Legislature(1995 - 1996)

03/29/1996 09:04 AM HES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                 SB 301 POSTSECONDARY EDUCATION                               
 Number 002                                                                    
 CHAIRMAN GREEN called the Senate Health, Education and Social                 
 Services (HESS) Committee to order at 9:04 a.m. and introduced                
 SB 301  as the only order of business before the committee.                   
 MIKE TIBBLES, Staff to Senator Green, informed everyone that he               
 would go through the proposals of the Executive Order (EO) and                
 explain how they have been changed in SB 301.  The executive order            
 proposed that the higher education and policy planning functions be           
 transferred to the Department of Education.  Mr. Tibbles noted that           
 some of those functions have become obsolete, are no longer                   
 required, and have been repealed from federal law.  Those obsolete            
 functions have been removed.  The advisory functions have been left           
 with the commission which will remain in tact.                                
 SENATOR SALO inquired as to what section that referred.                       
 MIKE FORD, Attorney with the Division of Legal Services, explained            
 that functions relating to postsecondary institutions were left               
 with the commission.  Page 18 of the draft CS is where this is                
 located.  He noted that there are numerous differences between the            
 draft CS and the EO.  Some functions of the commission are                    
 transferred to the existing corporation while others are being                
 placed in the Department of Education and some are left with the              
 commission.  Mr. Ford said this is an effort to maintain                      
 legislative confirmation of members to the commission, to transfer            
 the loan functions to the corporation.                                        
 CHAIRMAN GREEN mentioned that the task force had discussed the need           
 to specify a difference between the institutional authorizations              
 and loan approvals.                                                           
 Number 077                                                                    
 MIKE TIBBLES referred Senator Salo to Section 46 in answer to her             
 question.  The EO proposed to move the Alaska Student Loan                    
 Corporation to the Department of Revenue which SB 301 does.  The              
 proposed increase in the corporation's board membership from 5 to             
 7 is accomplished as well as adding three non voting members.  The            
 three non voting members consist of one student and a legislator              
 from each body.  Therefore, the majority of the board will consist            
 of public members rather than agency individuals.                             
 EO 97 also proposed to eliminate the special interest positions               
 which SB 301 does with specific language.  EO 97 proposed to move             
 the financial aid program administration and institutional                    
 authorization functions from the commission to the corporation.               
 SB 301 leaves the institutional authorization with the commission,            
 but SB 301 moves the financial aid program and administration to              
 the corporation.                                                              
 CHAIRMAN GREEN said that the intent with SB 301 was to take                   
 everything from EO 97 possible and place it in the bill with                  
 legislative oversight and separate the institutional authorization            
 and the financial aid program.                                                
 Number 123                                                                    
 SENATOR SALO inquired as to what portions of the EO are not                   
 encompassed in SB 301.                                                        
 MIKE TIBBLES pointed out that SB 301 allows the commission to                 
 remain in tact with the institutional authorization in order to               
 give the commission regulatory authority.                                     
 MIKE FORD mentioned that Section 2 of SB 301 gives the University             
 of Alaska the authority to run the WAMI program which the                     
 commission currently runs.  Mr. Ford pointed out that some sections           
 in SB 301 are clean-up from SB 123.  Section 12 changes the amount            
 of the loan a full-time undergraduate and a full-time graduate                
 student can receive.                                                          
 Mr. Ford informed the committee of a suggestion regarding the ties            
 between the two boards.  The commission and the corporation are the           
 same people.  In the draft CS of SB 301, the members of the                   
 commission consist of the voting members of the corporation.  He              
 emphasized that the goal is to maintain legislative oversight of              
 the loan process by having the power of legislative confirmation              
 over the commission members.  Mr. Ford suggested that the language            
 be changed so that the corporation members consist of the                     
 commission members in order to avoid the dilemma of an unconfirmed            
 commission member.                                                            
 CHAIRMAN GREEN inquired as to where the language would need to be             
 MIKE FORD pointed out that the board of the corporation is in                 
 Section 4, the board of the commission is in Section 44. The                  
 language should be reversed in those two sections.  The corporation           
 should consist of the voting members of the commission.  Mr. Ford             
 also noted that a substantive change was made in Section 22 which             
 left in an existing provision of law on page 9, line 19.  The same            
 issue occurs in Section 30 of SB 301 and that too should be                   
 changed.  Mr. Ford believed that the fees are subject to                      
 appropriation and that language should be in the bill.                        
