Legislature(2009 - 2010)HOUSE FINANCE 519
03/26/2010 01:30 PM FINANCE
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HOUSE BILL NO. 235 "An Act relating to professional student exchange program availability and conditions for loan forgiveness." 1:58:54 PM REPRESENTATIVE CATHY MUNOZ, SPONSOR, testified that the bill would establish a loan forgiveness incentive for Alaskan students entering into the fields of pharmacy, optometry, and dentistry. The bill would work through the Western Interstate Commission for Higher Education (WICHE), which is a professional student exchange program providing students in 12 western states with access to professional healthcare programs unavailable in the student's home state. With this legislation the state would agree to pay a participation fee for each student, thereby reserving spaces for Alaskan students entering into the fields of pharmacy, optometry, or dentistry. Alaska currently offers no programs in the aforementioned fields. The bill would establish the maximum cohort of 60 students over a four year period, five students per profession, and 15 students per year. The participation fee through WICHE was $22,700 for a dentistry slot, $15,600 for optometry, and $6,900 for a pharmacy slot. A 25 percent forgiveness incentive would apply to students who return to Alaska for at least five years, and additional 25 percent was available for student that practiced in underserved areas of the state or areas that accepted Medicaid patients. Representative Munoz continued. The standard repayment period would be 15 years and participants that qualified could receive annual credits on loan balances, which would result in shortening the repayment period or allow for reduced monthly payments. In FY 15, when repayments begin, approximately $40,000 would be repaid within the first year. In FY 16 $116,400 would be repaid and within three years the repayment would increase to approximately $420,000 annually. She stressed that the three fields identified in the bill remained as educationally underserved professions in the state. She urged support of the legislation as a vehicle to connect motivated young Alaskans with job opportunities in fields of high demand. 2:03:10 PM Co-Chair Hawker felt that the language of the bill was unclear concerning the 60 students. He said that he had not seen any reference to the five years of 15 students each. He noted Page 1, Lines 6, 7 and 8 of the bill: "the Alaska Commission on Postsecondary Education shall provide adequate funding for not fewer than five students to attend four-year programs in each of the following fields:" Representative Hawker suggested that the language could be further clarified. Representative Munoz replied that the intention was to allow for five students per category, per year, for four years. She agreed that the bill should be amended for clarity. Co-Chair Hawker expressed confusion with the language in Section 4; Loan forgiveness for program participants. He queried why the legislature should appropriate funds that would enable the state to forgive debt for loans that the state had granted to Alaskan students. 2:06:04 PM Representative Munoz responded that the intent of the legislation was to have 5 percent of the loan forgiven for each year that the student lived in Alaska upon returning to the state. If the student were to reside in-state for a minimum of five years then they would qualify for the 25 percent forgiveness. If they were to practice in an underserved area, or if five percent of the gross billing of their practice was for Medicaid patients, an additional 25 percent forgiveness could be granted. The percentages applied to the state's participation fee, and the funds to feed the program would be appropriated annually by the legislature. Co-Chair Hawker restated his question. He understood that the state was going to need to appropriate more money to forgive the loans. 2:07:51 PM Representative Munoz thought that the language referred to the funds appropriated initially for the program. She did not believe that the intention was the forgiveness, but to fund the initial participation fee. 2:08:50 PM JEAN MISCHEL, ATTORNEY, LEGAL SERVICES (via teleconference), believed that the money for the loans originally came from the Student Loan Corporation, and those funds were was not considered to be part of the state general fund, once deposited into the student loan fund. Once deposited, the funds were not subject to appropriation, but the loan forgiveness portion was an asset of the state that would require an appropriation back into the fund. Co-Chair Hawker said that if there was a required appropriation there should be language to authorize the debt forgiveness. He requested further research on the issue. 