08 p.m. Present at the call to order were Representatives Bunde, Toohey, Davis and Rokeberg. A quorum was present to conduct business. The day's calendar was read. Representative Brice joined the meeting at 2:09 p.m. HHES - 03/21/95 HB 65 - ASSISTIVE TECHNOLOGY LOAN GUARANTEES Number 050 DANIELLA LOPER, Administrative Assistant for bill sponsor Representative Brian Porter, presented the sponsor statement on his behalf. She said HB 65 is a bill that will help people with disabilities. It refers to people with disabilities, not people who are on Medicaid or Medicare, and not very wealthy people with disabilities. Of those, it affects those who want to work. Therefore, the bill will affect about 60 percent of the people with disabilities in this state. Those are people who need assistive technology in order to work. MS. LOPER explained the program creates a tie between the banks and people with disabilities. A communication is established whereby a person with a disability can go to the bank and apply for a loan. This person is usually in the middle-class socioeconomic range, although they may not necessarily have enough money to guarantee the loan. Therefore, the person would go to the Division of Vocational Rehabilitation (DVR) and explain they are applying for a loan for, for example, a lift that can be attached to a car. MS. LOPER continued that the person with a disability will explain to the DVR that they can pay off the loan, but they need a guarantee. The DVR would, therefore, guarantee 90 percent of the loan. Number 210 MS. LOPER said a study was conducted in 1993 and the default rate was found to be 5.2 percent on this type of loan. That is about the best rate possible. The banking association also is complimented by this bill because banks have to meet the provisions of the Community Reinvestment Act (CRA). Banks must reinvest into the community. Each bank is rated on that. MS. LOPER said therefore, HB 65 helps the banks and people with disabilities who want to work. She had various people waiting to testify on the attributes of this bill. Number 319 CO-CHAIR BUNDE asked if Ms. Loper wanted HESS Committee members to entertain the amendments to the bill so there would be a complete working document. He numbered the amendments. REPRESENTATIVE TOM BRICE moved amendment number one. CO-CHAIR BUNDE objected for discussion purposes. MS. LOPER explained that amendment one contains the wording for the descriptive term used for people with disabilities. "Handicapped people" and "handicapped individuals" are terms that are outdated and offensive. The term that is used today and is supported by the Americans with Disabilities Act (ADA) is "a person with a disability." It is important that the word "person" is used before the word "disability." MS. LOPER said the amendment has changed the verbiage in the bill to reflect those terms. Number 412 CO-CHAIR CYNTHIA TOOHEY asked if she was saying that on page 1, line 13, after the word "enabling," on line 14, item (1), the words "handicapped individual" will be replaced with "a person with a disability." REPRESENTATIVE NORMAN ROKEBERG inquired about page 2, line 30. He said the word "handicapped" is used to describe a disability. MS. LOPER said the reason is because by statute, that must be done in order to comply with the statute. An entire chapter would have to be changed in the statutes. REPRESENTATIVE ROKEBERG asked if a particular title or chapter in the Alaska State Statutes was being referred to. MS. LOPER said a particular title was not being referred to, but there are other words and sections in the statute books that use the word "handicapped." Therefore, in order to reflect the change in this particular bill, a definition had to be given. Number 490 REPRESENTATIVE ROKEBERG expressed surprise that the word "handicapped" even exists in the body of statutes at this late date. CO-CHAIR BUNDE said perhaps political correctness is late coming to Alaska. CO-CHAIR TOOHEY said there is a wording problem. On page 1, line 14, the amendment deletes what has just been added. She said that on line 14, the words "handicapped individual" are being replaced with "a person with a disability...to obtain or maintain employment." CO-CHAIR BUNDE said the sentence on line 13 will continue to read, "best suited for a person with a disability to (1) a person with a disability to obtain or maintain employment." Number 567 REPRESENTATIVE BRICE asked if that was a redundancy that was necessary in statute. CO-CHAIR TOOHEY said perhaps it would be changed in the regulations. REPRESENTATIVE BRICE said the words are being stated in Section (b), but then to go under subsection (1), it sounds redundant. CO-CHAIR BUNDE said "appropriate assistive technology that is best suited for (1) a person with a disability." Co-Chair Bunde read the whole section: "(b) Subject to (c) and (d) of this section, the agency may use money in the fund established under this section to guarantee 90 percent of the principal amount of a loan or to subsidize the interest rate of a loan guaranteed by the agency for appropriate assistive technology that is best suited for..." Co- Chair Bunde now added "a person with a disability." CO-CHAIR BUNDE said while it sounds redundant, if the whole section is read, it is appropriate. REPRESENTATIVE BRICE said it still sounds redundant when one continues to read. Number 664 REPRESENTATIVE ROKEBERG said the term of art in the disabled community is a "disabled person." However, in this bill the term "person with a disability" is used. He asked if the bill was attempting to form a word of art for statutory language. MS. LOPER said the term of art, and even the term used through the ADA is "a person with a disability." REPRESENTATIVE ROKEBERG said "disabled person" is proper terminology. CO-CHAIR BUNDE said there is a semantic problem. "Disabled person" has connotations that "person with a disability" does not have. The person has a disability, as opposed to the entire person being described as "disabled." It is putting a very fine point on the term. Number 720 REPRESENTATIVE ROKEBERG said he is familiar with dealing with these issues as the former chairman of the ADA Commission in Anchorage for three years. There is no stigma in being a disabled person. There is about a "handicapped person," and that is the issue here. He was simply wondering if there was a reason for all this, because he can see that the language changes would be more economic if they were done differently. However, he would not belabor the point. MS. LOPER said in the committee packet, there is a letter from the Disability Law Center of Alaska. Both this letter and the director of the DVR said the term "disabled person" was never to be used again. The desired term is "person with a disability." CO-CHAIR BUNDE asked if the committee felt the amendment as proposed was redundant. REPRESENTATIVE BRICE said the committee was comfortable with the amendment, and expressed the desire to move on. CO-CHAIR BUNDE removed his objection to the movement of amendment one. It was therefore passed. Number 813 REPRESENTATIVE BRICE moved amendment two, and Co-Chair Bunde objected for discussion purposes. MS. LOPER said she was reviewing the legislation and found a loophole on page 2, line 6. This is the part of the bill regarding who is able to receive the loan. Page 2, line 5, says, "the loan is made to a person with a disability or a member of the person's family." Ms. Loper felt that may be a loophole. Therefore, she worked with Legislative Legal to close that loophole to make sure that if a child needs a parent to drive them somewhere and assistive technology is needed, the parent can receive the loan. MS. LOPER said the amendment inserts, "to obtain assistive technology for the handicapped or disabled person within the limitations of (b) of this section." She was wary of the bill saying that a member of the person's family could receive a loan. She feared it would be a 16-year-old boy getting loans for a new car instead of for his grandmother's assistive technology. CO-CHAIR BUNDE said the word "handicapped" is used in the section just discussed. MS. LOPER said that will be changed to reflect the passage of amendment one. Number 914 CO-CHAIR BUNDE removed his objection, and amendment two passed. Before the HESS Committee was a Committee Substitute (CS) for HB 65. EARL CLARK, Staff member, Southeast Alaska Independent Living (SAIL), and former client of Vocational Rehabilitation, spoke in support of HB 65 for very personal reasons. After Mr. Clark left the university, he thought it would be relatively easy for him to get a job. He found out the real world is more cruel than the university. He found it was very difficult to get a position, and he felt it was because of his disability. MR. CLARK said after three years he went to the DVR. He was assessed and it was determined that a piece of assistive technology and training in that technology would be very helpful. This technology was a computer and it was determined that he needed skills in this area. The DVR bought Mr. Clark a computer, he was trained in the use of that computer, and he was subsequently successful in obtaining a job. MR. CLARK thought his experience in using assistive technology through the DVR probably changed his life. Assistive technology was there for him when he really needed help. It has been very valuable for him. Number 1060 MR. CLARK thinks HB 65 is a bill that is concerned with loans. It is not a handout. It is for people who can work and perhaps need assistive technology to work--to get a job or to continue working. This bill will be very helpful to people who are disabled. He asked that the committee pass the bill. MR. CLARK added he is familiar with semantics and the nature of language due to his previous position. There is a disabled person, meaning the total person, and a person with a disability. One could have a disability that is a very small part of the person. However, a disabled person implies that the total person is disabled. CO-CHAIR TOOHEY said a disabled car and a car with a disability are two different things. Number 1154 STAN RIDGEWAY, Deputy Director, Division of Vocational Rehabilitation, said the assistive technology loan program would be funded strictly by federal funds. No state general funds would be used to capitalize the loan fund. There are roughly 4,000 individuals with disabilities in