Legislature(2009 - 2010)BELTZ 211

02/09/2009 08:00 AM Senate EDUCATION

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08:03:53 AM Start
08:07:57 AM SB33
08:31:26 AM the Conference of Young Alaskans 2009
08:57:02 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Overview: Conference of Young Alaskans
               SB  33-POSTSECONDARY SCHOLARSHIPS                                                                            
CHAIR ELTON  announced consideration of  SB 33. He noted  for the                                                               
record that  one of the  committee members, Senator  Stevens, has                                                               
been invited  to speak  at the School  Board Association  at 8:30                                                               
a.m.; so he will have to leave this meeting early.                                                                              
NICK MOE,  aid to Senator  Johnny Ellis, presented  the sponsor's                                                               
statement.  He  thanked Chair  Elton  for  hearing the  bill  and                                                               
apologized for  Senator Ellis,  who is in  transit and  unable to                                                               
Senator Ellis  is sponsoring  this bill, which  they refer  to as                                                               
the "Alaskan  Achievers Incentive  Program," because  an educated                                                               
and prepared  workforce is  critical to  the success  of Alaska's                                                               
future. Postsecondary institutions in  Alaska provide hundreds of                                                               
programs  at   campuses  across   the  state  with   degrees  and                                                               
certificates geared to meet the  current needs of Alaska; however                                                               
affordability of  these institutions  is a growing  concern among                                                               
students   and  families.   If   a  family   thinks  college   is                                                               
unaffordable, a  student has little incentive  or expectation for                                                               
success and is more likely to drop out.                                                                                         
The  Alaskan Achievers  Incentive Program  creates a  scholarship                                                               
fund for those students who achieve  a B average or better in the                                                               
school  in   which  they  are  enrolled   and  demonstrate  unmet                                                               
financial  need  through  filing  for the  Free  Application  For                                                               
Federal  Student Aid  (FAFSA).  The scholarship  award cannot  be                                                               
less than  $1,000 or  more than  $20,000, or  for more  than five                                                               
years.  If  the  fund  is  too small  to  award  all  applicants,                                                               
priority  will be  given  to students  who  demonstrate the  most                                                               
unmet  financial   need.  The  fund   will  be  managed   by  the                                                               
commissioner  of  revenue  and administered  through  the  Alaska                                                               
Commission  for  Postsecondary  Education;  the  commissioner  of                                                               
revenue will identify the five  percent of the fund available for                                                               
scholarships each year.                                                                                                         
MR. MOE reported that the Taylor  Plan is in full support of this                                                               
bill. The Anchorage Assembly also  passed a resolution supporting                                                               
it  and  the  Coalition  of  Student  Leaders  helped  draft  the                                                               
original  language.  More than  30  states  have adopted  similar                                                               
measures and  Senator Ellis  believes this is  the right  time to                                                               
reduce  college  and  high  school   drop  out  rates,  stimulate                                                               
Alaska's economy  by building  our own  workforce and  create the                                                               
scholarship fund.                                                                                                               
He provided a brief sectional analysis.                                                                                         
8:07:57 AM                                                                                                                    
In Section 1, page 1, lines  4 through 14, lay out the objectives                                                               
and purpose of the program.                                                                                                     
Section 2, page 2, establishes the fund.                                                                                        
   · Lines   1-8   provide   that  the   Alaska   Commission   on                                                               
     Postsecondary Education will administer the program.                                                                       
   · Lines 9-13 establish the minimum and maximum awards.                                                                       
   · Lines 14-17 identify the priority for students with the                                                                    
     most unmet financial need.                                                                                                 
   · Lines 19-31 set out the requirements for eligibility, which                                                                
     continue  on page  3,  lines  1-3. The  student  must be  an                                                               
     Alaskan resident, must submit  an application, demonstrate a                                                               
     financial need of  not less than $4000 and be  accepted in a                                                               
     degree or certificate program at a qualifying institution.                                                                 
   · Page 3, lines 4-9 establish the fund as an endowment that                                                                  
    consists of appropriations, donations and earned income.                                                                    
   · Page 3, lines 10-22 place management of the fund with the                                                                  