2:10:44 PM Representative Foster requested the definition of the word "underserved" as defined by the Department of Health and Social Services (HESS). Representative Munoz relayed that the definition was based on whether or not a community had an adequate number of practitioners in a certain category of service to care for individuals in the community. The definition of "underserved" was not meant to encompass all communities that were considered rural. KENDRA KLOSTER, STAFF, REPRESENTATIVE MUNOZ added that Ketchikan had been defined as underserved because there were only two dentists that served the entire community. Representative Foster wondered who made the determination as to whether a community was underserved. Ms. Kloster replied that underserved areas were determined by HESS. 2:12:57 PM Representative Gara shared that the bill introduced a mandate that was not on a state agency. He stated that the Alaska Commission on Postsecondary Education (ACPE) was a quasi-state agency because their decisions were not determined by the governor. He thought that this point could help to clarify the language pertaining to loan forgiveness. Co-Chair Hawker replied that the language would be examined further. Vice-Chair Thomas requested the definition for the word "resident", as it pertained to the bill. Representative Munoz replied that legally there was a definition that was used by the ACPE to qualify for student loans, and that that definition would be used. She believed that a resident was an individual that had lived in the state for a minimum number of months. Vice-Chair Thomas shared that the University of Alaska board of regents defined a resident as a person who had received the permanent fund and had lived in-state for five years. He pointed out to the committee that under the governor's scholarship bill, and HB 235, residency could be established after 30 days. He argued that if a person wished to receive the benefits under the legislation the definition should be more stringent. He feared that students from out of state would default on the loan, and simply leave the state. 2:16:50 PM Representative Munoz replied that she was not opposed to writing stricter residency requirements into the bill. She added that if recipients of the loans left the state and did not come back they would not be eligible for the forgiveness benefit. She stressed that the loan and the forgiveness applied to the state's participation fee, not to the full tuition requirements of the student. Vice-Chair Thomas suggested adding a default clause to the bill. He asked who determined the three professions listed in the legislation. Representative Munoz replied that they were fields that did not have programs offered in Alaska or out-of-state incentive programs for Alaskan students. 2:20:12 PM Vice-Chair Thomas thought that nursing should be included in the professions listed in the legislation. He had heard that the university in southeast only allowed for 10 students to enter the nursing program, forcing other students to seek training out-of-state. Ms. Kloster replied that nursing was not included under the WICHE program, which is way it was not included in the professions listed in the bill. Vice-Chair Thomas asked if pharmacy, optometry, and dentistry were the only professions identified in the WICHE program. Ms. Kloster answered that the WICHE program included; dentistry, occupational therapy, optometry, pharmacy, physical therapy, physician assistant, and podiatry. Vice-Chair Thomas wondered why only three of the programs under WICHE had been identified in the bill. Ms. Kloster replied that the three fields had been identified as fields where students were traveling out out-of-state for training and not returning to Alaska. Research had shown that programs for the remaining fields recognized under WICHE were already available through the University of Alaska. Additionally, there was an occupational therapy program available through Creighton University, via the University of Alaska Anchorage. 2:22:56 PM Representative Austerman referred back to Page 1, Line 7 of the bill. He assumed that the language meant that money would be put forward for a minimum of five students, but requested further clarification of the language. Moreover, he wondered if any one of the three identified occupations were to be offered in-state, would the state continue to fund sending students out-of-state for training. Representative Munoz hoped that once the fields became better represented in the state, and the underserved areas were provided for, the legislature would cease to fund the program. She asserted that at the present there was great need in the three fields throughout the state. Representative Munoz added that an annual legislative review of the program, through the budget process, would determine existence of the program in the future. 2:25:12 PM Representative Salmon thought that the fields under the program should be expanded to other medical occupations. He suggested including all seven fields identified under WICHE. Representative Munoz stated that there were several of the occupations already offered through the University of Alaska. The two fields not offered in-state that were not included in the legislation, podiatry and physical therapy, could be added to the legislation. She said that only three were chosen in the attempt to be fiscally conservative. 