 Number 232                                                                    
 SENATOR SALO inquired as to the effect of moving the WAMI program             
 into the university.  Senator Salo noted that every year there has            
 been debate over the funding for this program.  Will this pass on             
 the obligation without the money?  MIKE FORD clarified that the               
 power of appropriation will remain.  Mr. Ford did not envision any            
 change other than who receives the funds.                                     
 CHAIRMAN GREEN mentioned that the concern was that currently there            
 are two separate budget items which pertain to WAMI one being in              
 the Department of Education and the other in the university.                  
 Chairman Green said that the university should handle the program             
 if the program is a valid university and state program.  She                  
 inquired as to who made the request for this change.                          
 REPRESENTATIVE BUNDE said that he made the request.  Currently,               
 there are two different funding communities for the same program              
 and this would simply consolidate the program.  The program would             
 not be changed at all.  This is pass through money after the first            
 year; the university instead of postsecondary education would pass            
 the money to the University of Washington.                                    
 SENATOR SALO felt that the WAMI funding would be more vulnerable              
 under this arrangement because of the pressures on the university's           
 budget.  She noted her support of the WAMI program.                           
 REPRESENTATIVE BUNDE said that if Senator Salo meant vulnerable in            
 the sense that the actual cost of the program would be more                   
 evident, he would agree.  He believed the debate over whether the             
 state can afford to fund WAMI will continue.  Representative Bunde            
 felt that placing the funding in a single budget item would clarify           
 the debate by showing the cost of the program in one item.                    
 MIKE FORD informed the committee that there are a number of changes           
 encompassed in SB 301 and the committee should have a sectional               
 analysis specifying the technical changes.  He said that he had               
 previously pointed out the substantive changes.  There are some               
 clean-up provisions removing many provisions that are no longer               
 required under federal law.                                                   
 CHAIRMAN GREEN asked if that, the repealers, was contained in                 
 Section 55.  MIKE FORD replied no, part of the repealers are                  
 contained in Section 55.  The repealers are in many provisions                
 relating to the existing functions of the commission, references,             
 and the relationship between the commission and the corporation               
 which are no longer necessary.                                                
 Number 298                                                                    
 SENATOR MILLER moved that Ford workdraft 3/28/96, version C be                
 adopted in lieu of the original bill for discussion purposes.                 
 Hearing no objection, it was adopted.                                         
 SENATOR SALO recommended that the committee review the suggestion             
 regarding which board creates the other board.  This probably is              
 not the final workdraft.  SENATOR MILLER agreed.                              
 DIANE BARRANS, Executive Director of the Alaska Commission on                 
 Postsecondary Education and Executive Officer of the Alaska Student           
 Loan Corporation, noted that the commission has worked with                   
 Representative Bunde, Representative Toohey, and Senator Green on             
 this draft; however, that does not mean that SB 301 would be an               
 ideal situation.  Ms. Barrans said that the commission has always             
 been committed to making the necessary changes for the success of             
 the loan program.  The EO would have consolidated all agency                  
 functions under one board with a clear focus on the general welfare           
 of the program and its customers.  Ms. Barrans acknowledged that SB
 301 does accomplish some positive changes such as separating the              
 institutional authorization function by placing that function in              
 the Department of Education and moving the administration of the              
 loan fund to the Department of Revenue.  The question still                   
 remains: why are two boards necessary?  Under SB 301, the                     
 inefficiencies of a state agency having to administer the function            
 of two distinctly separate bodies would remain.                               
 Ms. Barrans echoed the benefits of SB 301 which Mr. Tibbles and Mr.           
 Ford previously mentioned.  The change in the number of board                 
 members would provide some cost reduction.  Furthermore, arranging            
 meetings and doing corporation business would be easier.  All of              
 the AS 14.43 functions and administration of the loan fund would              
 also be consolidated with the administration of the loan finances.            