the state who could benefit from these types of loans. Fifty-eight percent of people who are employed who need technology cannot get it because they need a loan to get technology. MR. RIDGEWAY said of these people, many people who are experiencing new disabilities are pretty much tapped out. If they go to a bank to apply for a loan, they are usually turned down. Therefore, in cooperation with the banking institutions, this legislation would allow banks to loan money to people who would otherwise qualify except for the fact that they have no money. MR. RIDGEWAY said the interest rate could be bought down, or the loan can be guaranteed up to 90 percent. The funding would come over the next three or four years at $100,000 per year through the federal technology grant program. Number 1226 CO-CHAIR TOOHEY noted there is a $5,000 cap on the loan. She asked who is going to approve the loans. MR. RIDGEWAY said he envisions the program working in the following way. A person would go to bank. This would usually be a person who is working with an independent living center or another state agency. If there were no other way for a person to get assistive technology through another source, then he or she would apply for a loan. The person would then be directed to any financial institution. They would go through the loan process and apply for a loan. If the bank would approve the loan, it would then contact the DVR office. The office would keep a running total of the amount and the guarantee. MR. RIDGEWAY said the loan would then be applied to the guarantee, and the bank could make the loan. If there were a circumstance where the loan could not quite be paid back because of the interest rate, the office could then do an interest buy-down. Number 1286 JOE SHEARHORN, representative, Alaska Banker's Association (ABA), testified via teleconference that the ABA would be in favor of this legislation because it would help banks make loans to people who need this type of lending facility. The ABA does feel the 90 percent guarantee would be important in this case. MR. SHEARHORN added that the ABA is available to help draft regulation for the implementation of this legislation if necessary. The ABA and representative banks have a lot of experience working with similar loan guarantee programs such as the Small Business Administration Loan Guarantee Program, which is a very active program in Alaska. Any extent the regulations for this legislation could be patterned after this type of loan guarantee program would be helpful in that the system for the Small Business Administration Loan Guarantee program is already in place and working. Number 1359 JANIE LEASKE, Vice-president of Community Development and Community Reinvestment Act Officer, National Bank of Alaska, testified via teleconference on behalf of the Executive Vice President of the National Bank of Alaska. She provided some of the background information on the CRA. This is federal legislation passed in the late 1970s that encourages financial institutions to meet the credit needs of their communities with special emphasis on low and moderate income individuals in communities. MS. LEASKE said this federal legislation pertains to banks but not credit unions. On behalf of the National Bank of Alaska, Ms. Leaske voiced support of HB 65. It is her understanding that similar programs have already been implemented in 42 other states. In a brief review of the materials provided by the DVR and the Department of Education (DOE), a 1991 study estimated that there were about 20,000 persons with disabilities in Alaska. MS. LEASKE continued that of this number, as Mr. Ridgeway previously discussed, about 3,500 would meet the loan criteria in Anchorage and Southeast Alaska. An additional 800 reside in rural communities. Number 1435 MS. LEASKE said lending representatives from her bank have reviewed the draft legislation summary and the material provided by the DVR and DOE, and feel that the legislation fills an unmet need. She volunteered her organization's assistance to HESS Committee members for the passage and successful implementation of this program. Her bank has a network of 51 branches serving 28 communities, and it has an existing system to assist in public funding and programs in the rural areas of the state which are often more difficult to reach. MS. LEASKE offered her assistance to HESS Committee members in reaching other financial institutions as well. In the Anchorage area, the National Bank of Alaska has established an informal CRA officers group composed of representatives of the six local banks. These are Bank of America, First Interstate, First National, Key Bank, Northrim and National Bank of Alaska. Several of those banks have branches across the state, and Ms. Leaske would be happy to coordinate a meeting to help draft regulations once the legislation is enacted. Number 1484 CO-CHAIR BUNDE said he would pass her offer to volunteer on to Mr. Ridgeway, who may be intimately involved in the drafting of regulations to this effect. REPRESENTATIVE GARY DAVIS said he was approached by a person with a disability this summer. She was concerned about insurance to make repairs on a wheelchair. Representative Davis said apparently there is not much of a problem obtaining insurance for this type of equipment. He asked if there were any protections available to persons with disabilities from people peddling poor assistive technology. MR. RIDGEWAY said he is not aware of any such protections. However, there are a series of independent living centers throughout the state, and there is a lot of assistance for people with disabilities to insure they are receiving quality equipment. If the persons with disabilities are aware that programs are in place to help them, some of those problems may be alleviated. REPRESENTATIVE DAVIS said he wanted to bring that up in case it was a problem. From the research he has done, however, it does not seem to be a large problem. He thought if it was a problem, perhaps it was something that should be addressed. Number 1587 CO-CHAIR TOOHEY said there was a "lemon law" for liability for assistive technology. She thinks there is some kind of list of the better equipment. If someone has a defective piece of equipment, they can get their money back. CO-CHAIR BUNDE assumed that one of the goals for the centers for independent living is to help people buy appropriate assistance. He closed public testimony. REPRESENTATIVE BRICE moved CSHB 65 with individual recommendations and accompanying fiscal notes. There were no objections, and the bill was passed from the HESS Committee to the next committee of referral. HHES - 03/21/95 HB 216 - ESTABLISHING ALASKA EDUCATION TECHNOLOGY PROGRAM Number 1645 CO-CHAIR BUNDE said this is the first time this bill is being heard, therefore it is not the intent of the chair to move the bill today. Testimony will be taken. ROD MOURANT, Administrative Assistant for Representative Pete Kott, provided the sponsor statement on the representative's behalf. HB 216 establishes the Alaska Education Technology Program in the state of Alaska. This is not a new concept to the state legislature. In previous years there have been similar pieces of legislation introduced for this purpose. The major difference between this bill and previous legislation to that effect is that this bill seeks to eliminate most of the bureaucracy that was present and required through the review and qualifying process used in previous bills dealing with this topic. MR. MOURANT said education technology is very important to the students and the general public in Alaska. Every day in the Capitol Building and every day in the lives of the legislators they experience such technology. Mr. Mourant is certain that many members of the HESS Committee have Personal Computers (PCs) at home. They may spend time on the various computer networks that are available worldwide, and on the Internet as well. These systems can be used to share information and retrieve valuable knowledge. Number 1746 MR. MOURANT continued that HB 216 establishes the criteria for the education technology fund, and then, in Section 2, requires that performance of programs granted money under this program are part of the annual report card on education in the state of Alaska. MR. MOURANT said Section 3 defines the legislation and lays out the process, the criteria and the information that must be contained in the grant application package that is submitted to the DOE. This is a matching grant program. Besides public schools in Alaska, public libraries are also eligible for grants under this program. Number 1783 MR. MOURANT said the program will be funded through the earnings of an education technology fund. Representative Kott plans on introducing an appropriation for the bill to create an education technology fund. The earnings of that fund will be available as grant money on an ongoing basis. It will be an ongoing source of funding for schools and for public libraries to use in their pursuit of higher technology. MR. MOURANT has contacted the Department of Revenue (DOR), Treasury Division. This division manages the investment for such a fund. Based on the information from the Chief Investment Officer, it is reasonable to project that if the principal of the fund is $10 million, the anticipated earnings based on projections for the next five years would range between $750,000 and $900,000 per fiscal year for a $10 million endowment. Number 1843 MR. MOURANT said a fiscal note from the DOR was included in the bill packet. That is for $16,500 to manage the fund. That is the standard small fund management fee that the Treasury Division receives to manage a small fund that is part of the general fund in an investment portfolio. Also in the packet is a zero fiscal note from the Department of Administration which will be affected only because of access through various networks through their system. MR. MOURANT continued that there are two fiscal notes from the DOE in the bill packet. The first note is from Education Program Support, Basis Education and Instructional Improvement Unit to fund a position to review the grant applications received from around the state and to make certain all the elements of the grant application are present. HB 216 does spell out what the grant application must consist of. DOE will make sure all the required elements are present. MR. MOURANT said