2:28:23 PM Representative Gara understood that the program was limited to students who attended WICHE schools for training programs that were not available in-state. He noted that the state had a shortage of nurses and primary care physicians. He wondered why there was no loan forgiveness for the loans taken out to pursue those fields. Representative Munoz replied that nursing and primary physician programs were not an option through the WICHE program. However, the state had a successful program with the University of Washington of which more slots could be added to expand opportunities for Alaskans. She agreed that the state needed to increase the educational opportunities for nursing in the state. Representative Gara understood the need to keep the fiscal note conservative. He wondered why the forgiveness was limited to students that attended schools under the WICHE program. Representative Munoz shared that the legislation would authorize funding for the participation fees through the WICHE program. It did not address the tuition fees at those institutions. She reiterated that the bill addressed the participation fee in the WICHE program, and not the actual tuition. She explained that the WICHE program was a compact of state; the fees were negotiated that then reserved a certain number of slots for students from the participating 12 states. In the case of Alaska, if the state paid the fees, a maximum cohort of 60 slots, for the three fields, would be secured. Representative Gara felt that students were already receiving a discounted education through the WICHE program. He wondered why a student, studying one of the three fields, could not attend the school of their choice and receive the same amount of loan forgiveness. Representative Munoz responded not sure the requirement of attending a WICHE school could be removed. She did not think that the same program could be negotiated with a school like Stanford or Harvard. 2:34:03 PM Representative Kelly queried the intent of the language on page 2, Line 9. Ms. Kloster responded that the language was on par with the Washington, Wyoming, Alaska, Montana, and Idaho (WWAMI) program, setting the terms of the loan repayment on the same interest rate as the other participating states. 2:35:17 PM DR. MARK PRATOR, ALASKA DENTAL SOCIETY (via teleconference), testified in support of HB 235. He stated that there were 44 states that had incentive programs to bring students back to high need areas of their home state after graduation. He stressed the importance of providing incentives for students training in the three fields identified in the bill to return to Alaska. He said that a new generation of dentists, optometrists, and pharmacists was becoming more necessary to serve people in high need areas. He relayed that the average tuition for dental schools ran between $50,000 and $100,000 per year, and that the loan forgiveness program would be helpful in keeping trained professionals in-state. 2:39:14 PM Representative Salmon shared that he was billed $5,000 for his last hour and 30 minute visit to the dentist. He wondered why such a lucrative profession would require loan forgiveness. Vice-Chair Thomas wondered how many dentists retired each year in Alaska. Dr. Prator replied that he did not know. He related that there were approximately 300 active dentists in Alaska, a large percentage of which were over 50 years old. He stressed the importance of getting the Alaskan residents who leave the state for training in dentistry to return to the state to practice. He believed that loan forgiveness was the key. Vice-Chair Thomas offered that most of southeast was an "economy free zone" that did not attract healthcare professionals. 2:42:13 PM Representative Gara understood that without the passing of the legislation, the WICHE discount would not be extended to Alaskan students studying dentistry. Dr. Prator replied in the affirmative. 2:43:48 PM Representative Joule wondered the committee would hear from a representative from the Department of Education. Representative Kelly asked if the legislature approved the loan forgiveness component, the discount through the WICHE program would be included also. Dr. Prator thought that that was correct. 2:45:15 PM Vice-Chair Thomas asked how many dentists in Alaska had graduated from schools participating in the WICHE program. Dr. Partor did not know. He shared that he had not graduated from a WICHE school, although he had been presented with the opportunity to attend one. He returned to Alaska because he was born and raised here. 2:46:19 PM DIANE BARRANS, EXECUTIVE DIRECTOR, ALASKA COMMISSION ON POSTSECONDARY EDUCATION, DEPARTMENT OF EDUCATION, provided a historical perspective on the Professional Student Exchange Program, which was the program HB 235 attempted to amend. The Professional Student Exchange Program (PSEP) was a consortia approach to reducing the state's need to develop high cost graduate education programs. From 1955 to 1992, the legislature annually appropriated general funds to support Alaskans going into any one of 14 graduate fields of study. The program was phased out in the mid-90s because of the cost associated with it. In late 1990s the legislature approved a bill that allowed the student loan corporation to begin to lend the support fee to Alaska participants, under certain circumstance. Under the current terms of the program the commission identified which of the fields of study would be included under the loan through a 3 prong test: the program of study is not available in Alaska, there is a workforce need for the profession in Alaska, and that the income associated with entering the profession is sufficient to cover the debt. There were a larger number of fields in the student exchange program than Alaska participated in including; dentistry, medicine, occupational therapy, optometry, osteopathy, pharmacy, physical therapy, physician assistant, podiatry, and veterinary medicine. The fields that were listed in the legislation met all three criteria. 