ALASKA STATE LEGISLATURE
SENATE EDUCATION STANDING COMMITTEE
March 10, 2014
8:02 a.m.
MEMBERS PRESENT
Senator Gary Stevens, Chair
Senator Mike Dunleavy, Vice Chair
Senator Berta Gardner
MEMBERS ABSENT
Senator Bert Stedman
Senator Charlie Huggins
COMMITTEE CALENDAR
SENATE JOINT RESOLUTION NO. 23
Proposing an amendment to the Constitution of the State of
Alaska relating to contracting state debt for postsecondary
student loans.
- HEARD & HELD
SENATE BILL NO. 195
"An Act relating to the membership and authority of the Alaska
Commission on Postsecondary Education; relating to the Alaska
Student Loan Corporation; relating to teacher education loans;
relating to interest on and consolidation of postsecondary
education loans; relating to Alaska supplemental education
loans; relating to AlaskAdvantage grants; relating to the Alaska
family education loan program; relating to postsecondary
educational institutions; and providing for an effective date."
- HEARD & HELD
SENATE BILL NO. 208
"An Act increasing the school construction debt reimbursement
percentage for certain municipalities; and providing for an
effective date."
- HEARD & HELD
SENATE BILL NO. 139
"An Act increasing the base student allocation used in the
formula for state funding of public education; repealing the
secondary student competency examination and related
requirements; relating to high school course credit earned
through assessment; relating to a college and career readiness
assessment for secondary students; relating to charter school
application appeals and program budgets; relating to residential
school applications; increasing the stipend for boarding school
students; extending unemployment contributions for the Alaska
technical and vocational education program; relating to earning
high school credit for completion of vocational education
courses offered by institutions receiving technical and
vocational education program funding; relating to education tax
credits; making conforming amendments; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SJR 23
SHORT TITLE: CONST. AM: STUDENT LOAN DEBT
SPONSOR(s): SENATOR(s) FAIRCLOUGH
02/14/14 (S) READ THE FIRST TIME - REFERRALS
02/14/14 (S) STA, EDC
03/06/14 (S) STA AT 9:00 AM BUTROVICH 205
03/06/14 (S) Moved SJR 23 Out of Committee
03/06/14 (S) MINUTE(STA)
03/07/14 (S) STA RPT 2DP 2NR
03/07/14 (S) DP: COGHILL, GIESSEL
03/07/14 (S) NR: DYSON, WIELECHOWSKI
03/07/14 (S) FIN REFERRAL ADDED AFTER EDC
03/10/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
BILL: SB 195
SHORT TITLE: POSTSECONDARY EDUCATION LOANS/GRANTS
SPONSOR(s): SENATOR(s) FAIRCLOUGH
02/24/14 (S) READ THE FIRST TIME - REFERRALS
02/24/14 (S) EDC, FIN
03/10/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
BILL: SB 208
SHORT TITLE: SCHOOL CONSTRUCTION BOND DEBT
SPONSOR(s): SENATOR(s) OLSON
02/26/14 (S) READ THE FIRST TIME - REFERRALS
02/26/14 (S) EDC, FIN
03/10/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
BILL: SB 139
SHORT TITLE: EDUCATION: FUNDING/TAX CREDITS/PROGRAMS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/24/14 (S) READ THE FIRST TIME - REFERRALS
01/24/14 (S) EDC, FIN
02/03/14 (S) EDC AT 8:00 AM CAPITOL 106
02/03/14 (S) Heard & Held
02/03/14 (S) MINUTE(EDC)
02/10/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
02/10/14 (S) Heard & Held
02/10/14 (S) MINUTE(EDC)
02/24/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
02/24/14 (S) Charter School Funding; Residential
School
02/26/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
02/26/14 (S) Heard & Held
02/26/14 (S) MINUTE(EDC)
02/28/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
02/28/14 (S) Heard & Held
02/28/14 (S) MINUTE(EDC)
03/03/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
03/03/14 (S) Heard & Held
03/03/14 (S) MINUTE(EDC)
03/10/14 (S) EDC AT 8:00 AM BELTZ 105 (TSBldg)
WITNESS REGISTER
SENATOR ANNA FAIRCLOUGH
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SJR 23 and SB 195.
DIANE BARRANS, Executive Director
Alaska Commission on Postsecondary Education
Juneau, Alaska
POSITION STATEMENT: Presented information on SJR 23 and SB 195.
MIKE COONS, representing himself
Palmer, Alaska
POSITION STATEMENT: Testified on SJR 23 and SB 195.
KRISTEN PRATT, Staff
Senator Anna Fairclough
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Explained the sections of SB 195 on behalf
of the sponsor.
DAVID SCOTT, Staff
Senator Donny Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented SB 208 on behalf of the sponsor.
ELIZABETH NUDELMAN, Director
School Finance and Facilities Section
Department of Education and Early Development (DEED)
Juneau, Alaska
POSITION STATEMENT: Answered questions related to SB 208.
TY MASE, Superintendent
Lake and Peninsula School District
King Salmon, Alaska
POSITION STATEMENT: Testified in support of SB 208.
NATHAN HILL, Manager
Lake and Peninsula Borough
King Salmon, Alaska
POSITION STATEMENT: Testified in support of SB 208.
TOM BEGICH, Government Affairs Director
Citizens for Educational Advancement of Alaska's Children
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 208.
SUSAN MCCAULEY, Ph.D., Director
Teaching and Learning Support
Department of Education and Early Development (DEED)
Juneau, Alaska
POSITION STATEMENT: Presented information on SB 139.