     commissioner of revenue and provide for the appropriation                                                                  
     of available funds.                                                                                                        
Section 3  provides for the  transitional period during  which it                                                               
will not be  possible to calculate a  multi-year average balance.                                                               
The fund will  be averaged over a three year  period and the five                                                               
percent  appropriation  taken  from   that  average;  during  the                                                               
transitional  period it  will not  be possible  to calculate  the                                                               
multi-year average balance on the newly-created fund.                                                                           
MR. MOE mentioned  that the members' bill packets  contain a copy                                                               
of  the  "Report  Card"  on  postsecondary  education  in  Alaska                                                               
[created biennially by The National  Center for Public Policy and                                                               
Higher  Education],  which  shows  that  Alaska  rated  an  F  in                                                               
affordability  and  participation in  2008.  It  also shows  that                                                               
annual personal  income in  the state would  be about  $2 billion                                                               
higher if more students attained a higher education.                                                                            
SENATOR DAVIS joined the meeting.                                                                                               
8:11:54 AM                                                                                                                    
SENATOR  HUGGINS asked  Mr.  Moe if  any  consideration has  been                                                               
given to  a loan-forgiveness  provision to  encourage recruitment                                                               
of educators for Alaska                                                                                                         
MR. MOE answered that they have not discussed that.                                                                             
SENATOR HUGGINS encouraged Senator Ellis to consider it.                                                                        
8:12:51 AM                                                                                                                    
SENATOR STEVENS  asked Diane Barrans of  Postsecondary Education,                                                               
who prepared the  fiscal note for this bill,  how the legislature                                                               
would go about funding it.                                                                                                      
8:13:32 AM                                                                                                                    
DIANE   BARRANS,  Executive   Director,   Alaska  Commission   on                                                               
Postsecondary  Education  (ACPE),  Department  of  Education  and                                                               
Early  Development,  Juneau, AK,  responded  that  there isn't  a                                                               
ready  source  of   funds  she  can  point  to   as  an  earmark.                                                               
Discussions  with Senator  Ellis's aid  indicated that  they were                                                               
speculating there  may be money  available in one of  the federal                                                               
economic  stimulus bills  that could  be used  to capitalize  the                                                               
program. The language in the  [stimulus] bill is rather vague; it                                                               
did reference  funds for  higher education, but  it is  still not                                                               
clear to what purposes those funds can be put.                                                                                  
8:14:19 AM                                                                                                                    
SENATOR STEVENS asked how stable the ACPE program is.                                                                           
MS.  BARRANS answered  that repayment  performance has  been good                                                               
over the past few years, but  the default rates rise to in excess                                                               
of 10  percent after 4 to  5 years in repayment;  so although the                                                               
program has  been operating in  a sound manner, it  faces serious                                                               
challenges with  the rising  cost of funds  and the  condition of                                                               
the capital market.                                                                                                             
SENATOR STEVENS asked  Ms. Barrans to give the  committee an idea                                                               
of  what  she  expects  the   impact  of  the  national  economic                                                               
condition to be on the program.                                                                                                 
8:15:54 AM                                                                                                                    
DIANE  BARRANS said  they are  currently  considering what  steps                                                               
they could  take to provide alternative  deferments, forbearances                                                               
and the like; they do expect  their borrowers to feel the effects                                                               
of  the  economic downturn.  People  who  are showing  good-faith                                                               
efforts to  repay their  debt may find  themselves cash  poor; so                                                               
the  division is  looking  at ways  to  prevent delinquency  from                                                               
rising, although  to some  extent it is  inevitable. As  to other                                                               
changes, they  have not been  able to  issue bonds in  the market                                                               
for over  a year.  They last successfully  issued bonds  in 2007.                                                               
The market  for the type  of bonds  they issued between  2002 and                                                               
2007 disappeared in the wake  of the sub-prime mortgage fall-out,                                                               