2:49:58 PM Representative Gara asked if the benefit of paying in-state tuition; at an out of state school, under the WICHE program, did not apply to the graduate professional degrees. Ms. Barrans replied that there were three student exchange programs administered by WICHE. One was the Professional Student Exchange program, which had a per student fee associated with it. Two others; the Western Undergraduate Exchange Program, for which the state paid a membership fee, and the Western Regional Graduate Exchange Program, for which there were no separate fees. Representative Gara asked if the students identified in the bill would receive any discounts without the loan forgiveness program. Ms. Barrans said only if the student borrowed the additional PSEP loan, which paid a support fee. Representative Gara understood that this bill would help a student attending a WICHE school repay the loan if they returned to practice in Alaska. Ms. Barrans replied that that was correct. 2:52:13 PM Co-Chair Hawker mentioned the section of statute being amended was basically state participation in the compact for the WICHE schools. He said that the PSEP program had been funded through general funds. He asked if the authority to make loans of state money for the purpose of the program was general authority under the postsecondary education commission, or was there a niche in statute. Ms. Barrans replied that there was a niche in statue. She furthered that in the corporations statute there was a provision that said that the student loan corporation could fund the loans. Co-Chair Hawker summarized that the intent of the bill was to override the student loan corporation repayment interest rates with the same interest rates that were paid by WWAMI students. Ms. Barrans replied in the affirmative. 2:55:04 PM Vice-Chair Thomas asked if the initiation of the bill would impact bonds authorized in the previous fiscal year. Ms. Barrans said no. She said that care had been taken to indicate when a program that the commission was administering as a state agency was not a student loan corporation obligation. Vice-Chair Thomas understood that money would need to be appropriated for the loan forgiveness program on an annual basis. Ms. Barrans replied yes. Vice-Chair Thomas asked how much money the state currently had loaned out to students. Ms. Barrans said approximately $724 million. Vice-Chair Thomas asked how much of that total was in default. Ms. Barrans replied that he cumulative default rate was approximately 11 to 12 percent. The default rate after the first year of repayment was roughly 6 percent. Vice-Chair Thomas if a student under the WICHE program was to drop out of school in the first year how would the money be reconciled by the state. Ms. Barrans stated that loan programs were carefully crafted to incorporate all the tools needed to collect on the loan; permanent fund dividends could be garnished and administrative judgments could be issues against property. She added that loan applicants were subject to a credit report review. Vice-Chair Thomas asked if parental guarantees were required for applicants under 21 years of age. Ms. Barrans replied that a credit worthy co-signer was required by any applicant that had not met the credit writing standard, which is a minimum FICO score of 680. 2:58:56 PM Representative Austerman revisited the language concerns on Page 1, Line 7 of the bill. Ms. Barrans relayed that she had been operating under the assumption that the language intended that there would be five students, per category, per year. She said that the assumption was reflected in the fiscal note. Representative Austerman noted that "not fewer than", could mean more than five. Ms. Barrans replied that the number was subject to appropriated funds. Representative Austerman requested information pertaining to other loan programs for medical professions, and to the WICHE program. Ms. Barrans said she would provide the information to the committee. 3:01:21 PM Representative Joule requested information detailing the benefits to the state from other programs that offered loan forgiveness to professionals committed to returning to the state. He wondered if there were any similar loan forgiveness programs for students seeking trade professions. Ms. Barrans replied that there were two career specific loan programs which had forgiveness benefits. The A.W. Win- Brindle Memorial Scholarship Loan, which was available for individuals studying fisheries, and was funded by donations from the fishery industry, was not funded by the student loan corporation or the state. Under the program students could receive up to 50 percent off of their loan. The Teacher Education Loan Program pre-existed the student loan corporation and was funded by the state for a number of years from the general fund. The program 20 year-old program was designed to take graduates from Alaska high schools who intended to be teachers, and give them up to 100 percent forgiveness for teaching in rural schools. She divulged that the program had not been particularly successful as the default rates for the program had been high, and the students drive to teach in a qualifying community had diminished. She believed that fewer than 30 percent of the participants in the program went on to receive the benefits. Representative Gara reiterated his understanding of the legislation. He suggested altering the program proposed in the bill altogether. 