MARK HANLEY, Commissioner
Department of Education and Early Development (DEED)
Juneau, Alaska
POSITION STATEMENT: Presented information on SB 139.
JOHANNA BALES, Deputy Director
Tax Division
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions related to SB 139.
ACTION NARRATIVE
8:02:07 AM
CHAIR GARY STEVENS called the Senate Education Standing
Committee meeting to order at 8:02 a.m. Present at the call to
order were Senators Gardner, Dunleavy and Chair Stevens. He
noted that there were four bills before the committee.
SJR 23-CONST. AM: STUDENT LOAN DEBT
8:03:09 AM
CHAIR STEVENS announced that the first order of business would
be SJR 23.
SENATOR ANNA FAIRCLOUGH, Alaska State Legislature, Juneau,
Alaska, sponsor of SJR 23. She explained that SJR 23 provides
Alaska's students the lowest possible debt, should they have to
acquire debt. The Constitutional Amendment would be placed
before voters in the November general election, and should the
voters agree with a constitutional amendment that would allow
the best possible debt to be purchased for students in Post-
Secondary Education, the first loan would not be available until
about 2017.
8:04:30 AM
CHAIR STEVENS asked why there is a 41 percent denial rate for
student loan applicants. He asked if this bill would help to
remedy that problem by lowering the cost of loans.
SENATOR FAIRCLOUGH explained that in 2008, the federal
government changed the definition of credit. Students without
credit before 2008 were considered to have good credit and the
government would take a risk in allowing the student to take out
a student loan. After that date, student loans began to increase
in delinquency and if a student had zero debt, it was considered
bad debt. In short, SJR 23 would allow the Alaska Student Loan
Corporation to lower that threshold slightly and anticipate
positive repayment rates.
SENATOR GARDNER asked if it would have any impact on the
interest rate.
SENATOR FAIRCLOUGH said yes. She said they have been told that
the delta is somewhere above 1 percent. If one could pledge the
full faith and credit of the state of Alaska, there would be an
AAA bond rating, whereas the current loans carry a higher rate.
She deferred to Ms. Barrans to answer.
SENATOR GARDNER asked if the student loans would have an
interest rate of 1 percent or higher.
SENATOR FAIRCLOUGH clarified that the students would see a
decrease of at least 1 percent or higher in their loan rate if
general obligation bonds could be issued.
She noted a person who testified in opposition to SJR 23,
claiming that the bill encourages student loan debt. She stated
that this bill does not encourage student loan debt. It allows
the state to offer debt at a lower interest rate than it
currently can under the current scenario. The Alaska State
Constitution only allows the state to issue debt for a bond for
capital projects or bonds for veteran homes. This is a policy
decision that is permissible, but would have to come back to the
legislature every time a bond is issued.
CHAIR STEVENS commented on the amount and cost of student debt.
He recalled an article about a young couple who graduated from
the University of Washington Medical School and owed half a
million dollars between them in student debt. He said he
appreciates the sponsor's efforts to help solve this issue.
8:08:22 AM
DIANE BARRANS, Executive Director, Alaska Commission on
Postsecondary Education, Juneau, Alaska, presented information
on SJR 23. She expressed appreciation for the sponsor's interest
in supporting a long-term solution to offer Alaska residents the
lowest possible cost of an education loan in a fashion that
would not require any financial output by the state in terms of
general fund support.
CHAIR STEVENS appreciated efforts to change the culture. He
recalled problems with students not repaying loans in the past.
He inquired if the bill would have any negative impact on
student repayment of loans.
MS. BARRANS said, to the contrary, she believes that by reducing
the financing cost to students they would be better able to meet
their obligations.
SENATOR GARDNER asked what the current interest rate on state-
funded student loans is.
MS. BARRANS said 7.3 percent is the base rate. She added that
the Alaska Student Loan Corporation annually reviews its
capacity to offer discounts or credits - borrower benefits.
Currently, the corporation does offer a half percent benefit to
individuals attending school in Alaska and for borrowers in
repayment, a quarter percent discount for those who take
advantage of on line electronic repayment options. It allows the
corporation to reduce the total cost by three-quarters of a
percent against the 7.3 percent.
SENATOR GARDNER asked if SJR 23 passes, then the interest rate
would be 6.3 percent or less.
MS. BARRANS replied that it would depend on the market. At this
point in time, it would be at least a 1 percent reduction,
possibly as much as 1.25 percent due to being able to leverage
the state's outstanding credit.
8:11:53 AM
CHAIR STEVENS said because it is a constitutional amendment, it
will be on the November general election, not on the August
primary, which is pretty crowded.
MIKE COONS, representing himself, Palmer, Alaska, testified in
opposition to SJR 23. He wished to add information to a recent
testimony. He said he spoke of the major flaws in the bill at
that time.
CHAIR STEVENS stated that this is a new committee that has not
heard previous comments.
MR. COONS maintained that the U.S. is a debtor nation, not a
saving nation and low interest rates encourage students to go
into debt. He listed other ways for students to get a college
education debt free. He stated his belief that less government
is better.
CHAIR STEVENS closed public testimony and held SJR 23 in
committee.
195-CONST. AM: STUDENT LOAN DEBT
8:18:28 AM
CHAIR STEVENS announced that the next order of business would be
SB 195.