a fiscal note is also included from State Library Operations. It rightly anticipates that public libraries around the state will see an opportunity to upgrade their services to the general public through this program. Mr. Mourant has spoken several times with the DOE and his office will continue to work with the DOE on the fiscal notes and the role of the department. Number 1910 MR. MOURANT said Representative Kott, after looking at the fiscal note from State Library Operations, thought it made an excellent grant application for the program once it is adopted because it will serve a very useful and important role in the process. MR. MOURANT wanted to show HESS Committee members a document which indicated the matching fund requirements for communities. These are based on full-value average daily membership (ADM)-type calculations. In that regard, Anchorage and Juneau would be in a 30 percent match scenario. Number 1940 CO-CHAIR BUNDE asked if there would be any entities that would have zero matching funds. MR. MOURANT said no. He said although the rates may vary, he calculated that Galena, Hoonah, Hydaburg, Kake and Nenana will all be at 5 percent. REPRESENTATIVE CAREN ROBINSON said she supports this program, but she is a little skeptical because currently on the books is a Children's Trust Fund that is nothing without anything in the trust. She asked if another appropriation bill was going to be introduced that would request $10 million for the Education Technology Program. MR. MOURANT said that HB 216 is not an appropriations bill. There will be an appropriation introduced that is either a stand-alone bill or it will be introduced through another mechanism available for appropriation. Mr. Mourant said Representative Kott has not finalized his decision on the size of the appropriation. It will be as large as $20 million, but all calculations have been based on a $10 million figure. Number 2002 REPRESENTATIVE ROBINSON also asked how this will work for the department if the appropriation does not get through to put money into the endowment fund. If this bill was to pass, would the DOE get the money to set up a program that will not happen? MR. MOURANT answered that if the appropriations bill did not happen, he would see no reason for the department to conduct an unfunded program. He thought the legislature, as they deal with appropriations bills, would not fund the fiscal notes if they did not fund the fund. That would eliminate the problem for the department. CO-CHAIR BUNDE said HESS Committee members would study HB 216 until it sees the appropriation bill to have a better idea of the results. The HESS Committee would like to make sure it is not simply doing a paperwork exercise. Number 2042 REPRESENTATIVE ROBINSON reiterated that she thinks this is a wonderful program, and she would love to see it set up. She would also love to see the Children's Trust Fund funded. However, when the legislature is seeking to cut education to the level it is, and the Governor has requested $18 million to improve Alaska's education system, it is difficult to support this kind of action at this time. CO-CHAIR BUNDE shared her concerns. He said he would love to be able to fund an education trust, period. Number 2070 REPRESENTATIVE ROKEBERG said on page 5, concerning the ADM, participating share, there is a big gap between the 30 percent and the 5 percent. Representative Rokeberg asked if that was intentionally done in order to assist bush areas. MR. MOURANT said that is not the concept in mind. Actually, little consideration was given to altering the percentage allocations based on ADMs that were in previous legislation. If the committee in its wisdom chose to change those percentage allocations, Mr. Mourant suspects the bill's sponsor would have no objections. REPRESENTATIVE ROKEBERG suggested that those provisions be studied before the bill is returned before the committee. It seems like a large gap. Number 2110 VICKIE KELLY, Representative, Craig Schools, testified via teleconference that the parents and community in Craig have made a strong commitment to providing technology for Craig's children. Over the past five years, the school board has supported the addition of technology in the educational program at Craig schools. The role of technology in the lives of Alaska's children is an essential part of their development to be contributing members of society, both now and even more so in the future. MS. KELLY said all children from preschool through college are using technology to assist in their educational endeavors. Technology is playing a very vital role in providing educational opportunities in rural Alaska that would not otherwise be available. Through technology such as video conferencing and on- line communication the people of Craig are able to provide a link for their students to communicate and experience some of the diversity not only of Alaska but with the rest of the world. MS. KELLY continued that these are experiences and knowledge that are vital to the success of Alaska's children. She strongly supports HB 216 regarding technology and education in Alaska schools and urged the committee's support as well. Number 2159 CHICK BECKLEY, Director of Technology, Aleutians East Borough School District, testified via teleconference from Cold Bay. He supported HB 216. To him, this bill is more than just an educational issue. He sees the bill as something that benefits all Alaskan communities because the infrastructure that is developed through these tools will benefit every community. Most schools are used as community centers, and the schools are a logical focus for technology development. Therefore, when this sort of technological effort is coordinated, the entire state benefits, not just the educational community. MR. BECKLEY continued by saying that as early as 1981, technology was an entity in education. Alaska led the nation in the implementation of educational technology. Alaska seems to have dropped that ball in the last few years as the state has taken its eye off the vision. In this current atmosphere where it seems fashionable to see government as the enemy of the public, Mr. Beckley suggested there are projects and visions that cannot move forward without the support of government. This is one of those initiatives and efforts. Number 2227 MR. BECKLEY added the superintendent of Fairbanks North Star Borough has noted how different Alaska has been since the building of the Alaska Highway in 1942. This ended the isolation experienced by many rural areas and Alaska in general. Mr. Beckley suggested that the same challenge is being faced today in the realm of technology. Many states around the country are taking state initiatives to build these infrastructures. MR. BECKLEY said Alaska also needs to lead in this regard. Individual districts or regional efforts, while well-meaning and well-directed, oftentimes send conflicting messages to telecommunications providers. Efforts are duplicated, and resources are not as effectively used as they would be if efforts were coordinated in a bill of this sort. MR. BECKLEY said today, Alaska faces heavy challenges. Mr. Beckley welcomes looking toward the legislature and the Governor of Alaska and responding favorably to them. Mr. Beckley thanked HESS Committee members for the opportunity to speak. TAPE 95-24, SIDE B Number 024 TESS LANUM, Vice-President, North Star PTA, testified via teleconference that she is a parent concerned with the quality of education for children in Alaska. She voiced support for HB 216. The benefits of an educational technology program in Alaska would be tremendous. She has seen evidence of the benefits that technology can bring in her school at North Star. MS. LANUM said North Star is part of the reduced site class grant which has been received, and it has enabled her school to implement its own technology plan. The school has integrated technology as a learning tool, and she has already seen a significant impact on student learning. Ms. Lanum also extended an invitation to the committee to visit her school and see first-hand the benefits of technology in the classroom. Number 123 SKIP VIA, Teacher and Technology Specialist, Fairbanks North Star Borough School District, testified via teleconference. He thanked Representatives Kott and Brown for sponsoring this much needed legislation. He said the need for this bill has been very eloquently outlined in the findings and purpose of the bill. He asked HESS Committee members to pay attention to that section of the bill. MR. VIA thought the ability to access information resources on worldwide networks is one of the most powerful delineators between the "haves" and the "have-nots" in the information society. This bill speaks well for the need to develop equity in schools and to bring all schools up to a standard that will allow children and teachers to understand and utilize technology effectively as a part of everything in the learning process. Number 193 MR. VIA concluded by hoping HESS Committee members will consider at some point how this bill is to be funded. It sounds to Mr. Via like it is going to be funded through an endowment, and the endowment's earnings will be used to fund the program. Mr. Via suggested that a different premise be considered as a mechanism in which an amount is put in every year for five years. He suggested $10 million a year for five years be given to establish a fund that would pay directly to school districts to implement the programs that are outlined in this bill. MR. VIA fully supports this legislation and the principle behind it. Number 272 SUE HULL, representative of the Alaska PTA, testified via teleconference from Fairbanks that technology has been one of the top five priorities of her district for at least three years. Parents across the state are concerned about technology. Conversations that have taken place at conventions or conferences have indicated this. MS. HULL continued that from a parent's perspective, technology has become, in many ways, the new inequality in schools. There are schools in which students have access to the kind of training that will open doors for them in the future. Children in schools where that opportunity is not available actually may have the hardware and equipment, but do not have the access to the kind of training for teachers that would enable them to take advantage of it. MS. HULL said the Alaska