so they are working on  strategies to successfully issue bonds at                                                               
a low  cost. They also  expect to  look at their  credit criteria                                                               
for loans  that are  not federally guaranteed,  to make  sure the                                                               
loans they are issuing are usable as collateral for bonds.                                                                      
CHAIR  ELTON said  Ms. Barrans  has touched  on some  significant                                                               
issues  that the  committee  will  be getting  into  in the  near                                                               
future. He  added that her use  of the term "cash  poor" was very                                                               
good; he thinks the commission  also has some challenges in terms                                                               
of being cash poor.                                                                                                             
8:18:17 AM                                                                                                                    
SENATOR  HUGGINS asked  Ms. Barrans  what amount  of bonding  the                                                               
commission is looking at.                                                                                                       
DIANE BARRANS  said they hope to  bond for about $100  million in                                                               
the  next  successful  issue.  Their  federally  guaranteed  loan                                                               
volume  has  increased over  50  percent,  which is  attributable                                                               
primarily  to  other lenders  leaving  the  program for  economic                                                               
SENATOR HUGGINS  asked Ms.  Barrans to  refresh his  memory about                                                               
the  loan-forgiveness  program the  division  used  to offer  for                                                               
DIANE BARRANS  confirmed that the Teacher  Education Loan Program                                                               
still exists;  it is a very  small program and the  loans are 100                                                               
percent  forgivable.   To  be  eligible,  a   student  must  have                                                               
graduated   from  high   school  in   Alaska,  be   nominated  to                                                               
participate by one of the  rural school districts and must commit                                                               
to teach in  one of the qualifying schools  after graduation. The                                                               
program  has not  been very  successful. Fewer  than one  in five                                                               
students actually complete their degree  in teaching and go on to                                                               
teach in eligible schools; most go on to repay their loans.                                                                     
8:20:17 AM                                                                                                                    
SENATOR  HUGGINS  asked  if  she   would  provide  him  with  any                                                               
information  she  might  have  on what  is  contributing  to  the                                                               
failure rate of that program.                                                                                                   
CHAIR ELTON noted  for the record that the  Department of Revenue                                                               
had  provided  the  committee with  another  fiscal  note,  which                                                               
includes  $25,000  in   contractual  costs.  Deputy  Commissioner                                                               
Burnett was on hand to answer questions.                                                                                        
8:20:57 AM                                                                                                                    
CHAIR  ELTON  said four  people  have  signed  up to  testify  by                                                               
teleconference and  the committee  has only  about 10  minutes to                                                               
hear their testimony.                                                                                                           
8:21:26 AM                                                                                                                    
SAICHI  OBA, Associate  Vice  President,  Student and  Enrollment                                                               
Services,  University   of  Alaska,   Fairbanks,  AK,   said  the                                                               
university  supports  this  bill.   They  have  worked  with  The                                                               
Coalition  of  Student  Leaders this  year  and  last;  President                                                               
Hamilton  has sent  a letter  to  Representative Gara  supporting                                                               
this  bill  and  all  needs-based financial  aid  the  state  can                                                               
8:22:03 AM                                                                                                                    
KARL WING,  Student Body President, Anchorage  Representative for                                                               
The Coalition of Student Leaders,  University of Alaska Anchorage                                                               
(UAA), Anchorage, AK, thanked the  committee for considering this                                                               
bill  and  said  that  students   are  passionate  about  finding                                                               
alternatives to  help them stay in  Alaska; this bill is  one way                                                               
to  keep  Alaska's best  students  in  the state.  Recently,  the                                                               
coalition   approached   the    Anchorage   municipality,   which                                                               
formulated  a resolution  endorsing  SB 33  and  HB 94.  Students                                                               
believe  in  this legislation  and  would  really appreciate  the                                                               
legislature's support.                                                                                                          
8:23:37 AM                                                                                                                    
RYAN  BUCHHOLDT,   Student  Senator,  Union  of   Students,  UAA,                                                               
Anchorage, AK,  is also a  student who has  to work full  time in                                                               