SENATOR ANNA FAIRCLOUGH, Alaska State Legislature, Juneau,
Alaska, sponsor of SB 195, introduced the bill. She said SB 195
makes substantive housekeeping changes to Alaska State Statutes
regarding the Alaska Commission on Post-Secondary Education and
the Alaska Student Loan Corporation. These changes include
allowing the commission to set favorable terms for borrowers. It
increases the total loan limit a student may borrow. Loan limits
have not been changed for almost 20 years. In fact, since 1995,
the tuition at the University of Alaska has almost doubled.
Post-secondary expenses have increased. Alaska students and
their financial aid officers report that borrowers with high
unmet costs of attendance are increasingly choosing loans with
higher loan limits, even when the loan limits have higher
interest rates. This bill also defines an on-time status for
students to reach completion. There is evidence that shows a
strong correlation between enrollment intensity and the
completion rate. The bill also clarifies the corporation's
authority to offer consolidations of loans to state residents.
Research shows that students with multiple lenders are more
likely to default or otherwise struggle with repayments.
8:20:01 AM
KRISTEN PRATT, Staff, Senator Anna Fairclough, Alaska State
Legislature, Juneau, Alaska, explained the sections of SB 195 on
behalf of the sponsor. She related that Sections 1 and 2 broaden
the commission membership to clarify representation by an Alaska
private, nonprofit higher education institution's
representative.
CHAIR STEVENS asked who will be included on the commission that
has not been included in the past.
SENATOR FAIRCLOUGH explained that current state statute limits
the authority or the body to members of the Alaska Pacific
University. The bill would broaden it to others that offer post-
secondary education to serve on the commission.
MS. PRATT continued to explain that Sections 3 and 4 clarify the
authority for the commission and Department of Education and
Early Development (DEED), to work together to assess education
outcomes of public school students.
Section 5 corrects misplacement of language by removing from
paragraph (5) and inserting in paragraph (6) and clarifies
specific corporation powers into paragraphs (12), (13), and
(15).
Section 6 provides that a borrower may apply for a state
supplemental education loan without first having to exhaust all
other federal or private education loan options. Section 7 is a
conforming change to Section 6, regarding the financing program
for education loans.
Section 8 clarifies that corporation education loans are not
offered as lines of credit. Section 9 clarifies that state
education grants are not funded by the corporation's education
loan fund. Section 10 is a conforming change with Section 9.
Section 11 adds a new section (d) to AS 14.42.210. It moves the
corporation power to offer below-market loan terms. Section 12
adds a new section to AS 14.42.215 and clarifies that the
corporation sets the interest rates on loans it finances.
Section 13 permits the corporation's trust indenture to govern
the size of its capital reserve. Section 14 is a conforming
change to Section 13.
Section 15 incorporates the term "perfected", a term of art for
uniform commercial code purposes, as recommended by the
corporation's bond counsel. Section 16 updates the name of an
institutional accreditation organization.
Section 17 repeals and reenacts AS 14.43.122. It clarifies
corporation authority to offer consolidation loans to state
residents. It removes the option for joint consolidation of
married borrowers. Section 18 clarifies the definition of "half-
time student" for undergraduates and adds a definition for
graduate students.
Section 19 revises the school year definition to align with the
state fiscal year and to conform to the standard education
lending year. Section 20 clarifies that, subject to the annual
loan limits, a borrower may receive loans up to the amount of
their unmet cost of education without regard to other loans that
may be available.
Section 21 provides for applicability of institutional standards
for participation in state education loan programs. Sections 22
and 23 update references to federal education loans.
Section 24 clarifies that the corporation funds the loan and
revises upwards the annual maximum loan amount a person may
borrow. Section 25 revises upwards the aggregate maximum
borrowing limit to conform to Section 24. Section 26 adds a new
section that clarifies that the commission determines the amount
a loan applicant may borrow based upon their enrollment status
and not to exceed the costs of attendance.
Section 27 amends the maximum length of a post-enrollment
deferment period. Section 28 simplifies the name of the Alaska
Advantage Education Grant Program to Alaska Education Grant
Program for ease of use and identification as a state funded
grant. Sections 29 and 30 conform to Section 28. Section 30 also
incorporates by reference the commission's existing authority to
promulgate program regulations.
Section 31 permits the commission to set grant terms and
conditions. It directs the commission to establish annual grant
maximums relative to a student's enrollment status. Section 32
revises upwards the annual grant maximum. Section 33 revises
upwards the aggregate grant amount a person may receive to
conform to Section 32.
Section 34 adds a new section to enable the commission to
designate awards as a state match in the event federal funds for
education grants are available and require such a match. Section
35 repeals and reenacts AS 14.43.620(a). It clarifies that the
revolving loan fund for Teacher Education Loans is administered
by the commission.
Section 36 adds a new section that clarifies that loans to new
borrowers may only be made if sufficient funds are available. It
conforms to Section 35. Section 37 also conforms to Section 35
and clarifies that the commission sets the Teacher Education
Loan interest rate on loans financed from the fund.
Section 38 increases upwards the annual and aggregate loan
amounts available to a borrower under the Family Education Loan.
Section 39 clarifies that to be eligible for the Family
Education Loan, both the borrower and student must be Alaska
residents.
Section 40 changes the name of the program to conform to Section
30. It permits the administrative costs of the state grant
program to be paid from the education grant account. Section 41
amends the general definitions to incorporate "on-time"
enrollment status. Section 42 modifies the institutional
authorization exemption of short education or training courses
by increasing the maximum number of days or total hours of a
course.