PTA is very interested in proposals such as HB 216. Number 325 MS. HULL wanted to make two points. This is a crucial investment for the future. She reiterated previous testimony and said technology is the way to level the playing field geographically for Alaska and will enable Alaska to participate in the future. Technology is very important for students to prepare for the future. MS. HULL'S son is in the seventh grade. As they were waiting to testify, she and her son talked about the difference between students who come from schools where there is a technology program that enables students to get proficient in the skills for using the Internet, for example; and her son who came from a different school where computers were available but teachers are not trained well enough to use them. Now that her son is in the middle school, it may be awhile before he gets access to that kind of training. MS. HULL said that kind of training is not really available at her son's middle school and high school. This is a problem, and she discussed the need for some kind of summer camp or something. Even that is still only a program that would be available for a small portion of the population. Number 413 MS. HULL'S second point was that this inequality is something the state cannot turn its back on. Great care must be taken to administer the funds for this program. She cannot tell from reading the bill exactly who would be making the decisions to determine which grants will be funded. She cannot tell whether the department will make the decisions or the legislature. MS. HULL thought it is important to look at those determinations and to be sure decisions are removed to the greatest degree possible from political considerations. She also suggested prioritizing grants so they will be given to those most needy. MS. HULL said this sends a clear message that this is something that is important to Alaska in terms of preparing students to face the future. Number 470 CAROL MEARES, Legislative Chair, Fairbanks District Council PTA, said Alaska is in need of a comprehensive technology bill that will enhance technology training statewide and provide the equipment necessary to get the job done. The state needs to look at four areas of support in order for technology education to be successful in Alaska resulting in business employment opportunities. MS. MEARES said first, a statewide network infrastructure must be developed. Computers are no longer just for word processing and spreadsheets. They must be hooked up to other computers for two- way communication and information exchange. Second, adequate equipment in schools must be provided to connect to this infrastructure so Alaskan children can keep up with the ever- changing world. MS. MEARES said there are some very exciting exchanges going on in some of the Fairbanks Elementary Schools between students and other networks worldwide. Expanding opportunities need to be available to students statewide. Ms. Meares would like to see the distribution of funds stay out of the legislative arena, like has been said previously, and placed under the authority of the DOE. Ms. Meares does not think money should be appropriated the way it is done with the education capital projects where projects are funded according to names on a list. MS. MEARES said instead, the opportunity for grants must be made available for more schools. Some sort of grant program would distribute the money more equitably. Number 556 MS. MEARES spoke on her third point. She felt adequate staff training was needed for the technology education program. This is crucial to the success of this program. A school could have all the computers it could ever want, but if teachers do not know how to use the computers, they will not use them and neither will the students. Staff training will ensure that the equipment does not sit in the corner. MS. MEARES continued with her fourth point. She said significant resources are needed to make all these plans happen. She suggested a considerable sum of money be allocated over the next five years. She asked HESS Committee members to consider that the goal is to provide equal access statewide. MS. MEARES said Alaska has a unique opportunity. Considering the possibilities, technology hooked into a statewide network infrastructure could provide endless business and employment opportunities for the rural and urban populations. No longer will a person need to live close to a business to be employed by that business. Instead, there is a potential for a new Alaskan cottage industry. Number 600 MS. MEARES said the state needs to provide adequate computer access to students of all ages. Her experience has been that children have had excellent opportunities for technology education at the elementary level, but it diminishes at the secondary level. This is partially due to the lack of adequate equipment, and partially due to the inadequate equipment of the staff to the program mainly due to lack of training. MS. MEARES said she is not a "tekkie," (technological whiz) herself, but she can see the writing on the wall. To compete in the advancing world, children must be computer literate. The comprehensive technology education bill will help Alaska achieve this goal of computer literacy for all Alaskan students. Number 640 LARRY WIGET, Director of Government Relations, Anchorage School District, testified via teleconference that he is also the former supervisor of Instructional Technology. When he first came to the district, he was responsible for the Library Media program. The Anchorage School District (ASD) does support the establishment of the Alaska Education Technology program and urges the passage of HB 216. MR. WIGET said increased awareness by teachers, students and parents is creating a demand and a need in schools for access and training in the use of educational technology. Furthermore, students are growing up in an information age that is rapidly becoming the communications age. The Global Information Highway and the skills to communicate over it, as well as access to the rich store of information on it must be available to Alaskan students. This is being done in other states, but unfortunately, it is not being seen as necessary in such a vastly diverse and rural area such as Alaska. Number 708 MR. WIGET said the technology available to students in the ASD and probably other districts around the state as well is inadequate and outdated. The majority of ASD students are not being trained and do not have access to technology they will encounter when they enter the work force or higher education. MR. WIGET said the district budget cannot provide adequate funds to meet existing or future district instructional technology needs or eliminate the present inequity among schools in providing access to technology, information resources and communication. In fact, the entire district level instructional technology budget for the ASD's 47,609 students is only $13,000 next year. MR. WIGET said instructional technology is a priority of the district. The ASD had a technology committee which was in the process of developing a comprehensive district-wide technology plan. However, given the costs of technology and the constraints of the budget, the ASD, as well as other districts and libraries around the state, are unable to fund instructional technology. Number 760 MR. WIGET continued that proposed legislation will establish a technology endowment fund. It will not meet all technology needs, but it will raise the foundation for future monies to be set aside for technology needs statewide. It recognizes the importance of technology to the future of Alaska. It also recognizes the need for planning, and the need for local commitment to technology by requiring a matching grant. It is a starting point in meeting the instructional and communication technology needs for all Alaskans. He urged HESS Committee members to pass HB 216. Number 796 KAREN JORDAN, Technology Coordinator, Juneau School District, said she was representing the Alaska Society for Technology Education. This is a 500-plus member organization throughout the state consisting of educators, many of whom have testified today. These people are interested in seeing that Alaska is not left behind as technology is implemented across the country and throughout the world. MS. JORDAN said she is not going to reiterate why technology is important for children. Much testimony has already been given on that topic. It is important, and the state must figure out a way to implement it. MS. JORDAN had a few points she wanted to make. But first, however, she wanted to provide HESS Committee members with some background. The Juneau School District (JSD), a year and a half ago, did pass a bond initiative of almost $2 million to fund technology in Juneau's schools. This provided a system, it provided equity, and compatibility. In the past, in the 1980s, one computer could be bought at a time with "hot dog sales" or some other type of fund raiser. This computer was then put into a classroom and it was a wonderful addition. Number 875 MS. JORDAN said now, computers are used to connect to an infrastructure, and to connect to a network system where people can communicate and compete worldwide. This is where community members can have access to this type of technology. Things are on a much larger scale. There is definitely a need for a coordinated effort throughout the state. MS. JORDAN said people do not like bureaucracy, but they do like coordination. In this particular effort, it is important that there is some type of coordination. This bill does address all of those considerations. It addresses the need for the DOE to set up grants and collect them and make sure everything is in place. The fiscal notes probably support some coordinated technical oversight. The bill does support some training efforts. Number 900 MS. JORDAN said the issue of equity is an important one. In Juneau, there is complete access to the internet throughout all schools. The JSD has purchased computer networks and has installed them. All the library systems have been automated, and computers and software is in the schools. MS. JORDAN said schools in Anchorage have not passed the bond initiative, and their schools reflect that. Many rural districts do not have that funding avenue. This is something as a state that we have to figure out how to do statewide. The North