 Moving the institutional authorization function to the Department             
 of Education would clearly separate that activity as well as the              
 liability from the fund.  Ms. Barrans also reiterated the clean-up            
 language that eliminates the outdated or unnecessary language which           
 was not possible under the EO.  Ms. Barrans believed that the                 
 Department of Education is working on a fiscal note reflecting the            
 cost of managing the institutional authorization function as well             
 as the commission board.  SB 301 does provide for the assessment of           
 fees in order to offset the cost to the department.  Ms. Barrans              
 indicated that the department would pass along the cost of                    
 regulation to the regulated bodies.  Currently, that function is              
 funded through corporation receipts.  Due to the indenture and                
 covenants on the bonds, the transfer of the current funding source            
 for those activities is not possible.  Ms. Barrans offered to                 
 answer any questions.                                                         
 Number 366                                                                    
 SENATOR SALO inquired as to Ms. Barrans reaction to changing who is           
 a subset of who regarding the corporation and the commission.                 
 DIANE BARRANS said that this was the first discussion of such and             
 she would have to consult with the Bond Council.  Ms. Barrans                 
 expressed concern that the business of the corporation must                   
 continue even with the process of legislative confirmation.                   
 SENATOR SALO requested an explanation of the general fund or                  
 corporation receipts to which Ms. Barrans previously referred.                
 DIANE BARRANS explained that the institutional authorization                  
 function works out of the Anchorage office.  Those employees                  
 administer student financial aid compliance reviews as well as                
 institutional authorization reviews which achieves efficiency.  Ms.           
 Barrans estimated that the staffing costs for institutional                   
 authorization alone would total about $125,000 per year.  The dual            
 activity of the staff may allow institutional authorization to be             
 administered more efficiently than under the Department of                    
 Education.  Currently, the Department of Education does not have              
 staff to look at postsecondary institutions.                                  
 SENATOR SALO asked if Ms. Barrans meant that there is a problem               
 with the bond.  DIANE BARRANS explained that there are covenants on           
 the bonds.  That revenue, corporation receipts, funds all of the              
 activity.  Therefore, only functions related to the student loan              
 program can be financed.  The institutional authorization function            
 has been done without general fund support, but staff has done                
 institutional authorization functions as well as loan functions.              
 SENATOR SALO suggested that if this function is transferred to the            
 Department of Education and that employee is given other duties               
 within the department, there would be a problem with corporate                
 receipts paying for that.  DIANE BARRANS agreed.  Ms. Barrans                 
 emphasized that it is not an option to transfer staff funding or              
 revenues with this.  Perhaps, the positions could be transferred.             
 Ms. Barrans estimated that it would amount to 1.3 full-time                   
 positions in order to administer institutional authorization.  Ms.            
 Barrans reiterated that SB 301 does provide for the assessment of             
 fees on the regulated institutions to offset or cover the cost of             
 the function.  Long-term there should be a program receipt offset             
 to pay for the function.                                                      
 Number 419                                                                    
 SENATOR SALO inquired as to how that would work.  Senator Salo                
 asked if that meant paying for an evaluation authorization under              
 the program as a postsecondary institution.  DIANE BARRANS replied            
 yes.  Currently, there are fees associated, $100.  Other states               
 charge fairly substantial authorization fees.  Ms. Barrans said               
 that this is similar to occupational licensing.  Regardless of the            
 passage of SB 301, Ms. Barrans hoped that under the Governor's fees           
 bill there will be an opportunity to take this function off of the            
 corporation receipts and have program receipts to fund this                   
 CHAIRMAN GREEN was confused.  She thought that this workdraft was             
 brought forward by Ms. Barrans and Ms. Williams to the committee.             
 She was troubled by this very different reaction to the workdraft             
 that Chairman Green heard in the subcommittee last week.  Has                 
 something changed since that time?                                            
 DIANE BARRANS said that nothing had changed.  She reiterated that             
 SB 301 does contain advantages and improvements to the program.               