Section 43 clarifies that the commission may enter into multi-
state reciprocity agreements for the purposes of regulating the
delivery of education and training programs in Alaska. Section
44 limits the mandatory meningococcal immunization notice
requirement to students who are physically present on an
institution's campus.
Section 45 is conforming language that eliminates various
statutes to achieve the intent of this legislation. Section 46
is a transition section. It clarifies the commission will set
Teacher Education Loan interest rates upon enactment. The
corporation will set interest rates before enactment.
Section 47 contains revisor's instructions that the state grant
administrators retain existing regulations until the new act is
implemented. Section 48 provides for an effective date.
8:28:06 AM
CHAIR STEVENS asked what it means that a borrower and a student
must be Alaska "residents," and how long it would take for a
student to become a resident.
SENATOR FAIRCLOUGH replied that it takes one year.
CHAIR STEVENS stated that in one year a student from Connecticut
attending UAF could become an Alaska resident.
SENATOR FAIRCLOUGH said that is correct.
SENATOR GARDNER referred to Section 1 and asked if the other
schools now included offer a Bachelor of Arts program, or just a
certification or associates degree.
DIANE BARRANS, Executive Director, Alaskan Commission on
Postsecondary Education, Juneau, Alaska, answered questions
related to SB 195. She explained that those private, nonprofit,
higher education institutions offer an associate degree or
higher.
SENATOR GARDNER requested examples of those schools.
MS. BARRANS listed the schools: Alaska Pacific University,
Alaska Christian College, and Alaska Bible School. She added
that there are other institutions in the state that offer those
credentials as well, but they are covered by another non-
proprietary sector. Previously, the statute limited it to
alternating representation from Sheldon Jackson College and
Alaska Pacific and when Sheldon Jackson College closed, Alaska
Pacific was left.
8:31:37 AM
CHAIR STEVENS noted the Governor has termed this legislative
year the "education session." He wondered how urgent this bill
is and what happens if it is not enacted this year. He asked if
it would it fit into the Governor's omnibus bill.
SENATOR FAIRCLOUGH said she has not checked with the Governor.
She emphasized that SB 195 is about students and she has been
working with Ms. Barrans for over a year on this issue. She
noted that they tried to introduce a bill to this effect last
session. Student loan debt is becoming a national problem. She
stated that if the bill does not pass this session she will
offer it again. She maintained that it is the right thing to do
for Alaska students and the commission supports it. It is a
policy decision for the legislature. The bill provides tools for
the commission to perform better for students.
8:33:29 AM
SENATOR GARDNER applauded Senator Fairclough's efforts to reduce
the cost of student loans. She thought other elements of the
bill that are clean-up or long-standing wishes should go to the
Senate Judiciary Committee to address.
SENATOR FAIRCLOUGH replied that SB 195 goes to Senate Finance,
which can adequately deal with the bonding issues. She added
that she was surprised that SJR 23 did not get assigned to
Senate Judiciary, but it has three referrals. She said she is
not opposed to a recommendation that SB 195 be referred to
Senate Judiciary. She noted that the changes are at the request
of the Alaska Commission on Post-Secondary Education.
SENATOR GARDNER read some of the unclear parts, such as in
Section 15 which incorporates the term "perfected, a term of art
for uniform commercial code purposes." Section 17 "clarifies
corporation authority to offer consolidation loans to state
residents. Removes the option for joint consolidation of married
borrowers." She maintained that parts of the bill remain a
concern.
8:36:13 AM
SENATOR GARDNER noted Section 6, "Provides that a borrower may
apply for a state supplemental education loan without first
having to exhaust all federal or private education loan
options." She asked for the rationale for requiring students to
exhaust other loan options first and for the impact of the
change.
SENATOR FAIRCLOUGH explained that the intent is to provide the
lowest cost loan, so students would apply for a federal loan
first at a 3.48 percent interest rate.
MS. BARRANS said she did not know why the requirement to exhaust
private loans is there. It seems counterintuitive when the state
is offering a lower interest rate than private lenders. With
respect to the federal loans, the logic is that the federal
government may offer a better interest rate, and payback
options. When the state issues tax exempt bonds, under IRS
provisions, the state has to only supplement the aid from the
federal government. However, if the corporation could issue
taxable debt, that provision would not be required. Rather than
have it in statute, and lack the option of doing either taxable
or tax-exempt debt, it is better to remove it and apply it when
appropriate.
8:39:08 AM
SENATOR GARDNER remarked that in past there was no flexibility
regarding federal loans, and the new provision allows the
commission to make recommendations and allows the student to do
whatever is best in a changing world.
MS. BARRANS said absolutely.
CHAIR STEVENS brought up the issue of student privacy concerns
and requested an opinion of how that applies to student data in
Section 3.
MS. BARRANS explained that the bill does not go to privacy. The
commission, under its current authority, can collect information
and do outcomes reporting. This bill clarifies that it is
subject to approval by DEED, but is not mandatory in any way.
She added that in the commission's dealing with DEED, student
privacy agreement is tantamount and clearly spelled out. She
mentioned the Alaska Performance Scholarship outcomes report,
which does not contain students' personal information, as an
example.
SENATOR GARDNER asked about Section 12, which clarifies that the
corporation sets the interest rate on loans it finances. She
asked if that was a new policy.
MS. BARRANS related that student loan program statutes predated
the existence of the corporation. In some of the older statutes
it said the commission would set the interest rate, which was
changed over time. Section 12, under corporation powers,
consolidates the authority to set interest rates on any loan
financed by the corporation.