Slope Borough is the other district that has a district-wide network. Sixty-three percent of their budget is funded by the borough. They are exempt from the local cap laws. They too have received local funding, but again, other districts do not have access to that kind of money. Number 949 MS. JORDAN said there are many other efforts HESS Committee members have probably already heard about with the state government and health care and libraries. There are many avenues for creating a statewide information network. What is going to happen is that the schools will end up being islands. Connections will come right up to the door but there will be nothing in the school to connect to. The statewide telecommunications network will be created for all these other entities, but students will not have access to that. MS. JORDAN said coordination is necessary for a smart investment. If money is going to be placed into this program, it does make sense to have a statewide, consolidated, coordinated effort to cover it. This is an economic issue, and it is a community- building issue. MS. JORDAN realized that HESS Committee members were reticent to pass a bill that currently does not have any money in it. However, she would rather see the bill pass without an appropriation than nothing. Number 1011 MS. JORDAN explained there are other federal funds the state could get to put into the program in the future. There are also matching grants coming from the Department of Commerce and other areas such as private donations. There are lots of efforts nationwide that are focused on getting technology into the hands of kids in the communities. A fund and a mechanism needs to be set up for implementing the program. MS. JORDAN encouraged HESS Committee members to pass the bill to the next committee of referral to begin the process. The bill has a long road through committees, and in that process the bill can be modified. Number 1045 CO-CHAIR TOOHEY informed Ms. Jordan that she just spent the morning in Senate Finance, and they will not accept a bill that does not have a fiscal note. Number 1062 KATHI GILLESPIE, representing the Anchorage School Board, testified via teleconference. She said parents have been the funding mechanism for technology for the last years; most likely, they have been the most reliable source of funding for technology. The PTA has been largely responsible for putting computers in the schools. For a few years, money could be allotted from the operating budget of the ASD, and the PTA could also put some money into that budget. This was on a competitive grant basis. MS. GILLESPIE said therefore, some schools got some "seed money" to start their programs. However, by and large the computers that are in the schools are due to the parents raising the funds to make technology happen. Ms. Gillespie was not saying that was inappropriate, and she assured HESS Committee members that parents will continue to help in such a manner. Number 1105 MS. GILLESPIE continued by saying however, such a system is not equitable and it is very difficult to see the disparity between schools where parents have the capability to raise money to assist technology education and schools where this is not done. In some schools, many parents will not be able to raise money, and they are not conducting fund raisers in order to get computers in their schools. MS. GILLESPIE reiterated Ms. Jordan's remarks by saying some schools are, in fact, islands. The ASD has not been able to provide that kind of equitable exchange. The district and parents are just trying to put the basics into the schools in order for the children to learn how to do word processing. Then there are also schools that have absolutely nothing. MS. GILLESPIE is concerned, as a parent from south Anchorage, about the lack of continued technology education in the upper levels of schooling. There are elementary parents who are very concerned with putting computers into the schools, so there are a lot of elementary schools which have been able to put in some computers. That all ends in Junior and Senior High. Number 1155 MS. GILLESPIE said it is a shame to see the progress that elementary children have made drop by the wayside when they reach high school because parents have mostly gone back to work and they are not available to conduct fund raisers for technology. MS. GILLESPIE said parents are still willing to help, and she thinks taxpayers would be willing to put up matching money. However, parents need a fund they can count on from the state. She knows that money is tight, but it is not going to get any better. MS. GILLESPIE hopes funding can simply be started, perhaps as an endowment for technology. Then if there was a windfall, that money could be placed into the fund. Or if people wanted to make sure technology was in the schools and the libraries they could protect the fund a little bit and not have to compete with other items in the operating budget year after year. Number 1198 MS. GILLESPIE's feeling is that technology is very important for Alaska's children, but it is going to be a really tough sell when comparing it to plant size or other considerations when the state must downsize. She hopes the committee will pass this through, she thinks it is a good idea. Speaking as a parent who sold a lot of wrapping papers and candy bars during fund raisers, she certainly hopes she can count on the HESS Committee members. Number 1236 KAREN CRANE, Director of Libraries, Archives and Museums, DOE, testified that the department and DOE Commissioner Halloway support the intent of this bill to extend educational technology and training for school districts and public libraries. The commissioner is particularly supportive of the bill's recognition of the need to initiate the local planning process and to develop partnerships. MS. CRANE said the DOE has some comments that is hoped will strengthen the legislation. The bill requires a considerable planning effort on the part of school districts and public libraries. The grant submittal or the proposal must include a comprehensive plan, a description of the technology to be purchased, a proposed budget, a description of site preparation, security, technical and maintenance support. MS. CRANE said however, the bill does not outline how the proposals will be evaluated and by whom. It is apparent that some education and technical expertise will be needed to fairly review the grant requests. The same is true of the library submissions. Some library expertise is needed to determine which proposals offer the best long-term investment and plan for service. Number 1291 MS. CRANE said a similar bill introduced last session included the appointment of an educational technology committee to review and approve grant funding. Committee members were to have demonstrated expertise in education, libraries, telecommunications and technology. The DOE believes this mix of experience and expertise is really necessary in order to make the best long-term decisions for the state. MS. CRANE recalled that a number of the speakers referred to a coordinated effort. The DOE thinks a statewide coordinated effort would be better served with a committee or at least some designation of the department and the experience levels within the department making these decisions. The DOE would also suggest that the bill include a provision for pooling district or library funds in order to make bulk purchases of technology or to provide training. MS. CRANE said over the long term, the DOE has the potential to save money. Ms. Crane has some concern with the matching formula as it is applied to libraries. The department is certainly supportive of the matching requirement, however there is no relationship between school district budgets and public library budgets. MS. CRANE said for example, under the terms of this bill, Anchorage and Fairbanks public libraries, with budgets of $7 million and $2 million, respectively, would be required to match at 30 percent. The Pelican Public Library, which has a total annual operating budget of $21,000 would be required to provide a 40 percent match. Skagway Public Library would be required to match at the 50 percent level. For libraries, the DOE would prefer to see a different kind of match level, preferably based on their total operating budget. There are also a number of other ways this could be determined. Number 1371 MS. CRANE said the bill introduced last session also included a provision which allowed the commissioner to waive all or a portion of the required share for an REA or a publicly funded library. The commissioner certainly supports the matching requirement, but there may be some instances in which the REA or library is unable to provide the share. In such a case, some provision for a lower or a waived match should be made. MS. CRANE said the department certainly agrees with the need to assist schools and libraries in providing educational technology, and the DOE would like to work with the committee to make sure the goals of the bill are realized. MS. CRANE also wanted to point out that it was suggested that the State Library's fiscal note would make a good grant application. However, under the terms of the grant it says publicly funded libraries which meet the terms of AS 14.56.310 for grants are eligible under that statute. The State Library manages those grants. The State Library would not be eligible under AS 14.56.310. Number 1418 CO-CHAIR BUNDE said a number of important points have been brought out. One he shares is a concern for ragged textbooks and the lack of construction paper in the classrooms. It is hard to imagine that the state would have $10 million a year to go into a technology fund, as important as technology is. CO-CHAIR BUNDE was sure the sponsor of the bill would not mind him suggesting that the bill's sponsor would be very interested in the concerns that have been expressed as far as tweaking and strengthening the bill. Until there is an appropriations bill and the source of the funds is known, the bill will be held. Public testimony was closed. HHES - 03/21/95 HB 257 - POSTSECONDARY EDUCATION PROGRAMS/LOANS Number 1474 CO-CHAIR BUNDE said HB 257, Postsecondary Education Programs and Loans, is a bill needed to modify the student loan program to make it more viable. DR. JOE McCORMICK, Executive Director, Alaska Commission on Postsecondary Education (ACPE), asked HESS Committee