3:06:04 PM Ms. Barrans replied that the sponsor had intended to offer a program that would help Alaskan students that were interested in entering the three identified professions by providing debt relief to them in return for returning to the state. 3:07:17 PM Co-Chair Hawker hoped Ms. Barrans would be available for future discussion concerning the legislation. 3:08:02 PM DAVID LOGAN, ALASKA DENTAL SOCIETY, testified in support of the legislation. He shared that under the WICHE program, he was able to graduate without a large amount of debt. He said that dental students currently faced staggering amount of debt after graduation. Undergraduate and dental school could cost $200,000 to $350,000. He reminded the committee that dentistry programs were not offered in the state, consequently, non-resident tuition is the reality for students training out-of-state. While the proposed program would not make the non-resident tuition disappear, it would be a great help. He relayed that there was a huge health care issue in the state, multiple professions faced shortages. The dental school graduates were not returning to the state to fill the void left by retired practitioners. He felt that by providing incentives for in- state residents 3:13:14 PM NANCY DAVIS, EXECUTIVE DIRECTOR, ALASKA PHARMACY ASSOCIATION, EAGLE RIVER (via teleconference), urged support for the bill. She stated that Alaska had a shortage of pharmacists, with a 25 percent vacancy rate in 2007. She said that the shortage would continue as the population aged and medication use increased as more state residents decided to retire in-state. Alaska is the only WICHE state without a pharmacy school, and one of five states without a loan repayment program for pharmacy students. She shared that pharmacy was the third largest health profession in the United States. The WICHE web-site could be visited for further information on workforce needs in the country. The pharmacy association was working with the university to establish prerequisite classes in pharmacy within the state to assist student in the pursuit of pharmacy school. 3:16:53 PM BARRY CHRISTENSEN, ALASKA PHARMACY ASSOCIATION, KETCHIKAN (via teleconference), testified in supported of the legislation. As a former WICHE student, he stressed the importance of the program incentives for students choosing to return to Alaska after graduation. He felt that the bill would address the critical shortage of pharmacists in the state. 3:18:10 PM TRACY OMAN, EXECUTIVE DIRECTOR, ALASKA OPTOMETRIC ASSOCIATION, testified in support of the legislation. She stated that there were 119 practicing optometrists in the state, 27 would soon be reaching retirement age. For example, the two practicing optometrists in Kodiak were 63 and 66 years old, one of which had been searching for five years for someone to take over his practice. The tow optometrists in Ketchikan were in their late 50s. The more remote areas of Alaska do not have optometrists. Optometrists from Anchorage and Fairbanks traveled to the under-served areas, but as the practitioners aged, travel became more burdensome. She added that residents of the under-served areas often waited months for appointments. The optometric association provided a web-site to assist doctors in finding assistants to share the work, there were 14 doctors on the site that had been searching for assistance for over a year. She concluded that the bill was a good tool to incentivize doctors to return to the state. Co-Chair Stoltze acknowledged Ms. Oman's work with the Lions Club. 3:23:08 PM Co-Chair Stoltze closed public testimony. 3:23:25 PM Representative Munoz revisited the provision that had been highlighted by Representative Hawker concerning state appropriation for the loan forgiveness. She hoped to have deeper discussions of the concerns with the section in order to rework the language to create the clarity sought by the committee. Co-Chair Hawker thought that the discussions would be better done offline and not during committee time. Representative Munoz added that she would revisit the language on Page 1, Line 7 to clear up the concerns raised by Representative Austerman. Representative Kelly also requested that the language of the bill be revisited with a focus on clarity. Representative Austerman voiced that he was reserving support for the legislation until he had reviewed the information requested of Ms. Barrans. Co-Chair Stoltze wanted to hear all the additional information before making any decisions as well. HB 235 was HEARD and HELD in Committee for further consideration.