8:42:54 AM
SENATOR GARDNER addressed Section 46 - "Commission to set
Teacher Education Loans interest rate upon enactment." She
inquired if those rates are currently set in statute.
MS. BARRANS explained that there is a formula by which rates are
set by the corporation. Under the bill, the corporation would no
longer fund Teacher Education Loans; they would be funded by the
state and the commission would be setting the interest rates on
those loans.
CHAIR STEVENS asked if SB 195 should be included in SB 139.
MS. BARRANS said she has not studied SB 139. It would be a
subject of discussion with the Governor's staff. This bill is
discreet to the student loan program and it may not make sense
to blend it into SB 139.
8:44:39 AM
SENATOR GARDNER stated that Section 38 "Increases upwards the
annual and aggregate loan amounts available to a borrower under
the Family Education Loan." She requested more information about
the Family Education Loan.
MS. BARRANS explained that the Family Education Loan is a loan
through which a family member may borrow on behalf of a student.
SENATOR GARDNER pointed out that Section 31 permits the
commission to set grant terms and conditions. She asked if that
is already the case or if this is a new permission.
MS. BARRANS described it as a clarification to make sure the
commission can do so.
8:46:00 AM
CHAIR STEVENS asked if teacher loans mentioned in the bill
encourage students to go into teaching. Lack of teachers and
lack of Native teachers are current state issues.
MS. BARRANS said when looking at outcomes of that particular
issue, it does not seem so. It is not a particularly effective
tool. Conceptually, it is very attractive in that rural
districts nominate individuals who are graduates of Alaska high
schools who express an interest in teaching. If those students
complete the degree and teach in a qualifying school, they can
have the entire loan forgiven. Fewer than one-in-five actually
meet all of the criteria. It is not a successful model. Other
states have a similar issue and have gone to loan repayment or
loan assumption programs that create a fund for people who
successfully complete the program to then be able to apply for a
benefit. All the money goes to people who have already shown
commitment.
CHAIR STEVENS requested clarity on "one-in-five."
MS. BARRANS said one-in-five participants in the program were
successful and received the forgiveness benefit by teaching in a
qualifying school.
8:48:38 AM
SENATOR GARDNER said Section 27 amends the maximum length of a
post-enrollment deferment period. She requested more
information.
MS. BARRANS related that, currently, borrowers have a six-month
grace period after separating from school. Section 27 changes it
to up to six months.
SENATOR GARDNER asked about how that decision is made.
MS. BARRANS replied that it depends on how long until a student
is employed after leaving school. Interest accrues during that
time so sooner is better than later.
SENATOR GARDNER asked if the student's contract contains that
provision.
MS. BARRANS said yes.
8:50:31 AM
CHAIR STEVENS opened public testimony.
MIKE COONS, representing himself, Palmer, Alaska, testified on
SB 195. He agreed with the consolidation of existing loans. He
asked how much could be consolidated after four years and if
there is any loan counseling. He asked if a student could pay
down a loan while they were attending school.
MS. BARRANS explained said there is financial counseling
outreach to students as early as junior high. There are also
online programs, such as Reality Check. Once a student is
borrowing, the commission sends out an annual statement and a
monthly bulletin.
She addressed the importance of passing the bill. She stressed
that anything supporting the commission to better serve students
to expeditiously move to their credential is worthwhile. Alaska
has a high percent of students that attend part time and a low
graduation rate. Those two issues are connected, so anything the
commission can do to allow students to attend full time and to
graduate on time is very beneficial.
8:55:46 AM
SENATOR GARDNER asked if Ms. Barrans has any information about
Alaska's low completion rate compared to other states.
MS. BARRANS said the data supports that there is a direct
correlation between the lack of full-time attendance and the low
completion rate. The longer it takes, the lower the graduation
rate. Students who attend regularly are engaged in their post-
secondary education.
CHAIR STEVENS held SB 195 in committee.
SB 208-SCHOOL CONSTRUCTION BOND DEBT
8:58:14 AM
CHAIR STEVENS announced that the next order of business would be
SB 208, version A.
DAVID SCOTT, Staff, Senator Donny Olson, Alaska State
Legislature, Juneau, Alaska, presented SB 208 on behalf of the
sponsor. He explained that the intent of SB 208 is to encourage
small and rural schools to address their facility improvement
needs by issuing debt, rather than by obtaining a state grant
program. It would increase the state's share of the debt
reimbursement from 70 percent to 80 percent for a select number
of schools. Those schools are those who meet the 20 percent
threshold of the participating share that is set in AS
14.11.008. He counted seven schools that are eligible to
participate.
9:00:03 AM
MR. SCOTT referred to a drafting error in Section 1, page 7,
lines 1 and 2. It states that the schools would have to "meet or
exceed" the 20 percent participating share requirement. It is
the intent of the sponsor that it should say the schools should
"meet" the 20 percent participating share. The words "or exceed"
is confusing language and needs to be removed.
He continued to explain that Section 2 is a retroactive clause
that would allow schools that have taken debt at 30 percent
after January 1, 2013, and who meet the 20 percent requirement,
could take on the 20 percent share retroactively. Section 3 is
the immediate effective date.
9:01:51 AM
SENATOR GARDNER asked for clarification of Section 2. She
inquired if it applied to anyone who has outstanding debt or if
there is a start date for that debt.
MR. SCOTT said the project Port Alsworth would benefit from
Section 2 in the amount of $128,000.
SENATOR GARDNER said that explains why Port Alsworth has sent
testimony on the bill.
CHAIR STEVENS agreed.