members to think of HB 257 in three parts. Part one contains provisions that have been put into the bill to improve customer service. Part two are provisions that strengthen financial stability. Part three contains technical amendments that would improve overall program administration. DR. McCORMICK said improving customer service, or Section 1, raises a long-overdue issue, which is loan limits. Since 1984, the University of Alaska alone has raised its tuition 250 percent. The most recent increase occurred at the last Board of Regents meeting. The loan limits in this program have not been raised since 1981. Section 3 protects borrowers, by requiring more rigid requirements for schools to demonstrate sound financial capabilities before they are allowed to participate in the Alaska Student Loan Program (ASLP). DR. McCORMICK said Section 4 sets the borrowing limits for students at a dollar maximum. Currently the law provides a number of years maximum. This penalizes part-time students. These are students who work and go to school, and who typically would take more than five years to get a degree. However, these people could not get loans beyond the fifth year under the current laws. Therefore, the ACPE would like to simply convert the maximum the state is willing to allow a student to borrow to a dollar amount and eliminate that problem. Number 1568 DR. McCORMICK continued that Section 6 seeks to extend the terms of repayment from 10 to 15 years. In Section 12, the ACPE seeks to extend the period before a loan goes into default from 120 days to 180 days. This will allow two more months for a borrower to work with the ACPE in trying to come up with a revised repayment schedule. In this way, the borrower can avoid going into default, having his or her credit ruined and all the other ramifications of default. DR. McCORMICK said Sections 16, 17 and 21 would allow a student to take out a loan at the same time the family borrows on their behalf. The brown briefing document given to HESS Committee members contains a portfolio analysis in the back. HESS Committee members could find a chart that reflects that about 32 percent of the ACPE portfolio are students who go out of state for their education. DR. McCORMICK said many of those students go to colleges that cost in excess of $20,000 a year in tuition. Under current Alaska law, that student can get an Alaska student loan for $5,500. If he/she does so, his/her parent cannot also borrow under the family education loan program. Number 1619 DR. McCORMICK explained that these sections would correct that. The parent could then borrow $5,500, and the student could borrow $5,500. In that way, at least they would be half way toward paying the tuition of $20,000. DR. McCORMICK reiterated the second objective of HB 257: To increase the financial soundness of the ASLP. Section 5 eliminates a drain on the fund from interest-free deferment period. It has been estimated the ACPE experiences approximately $4 million in lost revenue as a result of this. Sections 9 and 13 clarify existing language in the statute that says the state will pay that interest during deferment periods subject to appropriations. Number 1649 DR. McCORMICK stated the state has never paid that subsidy, but it has always been in the law that it has the authority to do that. DR. McCORMICK continued by explaining Section 14 allows the ACPE to raise the origination fee from the current 1 percent up to a 5 percent maximum. This is arranged so if the ACPE charged a 5 percent fee on a $50 million group of loans, that would generate $2.5 million annually that the ACPE could use to offset losses due to death, disability and default. For example, last year the ACPE paid out over $6.8 million in forgiveness benefits. DR. McCORMICK said Section 17 would deny loans to incarcerated individuals because of their inability to pay. There was an amendment in the bill packet. The Department of Corrections (DOC) was present to testify as to a clarifying amendment. The ACPE supports that amendment. The amendment will avoid complicating a court case in which the DOC is currently involved. Number 1693 DR. McCORMICK said Section 19 gives delinquent loans second priority for wage garnishment behind child support. DR. McCORMICK moved onto Objective Three for HB 257: Improving overall program administration. In current law, the ACPE must send a certified, registered letter to the borrower prior to his/her going into default. This is an unnecessary expense. Section 8 eliminates the requirements for a registered letter. It simply says the borrower "shall be notified by mail" prior to going into default. DR. McCORMICK said Section 15 reduces the residency requirement from two to one years. The courts ruled the two-year residency rule unconstitutional. Therefore, the ACPE was cleaning up the language to reflect that the residency requirement is one year. DR. McCORMICK explained that Section 20 simply brings the teacher scholarship program in line with the ASLP in terms of all these changes. Section 24 clarifies an issue. If, by some reason, a student receives a loan when they are not a student, as has happened on a rare occasion, that is an illegally obtained loan, and the ACPE can demand payment in-full on that loan and not go through a 10-year repayment plan. Number 1750 DR. McCORMICK said Section 27 contains technical, cleanup language to bring the statute in compliance with other sections of the bill. DR. McCORMICK said HESS Committee members may have seen the article in the previous Sunday's edition of the Juneau Empire that referred to a Division of Legislative Audit report. Dr. McCormick wanted to speak on that report. The report says under a given scenario, the loan fund could lose from $40 million to $60 million by the year 2011. DR. McCORMICK said that report, taken in its full context, simply confirms what has been known for some time about the loan program. It is not actuarily sound. However, legislators must be mindful of the fact that when the loan program was originally created, it was not created to be actuarily sound. That must be taken into account. Number 1783 DR. McCORMICK continued that the way the program operates today does not cover all the costs associated with the program. There is an in-school period in which the ACPE does not charge interest. At the same time, interest is being paid to the bond holders. The ACPE does not charge interest during the deferment period. This bill asks that the ACPE be allowed to do that. DR. McCORMICK said the ACPE absorbs all losses due to death, default and forgiveness on the loans. There is no revenue stream to cover that. Therefore, the ACPE by and large agrees with the findings of the report, and with the recommendations the report makes. Number 1810 DR. McCORMICK asked HESS Committee members to keep something in mind when they read about the potential for a $60 million loss in that report. That is a loss after the state of Alaska cashes in an equity of $200 million to $220 million. That is after all bonds have been paid; all student loans have been retired; all losses to the loan fund from default, death, disability and forgiveness have been accounted for; and then lastly and most important, the state has provided over $900 million to 184,000 Alaskans. What the state has to show for that is a potential loss of $60 million. DR. McCORMICK said given all that has been provided over a 30 year period, this is a pretty good program. It is worth the attention of the legislature. The ultimate goal of the ACPE is to ensure that this program survives in the future and can be used by future generations of Alaskans. DR. McCORMICK noted that in order to do that, the ACPE is assuming there would never be any general fund support to the ASLP. Therefore, the ACPE must move the program toward an actuarily sound operating basis. That is what this bill does. Number 1870 CO-CHAIR BUNDE offered an analogy with the loan as a five gallon bucket with a pinhole in it. It is dripping, and there is no danger of going dry but the drip needs to be addressed. CO-CHAIR TOOHEY was very encouraged by Dr. McCormick's talk. She agreed for the need to make the program sound. She recalled that Dr. McCormick referred to $6.6 million in forgiveness for death or injury. She asked if there was any way a small insurance policy could be written on the loans. She asked if larger lending institutions have such loan guarantees or insurance policies in the event of death. Number 1897 DR. McCORMICK said an insurance premium could be purchased. The problem is that the premiums would be very high. It would not be realistic. Dr. McCormick referred HESS Committee members to page 20 in their briefing book, regarding the student loan forgiveness volume over time. The important thing about that chart is to look at the year 1991. It looks like 1991 was the peak. That is when the most is paid out. The figure is going down gradually. DR. McCORMICK estimates that the ACPE will pay out not more than $12 million to $16 million more in forgiveness. The audit report stated that there are only about $150 million left that is even eligible for forgiveness. Of that $150 million, the ACPE does not estimate more than $12 million or $16 million will actually qualify for forgiveness. Therefore, actuarily, the amount will continue to decrease. Dr. McCormick cannot predict, however, when the figure will reach zero. Number 1953 REPRESENTATIVE ROKEBERG asked Dr. McCormick to describe for the committee what happens if a loan under the forgiveness program goes into default. He asked if that event would accelerate the loan and do away with the forgiveness program. DR. McCORMICK said the promissory note signed by borrowers prior to 1987 states that if the loan goes into default, the forgiveness provision is lost. Forgiveness is for loans that are in a current or deferred status. If the student had applied for forgiveness at that time, it would be granted. Number 1984 REPRESENTATIVE ROKEBERG asked if the default provision is strongly enforced. DR. McCORMICK said currently, it is being strongly enforced. Number 1991 CO-CHAIR BUNDE had previously served on the Postsecondary Education Commission. Co-Chair Bunde directed committee members to page 22, regarding the default rate, in the packet handed out by Dr. McCormick. Co-Chair Bunde said it is not coincidental that Dr. McCormick's tenure began in 1993, and the default rate