 Ms. Barrans pointed out that she has consistently supported a                 
 single board.                                                                 
 CHAIRMAN GREEN asked Ms. Barrans if she had determined language               
 creating a single board with legislative confirmation.  DIANE                 
 BARRANS replied no.  That is why SB 301 is before the committee               
 CHAIRMAN GREEN stated that the legislature feels the need for                 
 confirmation.  DIANE BARRANS said that Kathleen Strasbaugh may want           
 to speak to that.  Ms. Barrans pointed out that the commission has            
 performed these functions for 21 years and without legislative                
 confirmation.  With the two ex officio members on the corporation             
 board, there is a voice - if not a vote - from both the House and             
 the Senate.  Ms. Barrans indicated that may be why the confirmation           
 issue has not been pressed.  The language has been present for the            
 commission's 21 years, but no general public members have been                
 CHAIRMAN GREEN pointed out that there was also more strict criteria           
 regarding who the members would be or represent.  Chairman Green              
 believed there was an interest to reach confirmation.  She                    
 expressed interest in developing a method to which Ms. Barrans                
 SENATOR SALO did not believe that the interest in legislative                 
 confirmation was universal for the legislature.  Senator Salo was             
 interested in developing the best governing body which could                  
 function without disruption.  She agreed that legislative input may           
 be desirable, but it may be problematic to create a situation in              
 which the board cannot function for any period of time.  The                  
 language must ensure that the corporation maintains a good bond               
 rating and can function amidst political upheaval.  Senator Salo              
 felt that it was more important for the governing body to be able             
 to clearly function rather than for the legislature voting on the             
 membership of the body.                                                       
 DIANE BARRANS believed that the commission's preferred approach has           
 been consistent on this issue.  She believed there to be an ernest            
 effort to improve the program and a bill that could be debated and            
 discussed with regards to the best interest of the loan program.              
 Number 482                                                                    
 KATHLEEN STRASBAUGH, Assistant Attorney General in the Department             
 of Law, informed the committee that the confirmation of the board             
 poses constitutional problems.  The board has not been subject to             
 confirmation in the past 21 years because the enforcement                     
 activities of the board were somewhat less than a majority of the             
 activities of that commission.  Ms. Strasbaugh pointed out that               
 governors of both parties have been willing to overlook the                   
 constitutional violation in legislative membership on any such                
 board.  This dual office holding has been tolerated because there             
 was not a confirmation process and the legislature was allowed to             
 Ms. Strasbaugh stated that she had mispoken yesterday and neither             
 the PERS or TERS board are subject to confirmation.  Members of the           
 TERS board are subject to confirmation because they are the                   
 personnel board.  Currently, postsecondary is an open                         
 constitutional question due to the smaller role their current                 
 activities play in their overall activities.  SB 301 would maintain           
 two boards solely for the legislature to indirectly confirm the               
 members of the loan corporation.  Loan corporations are not subject           
 to confirmation which was determined early in the constitutional              
 juris prudes in two cases in 1963 and 1969.  There is a specific              
 constitutional definition of which boards are subject to                      
 confirmation.  Ms. Strasbaugh said that the argument against                  
 confirmation is made substantial due to the lack of confirmation              
 over these 21 years.  Ms. Strasbaugh emphasized that the only                 
 reason for the second board is to reach the corporation which would           
 not otherwise be possible constitutionally.  In Ms. Strasbaugh's              
 opinion, the postsecondary commission is not a confirmation board             
 in the present workdraft.  There have been dual boards, PERS and              
 the personnel board who was also the Labor Relations Agency.  In              
 this case, the corporation is supposed to be separate so that its             
 assets are only subject to liability and not the full faith and               
 credit of the state.                                                          
 SENATOR SALO said that the workdraft before the committee                     
 establishes that the corporation board is subject to confirmation.            
 KATHLEEN STRASBAUGH replied not directly.  If the corporation board           
 is the postsecondary board or vice versa, only the postsecondary              
 board is subject to confirmation.  Ms. Strasbaugh emphasized that             
 in name the student loan corporation is not before the legislature;           
 however, if the statutes say they are the same people then in                 
 essence the student loan corporation is being confirmed.                      