9:03:15 AM
ELIZABETH NUDELMAN, Director, School Finance and Facilities
Section, Department of Education and Early Development (DEED),
Juneau, Alaska, answered questions related to SB 208.
CHAIR STEVENS requested the department's reaction to the bill.
MS. NUDELMAN agreed that clarification of an area of the bill is
needed, as pointed out by Mr. Scott. She said without it, it is
difficult to complete a fiscal note.
CHAIR STEVENS said that is problematic.
MS. NUDELMAN related that the language on page 7, lines 2,
"exceeds the 20 percent participating share" is a problem. If
the intent of the bill is for districts who have a 20 percent
participating share in the grant program, the language needs
more clarity.
CHAIR STEVENS requested an explanation of a document by DEED on
the FY 2015 Participating Share Requirement.
MS. NUDELMAN explained that the document comes from the
Construction Grant Program, a competitive program. The
department does not use participating share in this manner in
the debt program. The department does review and rank the
applicants for the Construction Grant Program. The statute for
the grant program says if the full assessed value of the
property in the district is over $500,000 per ADM, then the
participating share is 30 percent. There is a ladder of five
categories. The participating share for a school district and
their municipality is 5 percent, 10 percent, 20 percent, 30
percent, or 35 percent for the grant program. The handout shows
where each school district falls. For example, the Aleutians
East is at 35 percent.
She pointed out that the regional education areas are at 2
percent. They do not have legal capacity to bond.
CHAIR STEVENS said Aleutians East must pay 35 percent as their
local share.
MS. NUDELMAN said, "For our grant program; correct."
9:07:50 AM
TY MASE, Superintendent, Lake and Peninsula School District,
King Salmon, Alaska, testified in support of SB 208. He thanked
the sponsor and said how important the 20 percent rate is to his
district. He related that the district has been pursuing an
80/20 school construction grant for Port Alsworth's school
expansion for the better part of a decade. He said they have
been as high as number five on the list. He said with an
anticipated enrollment of 70-plus students in Port Alsworth, the
district could not wait any longer to begin construction. In
April they obtained voter approval to issue debt and get the
project underway. The participating share was set at 70/30. He
concluded that debt reimbursement is a means for the district to
address overcrowding and much-needed upgrades. He requested
passage of the bill.
9:09:56 AM
NATHAN HILL, Manager, Lake and Peninsula Borough, King Salmon,
Alaska, testified in support of SB 208. He thanked Senator Olson
for sponsoring the bill and the committee for considering it. He
believed the bill was a reasonable request and would have a
positive impact on education and teacher development for rural
schools like Lake and Peninsula Borough.
CHAIR STEVENS commented that the school was built under the 30
percent program, but the 20 percent retroactively would be very
beneficial.
MR. HILL said yes. He added that there was overcrowding and they
could not wait any longer to expand the school.
CHAIR STEVENS said he has been in the old school and understands
the problems they were facing.
9:12:05 AM
TOM BEGICH, Government Affairs Director, Citizens for
Educational Advancement of Alaska's Children, Anchorage, Alaska,
testified in support of SB 208. He said the bill is good public
policy and would allow districts to upgrade and improve schools
in rural Alaska statewide. Rural schools were chronically
underfunded for years. The bill would fill the gap in school
grant construction.
CHAIR STEVENS thanked Mr. Begich.
MR. SCOTT pointed out that the participating share requirement
has some precedent. On page 6, line 6, those schools who met the
10 percent participating share were eligible for 90 percent
reimbursement from the state.
He reiterated that the language in Section 1, page 7, lines 1
and 2, "or exceed" needs to be removed. Also, the sponsor would
like to add language to allow for 5 percent and 10 percent
shares, but for all practical purposed, those districts would
not be able to bond.
9:15:12 AM
CHAIR STEVENS asked Mr. Scott to comment on the need for
clarity, as mentioned by Ms. Nudelman.
MR. SCOTT agreed. The intent of sponsor is for 20 percent and
lower.
CHAIR STEVENS held SB 208 in committee.
SB 139-EDUCATION: FUNDING/TAX CREDITS/PROGRAMS
9:16:39 AM
CHAIR STEVENS announced that the final order of business would
be SB 139. He said the committee will deal with two portions of
the bill, charter school funding found in Section 9, page 7, and
the tax credit in Sections 21-31, pages 11 through 17.
CHAIR STEVENS began with charter school funding.
SUSAN MCCAULEY, Ph.D., Director, Teaching and Learning Support,
Department of Education and Early Development (DEED), Juneau,
Alaska, presented information on SB 139. She introduced herself.
9:17:51 AM
MARK HANLEY, Commissioner, Department of Education and Early
Development (DEED), Juneau, Alaska, presented information on SB
139. He stressed the importance of the language beginning on
line 4 in Section 9: "The budget shall not be less than the
amount generated by the students enrolled in the charter school,
less administrative costs retained by the local school
district." He said the idea is that students generate funds
through the district funding formula. He pointed out on line 7,
the amount generated by students is clarified: "The amount
generated by students enrolled in the charter school is to be
determined in the same manner as it would be for a student
enrolled in another public school in that school district." He
said the idea behind current language in statute is equity.
COMMISSIONER HANLEY explained the separate organizational
structure of charter schools. He said there is a parent group
that provides oversight, but he maintained that they should be
funded in the same manner. Language beginning in line 9,
clarifies what that funding entails: special needs funding,
secondary vocational/technical instruction funding, and pupil
transportation funding. The first two funds are a part of the
per-student formula or the BSA formula. Pupil transportation is
also driven by student enrollment, but is a separate formula.