decrease began in 1994. It was pointed out that the state began this program when Alaska was never going to run out of money. It was a giveaway program. CO-CHAIR BUNDE was at the University when people would take out a 3 percent student loan to buy their car, and pay for their tuition in cash because the loan program was such a good deal. Additionally, half of the loan would be forgiven. It was a wonderfully generous program, and people often did not take their obligation as borrowers seriously. CO-CHAIR BUNDE said he has listened to some of the testimony in which people appeal being placed into default. Some of these people have loans that were issued as far back as 1977. Suddenly they are aware they are having problems with their credit rating. Number 2034 CO-CHAIR BUNDE assured HESS Committee members that those in default are now taking their obligations to repay the state more seriously. He said the bill and the ASLP could be tightened up even more by asking for credit checks and co-signers. However, that would really inhibit the number of people who could have access to the loan. CO-CHAIR BUNDE supports what the ACPE is doing--trying to make the program actuarily sound without unduly limiting access to the loans. Number 2050 DR. McCORMICK asked Representative Rokeberg to look on page 21 of the budget briefing document. The top chart was a student loan repayment volume. That is something that must be monitored very closely in a loan program. HESS Committee members could see the actual total dollars collected in 1994, $62.9 million, is on an upwards trend. That is a rapid trend, not a gradual trend. That is very encouraging in terms of determining the viability of the program. DR. McCORMICK directed the attention of the HESS Committee members to right below that chart, which regarded the Student Loan Collection Agency recovery chart. That showed the actual dollar amount in millions that is being collected from students who have, in fact, defaulted. He asked HESS Committee members to not be misled by the term "default." This does not mean the student is not paying or will never pay. It only means that the ACPE has not quite got to him/her yet. Those the ACPE has contacted are paying at the shown rate. DR. McCORMICK said page 20 shows the one very unique aspect of the ASLP that is different from any other student loan program in the country. That is the ability to garnish permanent fund dividends (PFDs). The chart shows, in millions of dollars, the amount collected each year since 1987 from the PFD. That is a very viable source of loan repayments from defaulted borrowers. Number 2115 REPRESENTATIVE ROKEBERG asked if the garnishments were separate from the collection recoveries. DR. McCORMICK answered yes. REPRESENTATIVE DAVIS said page 6, Section 14 reminds him of the price of stamps, going up in small increments constantly. He asked what the sense was in raising costs little by little, and why not simply raise costs less frequently and by larger amounts. REPRESENTATIVE DAVIS said the standard student loan is $5,500 for a year, and currently the origination fee is 1 percent. DR. McCORMICK said therefore, the origination fee on $5,500 is $55. TAPE 95-25, SIDE A Number 000 REPRESENTATIVE ROKEBERG asked from what amount the loan level was being raised. DR. McCORMICK answered that the loan levels were being raised from $5,500 to $8,500 for undergraduates attending colleges and universities that offer degrees. The graduate amount is being raised from $6,500 to $9,500. REPRESENTATIVE ROKEBERG asked if Dr. McCormick and the Chair were comfortable with that level. He said that is a major increase. DR. McCORMICK agreed. He said he would not be comfortable with that level of borrowing except for the fact that the risen loan levels have been limited only to degree-granting institutions at the college and university level. Repayment is far greater at those institutions. More importantly, those students who attend those institutions also qualify for federal aid. Therefore, the chance they would borrow the maximum amounts are somewhat diminished. DR. McCORMICK said the increases are in-line with current borrowing levels in other federal programs that students have available to them. Number 106 REPRESENTATIVE ROKEBERG asked Dr. McCormick if he knew what the tuition and costs, excluding room and board, are for the University of Alaska Anchorage or Fairbanks. DR. McCORMICK said the school catalogs estimate around $9,500 for 9 months for a single student living off-campus. However, he could be off by about $1,000 a year. He said that includes room and board. CO-CHAIR BUNDE asked if that included the new tuition increase. DR. McCORMICK said the resident undergraduate budget, including tuition fees, room and board, books and supplies, and transportation for a student living on-campus is $9,100 for 9 months. For a student living off-campus, the amount is $14,000. That is a considerable difference. Those figures are for the University of Alaska Fairbanks (UAF). The figures for the University of Alaska Southeast (UAS) is $8,300 for on-campus, and $9,900 for off-campus. DR. McCORMICK said the figures for the University of Alaska Anchorage (UAA) are $13,000 for 9 months following spring for a full-time student living away from home. Number 272 CO-CHAIR BUNDE said he shares the concerns of Representative Rokeberg. Students can, conceivably, graduate from college with a $40,000 debt. Graduating from college now with that large a debt by going to school in the Lower 48 is the price of doing business. However, Co-Chair Bunde hopes there is a very clear message being sent to students that this is a business transaction, not a giveaway. Students should only borrow what they absolutely need. REPRESENTATIVE ROKEBERG asked Dr. McCormick if the ASLP is able to provide loans for all applicants during the fiscal year. DR. McCORMICK answered by saying historically, the program has been able to provide all qualified applicants with a loan. The program processed and funded all eligible applications. The ACPE anticipates another sizeable jump, if this bill passes, in the loan volume for next year. That would go into the calculations of the ACPE to determine how much additional bond money should be issued in 1995. DR. McCORMICK said those numbers are being worked on now. The underwriter and financial advisor of the ACPE are working with the ACPE, making assumptions on the volume of the loans if the bill passes and if it does not pass. REPRESENTATIVE ROKEBERG asked why there would be a jump. Number 400 DR. McCORMICK answered that if the loan amount is increased, that alone will increase the loan volume somewhat. In addition, the University of Alaska system has grown every year for the last five years. It has seen an increase in student population. If enrollment increases are assumed, along with increases in loan amounts that students can borrow, an increase in the actual lended dollars can be anticipated. DR. McCORMICK said the part the ACPE cannot calculate with any degree of certainty is how much that will be. CO-CHAIR BUNDE said last year, in the continuing attempt to make the loan program more actuarily sound, a bill was passed that pegged the interest rate to the cost of borrowing money. This is because in the past the ACPE was charging students 8 percent interest. If one factors in 5 years of interest-free money, the state was borrowing money at 6 percent and charging only 4 or 5 percent. Therefore, some progress is being made. Number 491 REPRESENTATIVE ROKEBERG expressed concern about the cumulative totals a person can borrow. A person can borrow up to $79,000 in graduate school. That is a lot of money. He asked Dr. McCormick to explain again about the "family" provisions of the bill. DR. McCORMICK replied under current law, there are two types of loans in the ASLP. This is in Section 16 of the bill. An undergraduate can borrow $5,500. There is also a provision in the law that the parent of that child can borrow $5,500 under the ASLP rules and regulations. However, that parent cannot borrow for their child at the same time a child borrows for an ASLP. DR. McCORMICK said therefore, the current law reads that one or the other has to take out the loan. HB 257 is advocating being more responsive to parents, students and the higher cost of tuition. Where the total cost of education will justify it, the child and parent can both borrow $5,500 for those families that have children at a high-cost school. That is what Section 16 does, is allow that to happen. Number 649 CO-CHAIR BUNDE said the reason there are two different loans is because a parent is a more secured borrower, they are able to borrow money at a lower interest rate. The student has a higher interest rate. Some parents choose to put the loan in their name rather than have the student apply for the loan. Other young people are not so closely connected with their family, and have to do it on their own. REPRESENTATIVE ROKEBERG wanted to know what happens if a person has two children in college. He asked how much the parent could then borrow. DR. McCORMICK said the limit is the cost of attendance. If the student is going to UAF, and is single and living on-campus, and the cost of attendance certified by the institution is $9,000, if the student borrows $5,500 under the ASLP, this provision would only allow the parent to borrow $3,500 because the loan could not exceed the total cost of attendance. Number 709 REPRESENTATIVE ROKEBERG asked if the ASLP was going to loan the entire cost of an education. DR. McCORMICK said the provision would allow for that. REPRESENTATIVE ROKEBERG said he found that very hard to take. CO-CHAIR BUNDE said this is not a new concept. When one could attend UAA for $5,500, people were borrowing $5,500. REPRESENTATIVE ROKEBERG wished someone had loaned him all his money to go to school. CO-CHAIR BUNDE said it used to be that working through the summer could pay tuition. It is beyond that point now. Number 763 REPRESENTATIVE ROKEBERG asked if it would be conceivable under this Section to borrow up to $17,000. Dr. McCormick answered yes. Representative Rokeberg also asked about the final gross amount. DR. McCORMICK said there is a gross amount a person cannot exceed in total as an undergraduate. That is around $42,000. The gross amount for graduate students is around $47,000. REPRESENTATIVE ROKEBERG asked if that was a cap, and