order to pay for college. Many  students are forced to do that in                                                               
order  to pay  the rising  costs of  tuition, books,  housing and                                                               
food. This  reduces the  amount of  time they  have to  devote to                                                               
their studies,  which results in  lower grades and/or  a complete                                                               
lack of sleep,  as well as delaying graduation.  He confided that                                                               
he should have  graduated last year, but because he  has not been                                                               
able to devote full time to  his education, he won't graduate for                                                               
two  years. This  bill not  only provides  the opportunity  for a                                                               
college education  to those  who could  not otherwise  afford it,                                                               
but keeps them  here in Alaska to help staunch  the "brain drain"                                                               
and  add  to a  well-educated  workforce.  There is  an  economic                                                               
benefit to the  state, as most studies show that  a person with a                                                               
four year degree earns approximately  a million dollars more over                                                               
the course of his life [than a person with less education].                                                                     
8:25:40 AM                                                                                                                    
DANA   THOMAS,  Professor   of  Statistics,   Assistant  Provost,                                                               
University  of Alaska  Fairbanks (UAF),  Fairbanks, AK,  supports                                                               
this  bill. He  pointed out  that Alaska  has the  lowest college                                                               
participation rate  in the nation  among low income  families; it                                                               
is 51 out of 51 when the  District of Columbia is included. It is                                                               
clear that  low income families  generally appear to  be spending                                                               
their permanent  funds on the basic  needs of the family  and not                                                               
saving  for their  children's college  education. What  would the                                                               
committee  members  do for  their  families,  he asked,  if  they                                                               
earned less than $20,000 per year; where would that money go?                                                                   
MR. THOMAS  said the University  of Alaska Fairbanks  conducts an                                                               
independent  study  called  the  "  National  Survey  of  Student                                                               
Engagement,"  which   indicates  a  much  higher   percentage  of                                                               
students working  than in other  institutions nation wide;  it is                                                               
well known  that students who  work more  than 20 hours  per week                                                               
have  a   significantly  lower  graduation  rate.   UAF  freshman                                                               
retention is comparable to some  of the best liberal arts schools                                                               
in the nation  at about 75 percent, but the  graduation rates are                                                               
low  compared  to  other  schools.  A  detailed  study  by  UAF's                                                               
institutional  research shows  that students  drop out  when they                                                               
have  accumulated about  $10,000  in debt.  Clearly,  cost is  an                                                               
issue and this  needs-based support, which is  also largely based                                                               
on merit, is the right direction to go.                                                                                         
8:28:00 AM                                                                                                                    
SENATOR HUGGINS asked  if Mr. Thomas is familiar with  the new GI                                                               
MR. THOMAS said he is; it is a wonderful new addition.                                                                          
SENATOR HUGGINS  asked if Mr.  Thomas would compute  a projection                                                               
of the  number of students who  could benefit from a  transfer of                                                               
benefits from that GI bill.                                                                                                     
MR. THOMAS said he would look into it.                                                                                          
8:28:31 AM                                                                                                                    
STEPHANIE ASHLEY,  Student Body President,  Juneau representative                                                               
to  the  Coalition  of  Student  Leaders,  University  of  Alaska                                                               
Southeast (UAS),  Juneau, AK, supports  SB 33. She  will graduate                                                               
this year with  over $54,000 in loan debt. She  was slightly over                                                               
the qualifying  income for a Pell  grant; so she did  not qualify                                                               
for any federal  grants. This bill, based on  merit and financial                                                               
need, is something  she would definitely have  taken advantage of                                                               
and she strongly supports this legislation.                                                                                     
8:30:11 AM                                                                                                                    
CHAIR ELTON  closed public testimony on  SB 33 and held  the bill                                                               
in committee.                                                                                                                   

Document Name Date/Time Subjects
Facts about Financial Aid.PDF SEDC 2/9/2009 8:00:00 AM
SB 33 lttr Fabian Philipp.pdf SEDC 2/9/2009 8:00:00 AM
SB 33
SB 33 Sponsor Statement.doc SEDC 2/9/2009 8:00:00 AM
SB 33
SB33 Sectional.pdf SEDC 2/9/2009 8:00:00 AM
SB 33
SB033-EED-ACPE-02-05-09.pdf SEDC 2/9/2009 8:00:00 AM
SB 33
SB33 Report Card.PDF SEDC 2/9/2009 8:00:00 AM
SB 33