CHAIR STEVENS asked if, at present, those three are a part of
charter school funding.
COMMISSIONER HANLEY said not necessarily. He opined that current
statute includes says "these are funds generated by a student."
However, he agreed it is open to interpretation by school
districts. Some districts provide transportation; some provide
special education services. The bill clarifies and provides
equity.
CHAIR STEVENS concluded that this provision would not have an
impact on a district's budget as they are already receiving the
funding.
COMMISSIONER HANELY said that is correct. Some districts might
have to provide additional funding to charter schools.
9:21:42 AM
SENATOR GARDNER said there are neighborhood public schools where
all students must be accepted, including students with special
needs or transportation needs. There are also optional schools
filled by lottery programs. She said in her school district,
alternative schools do not receiving transportation and can
decline to take a student with special needs. She asked if
charter schools could decline to accept a special needs student.
COMMISSIONER HANLEY stated that a public school cannot refuse
special needs students. Charter schools also cannot refuse
special needs students.
SENATOR GARDNER said it makes sense then that charter schools
get special education funding. She questioned whether districts
who do not currently provide transportation funding to charter
schools will be required, and able, to provide it.
COMMISSIONER HANLEY said the key is the contract between the
charter school and the district on how those services will be
provided. Currently, public schools share special education
services and transportation can be the same way. Some districts
already do provide transportation services. The bill is
recognition that students are generating funds for
transportation and should have access to transportation in some
manner.
9:26:00 AM
CHAIR STEVENS summarized that currently money for transportation
goes to the district, not to each school. The bill recognizes
the obligation of the district to use those funds for the
charter school. He said this might allow the charter school to
use transportation funds for ways other than transportation.
COMMISSIONER HANLEY provided several examples of uses of
transportation funds for charter schools. The funds are in the
form of block grants and are not monitored or tracked by the
state. A district could use the funds in a variety of ways.
Technically, charter schools could reallocate transportation
funds for other uses.
9:27:46 AM
SENATOR GARDNER said the provision opens a can of worms. If
there is no fiscal note, the district has "x amount." Some
schools must use the funds to provide transportation, but the
funds will also be sent to charter schools that have no busses.
Therefore, funds are being siphoned from neighborhood schools
that have to bus and given to charter schools that can't provide
busing. She questioned the idea of paying to "offset carpool
fees."
COMMISSIONER HANLEY replied that it would hurt a district if it
was generating funds for those students and not providing any
transportation services. He discussed how a district might
provide services, such as drop-off spots.
DR. MCCAULEY noted that the intent is that there is some level
of service for the student. She said transportation funds are
generated by all students. There is currently no language that
requires students to receive benefits from the funds they
generate. The intent is not to undermine a school district.
She provided an example in the Mat-Su District several years
ago. The approach was to identify pick up locations along
existing routes to include charter school students. She
described a level of transportation agreed upon by the district
and the charter school.
CHAIR STEVENS asked if that plan achieved equity.
DR. MCCAULEY said yes. She continued to say what is inequitable
is not providing any transportation funds for charter school
students.
SENATOR GARDNER asked about transportation funding for non-
charter, alternative schools.
9:33:53 AM
COMMISSIONER HANLEY said optional school students also generate
transportation funds, but it is a district policy on the
transportation component. Transportation was not provided for
optional or charter schools in Anchorage. He said the exception
was Rogers Park School.
SENATOR GARDNER asked if Northern Lights, ABC School, and
Polaris receive transportation funds under the current formula.
COMMISSIONER HANLEY said the school district receives funding
for those students.
SENATOR GARDNER asked if those schools receive the funding.
COMMISSIONER HANLEY said no. A school has a separate budget as
generated by the district.
SENATOR GARDNER asked why Section 9 applies only to charter
schools and not to alternative schools.
COMMISSIONER HANLEY explained that charter schools operate under
academic policy committees, which is different than an optional
school. There is a significant difference in the structure and
management of an optional school.
SENATOR GARDNER said it does not make sense, if talking about
equity of funding and students generating the funds. She said
she does not understand why other alternative schools are not
included in the bill.
9:36:30 AM
DR. MCCAULEY clarified that comparisons between charter schools
and non-charter schools are very different. The structures for
operation are very different. Alternative schools fall under all
district support systems, whereas charter schools do not. The
intent of the bill is to provide equity and clarity for funding
charter schools.
SENATOR GARDNER said she is aware of the inequities for funding
charter schools and has sponsored bills to address it. However,
she said her legislation has a cost to the state because it does
not "cannibalize" the rest of the district to provide what
charter schools aren't currently getting. Even though
alternative schools fall under the support of the district, they
do not receive transportation funds. She argued that if a
charter school will receive transportation funds under SB 139,
alternative schools should also.
SENATOR GARDNER asked how charter schools fund special
education. She asked if the district provides funding or if the
funds come out of the 25 percent administration fee.
DR. MCCAULEY said it varies district to district. All districts
have a requirement for all students to ensure that when the
students have IEP's, that they are accountable to goals of the
IEP's. Some districts, as part of the contract with the charter
school, charge for access to services. Other districts don't
charge for services, but provide access to those services. State
statute is not prescriptive with regard to what approach is
taken.
9:41:14 AM
CHAIR STEVENS thought it was strange to have to put the wording
in the bill. He asked if the Commissioner would like to comment
on the vocational/technical component.