Dr. McCormick answered yes. He said there is no way to get around that cap. Representative Rokeberg said there are two loans, the family loan and the student loan. He asked how the cap works in that case. He said it is conceivable that a student could rack up a $160,000 loan. DR. McCORMICK said he would have to get back to Representative Rokeberg on that topic. He knew the cap applied to the student, but he did not know how it applied to the borrowing parent. Number 850 GILLIAN HAYES, Executive Assistant to Dr. McCormick, ACPE, asked if Representative Rokeberg was asking if the family education loan also has a dollar cap. However, the loan is taken out by another person. It is taken out by the parent or spouse. That is another issue in which the family education loan limit would go up to $37,500. CO-CHAIR BUNDE said the bottom line was if a student and a family member wanted to borrow the maximum, they could borrow an excess of $70,000. That would include the student cap plus the family cap. REPRESENTATIVE ROKEBERG said the student can borrow more if they go to graduate school. DR. McCORMICK said again that he would like to get back to Representative Rokeberg on those caps. He is not sure how the cap numbers apply to the payment of the education loan. He does not know if they are treated separately or if they are treated inclusively. DR. McCORMICK asked Representative Rokeberg to consider something when looking at the caps and what people borrow. Students are borrowing money on their future earnings to pay the total costs of education. Based on the way the program will be administered, they are not going to be subsidized at all. They will pay the total cost of loan interest. DR. McCORMICK shares the concerns of Representative Rokeberg in some ways. In other ways, the loans are more of a family decision. They need to decide how much they need to borrow for the opportunity to attend the institution they have chosen. This bill provides families with more flexibility to make those kinds of decisions. Number 964 CO-CHAIR BUNDE pointed out that currently the state invests $160,000 a year in each of its medical students. That is after a four-year graduate degree. The sums being spoken of for graduate study are calculated. It is a judgement that must be made--will he or she make enough money to make it worthwhile. REPRESENTATIVE ROKEBERG said the state must make that calculated judgement also. CO-CHAIR BUNDE said he does not have any discomfort at all, because the students are responsible for the money. The recovery rate is going very well. CO-CHAIR TOOHEY asked if the parent's loan is backed by any type of collateral. DR. McCORMICK said it is not a collateralized loan. However, it is a loan in which repayment begins within 60 days of the date that the loan originated. That is a big difference from the student loan. The student loan repayment will not begin until six months after they have left school. The borrowing parents, however, must start making payments within 60 days of the date they receive the funds. Number 1055 CO-CHAIR TOOHEY appreciated the bill, and said she is totally comfortable with it because the state cannot give enough to educate its children. She stressed to Representative Rokeberg that the money is a loan. REPRESENTATIVE ROKEBERG asked about the delinquency rate. DR. McCORMICK said it is 19 percent. The rate is decreasing, however, the current rate is still unacceptable. The rate must come down. Number 1093 CO-CHAIR BUNDE said two amendments had been offered. The first page was called amendment one. He asked Dr. McCormick if that was different from the second page that concerns people in jail. Dr. McCormick answered yes. Co-Chair Bunde said he would like to deal with amendment one first. REPRESENTATIVE ROBINSON said that she has a close-out at 4:00 p.m. CO-CHAIR BUNDE said if HESS Committee members were speedy, they could finish the meeting by 4:00 p.m. CO-CHAIR TOOHEY moved the amendment. CO-CHAIR BUNDE asked Dr. McCormick to speak to the amendment. DR. McCORMICK said the amendment simply changes the words "guarantee fee" to the correct term of "origination fee." These loans are not guaranteed by anyone. CO-CHAIR BUNDE asked for questions about and objections to the amendment. Hearing none, amendment one was adopted. Number 1176 CO-CHAIR BUNDE brought up amendment two, and Co-Chair Toohey moved the amendment. Co-Chair Bunde objected for purposes of discussion. JERRY SHRINER, Special Assistant, Department of Corrections (DOC), said the amendment to Section 17 is important to the DOC because the state of Alaska is party to an agreement called the Cleary Fair Settlement Agreement. In part, that agreement requires the state, through the DOC, to provide a variety of rehabilitative programs to inmates. Education is one of these rehabilitative programs. The good news is that almost none of the inmates have received a loan from ACPE. MR. SHRINER said these loans are not unheard of, but they are extremely rare. This language would not require postsecondary education to make any loans to inmates. It only means that legally and constitutionally inmates have access to the same programs of the state that other individuals have who are not incarcerated. The amendment also provides a level of insurance which is necessary in the sense that if the inmates did not have technical access to the loan program, an inmate could, at some future date, go back into superior court and allege that the state acted in bad faith with respect to the Cleary Fair Settlement Agreement in taking away a right that was available to them at the time the act was entered into. MR. SHRINER summarized by saying inmates get almost nothing out of the amendment. The DOC is concerned that it could end up spending a lot of money in legal fees if inmates do not have at least technical access to the loans. Number 1290 CO-CHAIR TOOHEY said she cannot understand the last part of the amendment. She also said that the entire bill assumes that people are borrowing on their future earnings. She asked how someone incarcerated for 30 years will pay off the loan. MR. SHRINER said the language of the amendment would make it such that an inmate would not be eligible for a loan unless they were to be released within six months of the time the educational program was completed. CO-CHAIR BUNDE asked if that applies to the six-month grace period for all borrowers. Dr. McCormick said the ACPE supports the amendment. CO-CHAIR BUNDE asked if the ACPE was amenable to a small amendment. He said no one is going to get a job the day they get out of jail. He asked if the amendment could be changed to say the inmate's release date is no more than two months after the program is completed. That gives the inmates four months to find a job after they are out. Number 1353 DR. McCORMICK said the six months referred to in amendment two is the point in time the inmate is eligible to receive a loan. An inmate cannot receive a loan until he or she is within six months of a release date. CO-CHAIR BUNDE said he had misunderstood the amendment entirely. He read, "a person's scheduled release date is more than six months after the scheduled completion date of the career education or degree program for which the loan was requested." MR. SHRINER said Co-Chair Bunde was correct, and Dr. McCormick noted he was mistaken. Mr. Shriner understood the amendment as referring to a person who has four years to serve, and who wants to get into a two-year degree program while in prison. If he/she wants to have the educational program completed by the time he/she gets out of prison, the person can start borrowing money four years and six months ahead of his/her release date. If a person has five years left to serve in a sentence, and it takes him/her four years to complete the educational program participating half-time, he/she can start borrowing money four-and-one-half years short to pay the course fees. That money can be borrowed up until the educational program is completed, which is six months prior to his/her release date. MR. SHRINER said this addresses the concern of Co-Chair Bunde. He said the terms should be two months of the release date so the person has four months on the outside to get a job. CO-CHAIR BUNDE said under the current amendment, the person would have to begin making payments the day he or she is released from jail. That puts the person into default immediately and undermines the program. MR. SHRINER did not see a problem with the amendment. REPRESENTATIVE ROBINSON reminded HESS Committee members that she had to leave the meeting soon. Number 1437 REPRESENTATIVE DAVIS said the amount of money an inmate is borrowing would be less than the average borrower. The inmate's room and board is paid. CO-CHAIR BUNDE proposed an amendment to amendment two that replaced the words "six months" with "two months." There was no objection to the amendment to the amendment. The new intent of amendment two is to provide the ex-inmate with about four months to find a job so repayment can begin. Co-Chair Bunde removed his objection to amendment two, and asked if there were further objections. Number 1500 REPRESENTATIVE ROKEBERG objected to the amendment. He said he would vote against this amendment because he is a member of the House Budget Subcommittee on Corrections and he has a problem with the Cleary Settlement and the policy being established. CO-CHAIR BUNDE said he shares the concerns, however, the fear of future litigation will keep him from voting against the amendment. A roll call vote was taken. Voting "yes" on the amendment was Representatives Davis, Toohey, and Robinson. Voting "no" were Representatives Rokeberg and Bunde. The amendment passed. CO-CHAIR TOOHEY moved HB 257 as amended be passed from the HESS Committee with individual recommendations and accompanying fiscal notes. REPRESENTATIVE ROKEBERG objected. He said he is concerned about the amount of money that can be borrowed, and the family loans. He is concerned about how those amounts can affect the actuary health of the ASLP. CO-CHAIR BUNDE noted his concern, and said people are not required to take the loans. Some people make bad judgments, however. A roll call vote was taken. Voting "no" was Representative Rokeberg. Voting "yes" were Representatives Toohey, Bunde, Robinson, and Davis. HB 257 passed from the HESS Committee. ADJOURNMENT CO-CHAIR BUNDE adjourned the meeting at 4:08 p.m.