COMMISSIONER HANLEY said the component applying to
vocational/technical educational programs for secondary students
does not get as much attention as the other two components.
Students generate funds for vocational/technical programs, but
often do not receive them in charter schools. Not all charter
schools have those programs.
CHAIR STEVENS voiced appreciation for the attempt to achieve
equity and clarity in the bill.
SENATOR GARDNER understood that transportation is a big issue
for students who are interested in attending an alternative
school, charter or otherwise. Without transportation funding,
those schools are not open to all. She maintained that if
transportation is provided to charter schools, it should also be
provided for alternative schools. She pointed out that it would
entail a cost to the district.
9:43:31 AM
COMMISSIONER HANLEY drew attention to another component of the
charter school in Section 6, on page 5, regarding the
application. He said there are two components, one of which has
been addressed; funding equity. The second component is found in
lines 16 and 17 - the application for a charter school. This
provision allows an academic policy committee to apply to become
a charter school. If they are denied at the local level,
currently, the process ends.
COMMISSIONER HANLEY said on line 23 (b), it strengthens and
brings transparency to the decision-making process: "The
decision of the local school board, approving or denying the
application for a charter school, must be in writing, and must
include all relevant findings of fact and conclusions of law."
He said the appeal process begins on page 6, line 12. The
appeal goes to the commissioner who has three options. On line
17, one is to remand the appeal to the local school board for
further review. Another is to approve the charter school
application and forward the application to the state board with
or without added conditions. The third is to uphold the decision
denying the application. This process allows an extra set of
eyes to review the application process. He stressed that the
important part is at the beginning of the process; the decision
needs to be based on fact and in writing.
CHAIR STEVENS agreed that putting it in writing makes sense. He
said, having served on a local school board, it is unrealistic
that a school district would be forced to have a charter school.
He said the only way to get beyond that is to have the State
Board of Education in charge of the new charter school. He asked
how the department could force a charter school on a district.
9:48:02 AM
COMMISIONER HANLEY agreed. He opined that if a district denied
an application based on fact and the conclusions of law, it
would be very uncomfortable and awkward to approve it and force
it on a school district. The idea behind this provision is to
provide an opportunity for a review of the procedure. He noted
that there have never been any denials of a charter school
application; however, some charter schools were turned away
before they applied.
CHAIR STEVENS said the Commissioner's staff is not excited about
having to manage more schools.
SENATOR GARDNER asked if it was appropriate for a district to
discourage a charter school proposal that is unrealistic.
COMMISSION HANLEY said yes; there are many reasons to deny an
application and the decision should remain at the local level.
He said he is not suggesting that scrutiny at the local level is
not a great idea.
9:51:07 AM
CHAIR STEVENS moved on to the tax credit issue, beginning on
page 11, Sections 21-31.
COMMISSIONER HANLEY said two components were added to the list
of tax credits. The first one is on page 11, line 23, (8), and
related to tax credits for a scholarship for students pursuing
dual credits, to defray the cost of tuition, registration,
course, and textbook fees. The second is (9), beginning on line
26, for the construction, operation, or maintenance of a
residential housing facility by a residential school. These two
provisions are duplicated throughout the bill referencing
different taxpayers.
9:53:10 AM
SENATOR GARDNER asked about (8) on line 23, the scholarship
program. She asked if it is open to all applicants or if they
are limited.
COMMISSIONER HANLEY said that provision involves a tax code. He
did not know the restrictions.
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue, Anchorage, Alaska, answered questions related to SB
139. She explained that any non-profit that has set up a
scholarship program would qualify for the tax credit, but there
are no parameters within the language, so the non-profit could
have some restrictions on who could qualify for the scholarship.
The scholarship does not have to be open to everyone.
CHAIR STEVENS asked for clarification on the residential school
credits and if they can be used for operations and maintenance.
MS. BALES said the tax credit could be for operations,
maintenance, and construction of an approved facility.
CHAIR STEVENS asked how many residential schools there are.
COMMISSIONER HANLEY said there are eight.
CHAIR STEVENS noted the two provisions are found throughout the
bill.
9:56:19 AM
MS. BALES said the two new contribution types would be available
against four different tax types administered by the division;
corporate income tax, mining license tax, fisheries business
tax, and fishery resource landing tax.
CHAIR STEVENS summarized that non-profit organizations can offer
scholarships for students pursuing dual credits and receive a
tax credit. He asked if anyone is doing that now.
MR. BALES said she did not know.
CHAIR STEVENS asked Commissioner Hanley if he believes this
provision to be functional.
COMMISSIONER HANLEY did not know of any non-profits that offer
scholarships, currently. However, the boarding stipend just
barely covers expenses for the time students are in attendance.
Almost all residential schools have partners that help provide
support. He anticipated that several entities would receive tax
credits due to this bill.
9:58:20 AM
SENATOR GARDNER addressed the four kinds of tax credits. She
gave a hypothetical example of a donation by a mining company
and asked if the tax credit can be applied to their mining tax
and their corporate income tax, yielding a double credit.
MS. BALES said no. There is language in current statute that
says an entity cannot use the same contribution amount to take a
credit against multiple tax types.
COMMISSIONER HANLEY summarized that the two components are
relatively straightforward; one is equity and transparency for
charter schools and the other is to incentivize more
partnerships in education.
CHAIR STEVENS held SB 139 in committee.
9:59:19 AM
There being no further business to come before the committee,
Chair Stevens adjourned the Senate Education Standing Committee
at 9:59 a.m.