 Number 536                                                                    
 SENATOR MILLER commented that this has been an ongoing discussion.            
 The other argument is that the framer's of the constitution                   
 probably never envisioned the semi-public corporations of today who           
 control billions of dollars of state assets.  Perhaps, the                    
 constitution may have been written differently if this had been               
 envisioned.  Senator Miller inquired as to the time when the                  
 legislature would be involved with the billions in state assets,              
 the assets of the people of Alaska.  He mentioned that there are              
 some constitutional amendments that would change part of that.                
 KATHLEEN STRASBAUGH clarified that she was present to point out               
 that this is a constitutional problem and must be addressed in a              
 constitutional fashion.                                                       
 SENATOR MILLER noted that there were a few recommendations on                 
 CHAIRMAN GREEN asked if Mr. Ford had the language for the changes.            
 MIKE FORD said that there were a number of minor issues that were             
 pointed out in House HESS yesterday.  There was a recommendation to           
 change "program to "programs" on  page 4, line 21.  Also there was            
 a recommendation to delete subsection (b) of Section 6 in order to            
 allow the attorney general to be legal counsel.                               
 KATHLEEN STRASBAUGH interjected that there is a process that the              
 attorney general is supposed to approve legal contracts which                 
 almost every statute includes without the second section.  She felt           
 that subsection (b) might create confusion about the procurement              
 code requirements regarding legal counsel.  Deleting subsection (b)           
 removes any ambiguity, but is does not prohibit access to private             
 CHAIRMAN GREEN specified lines 29 and 30 on page 4.                           
 MIKE FORD directed the committee to page 13, line 30 where it was             
 suggested to insert the "subject to appropriation" language.  Mr.             
 Ford suggested that the existing approach to the commission and the           
 corporation should be reversed in order to be clear that if a                 
 member of the commission is not confirmed, the person could not sit           
 on the corporation board.  Mr. Ford did not believe there would be            
 any greater a disruption than currently because the current members           
 of the corporation are subject to confirmation as commissioners.              
 Number 580                                                                    
 SENATOR LEMAN said that Amendment 1 consists of the following:                
 page 4, line 21 delete "program"  insert "programs", delete                   
 subsection (b) under Section 6, page 13 reinsert "subject to                  
 appropriation."  Senator Leman moved Amendment 1.                             
 SENATOR SALO inquired as to where the "subject to appropriation"              
 language was located.                                                         
 CHAIRMAN GREEN directed Senator Salo to page 13, line 30.                     
 Reinserting the language would make it consistent with the language           
 on page 9.                                                                    
 TAPE 96-25, SIDE B                                                            
 SENATOR SALO said that she would appreciate another workdraft which           
 incorporated the amendments.  She indicated that she would like               
 more time with the bill.                                                      
 CHAIRMAN GREEN said that was her intention.  Chairman Green                   
 requested that the workdraft clarify the language regarding the               
 boards.  She invited Ms. Barrans to give input on this.  Chairman             
 Green said that she had intended to incorporate everything possible           
 from the EO with input from everyone involved.  She reiterated the            
 importance of confirmations and addressing the issue before it                
 becomes a problem.                                                            
 DIANE BARRANS pointed out that her charge was the well-being of the           
 student loan fund.  There are issues larger than this that Senator            
 Miller has addressed; Ms. Barrans said that debate was beyond her             
 CHAIRMAN GREEN asked Ms. Barrans to stay in touch so that another             
 draft could be ready for Monday.                                              
 DIANE BARRANS pointed out that page 17, line 25 of Section 44                 
 refers to the commission as the Alaska Postsecondary Education                
 Commission while everywhere else the bill refers to the commission            
 as the Alaska Commission on Postsecondary Education.                          
 MIKE FORD said that as long as the language is consistent it would            
 not matter; the commission could be referred to in either manner.             
 Mr. Ford asked if Mr. Barrans had a preference.                               
 SENATOR LEMAN inquired as to how the letterhead was printed.  DIANE           
 BARRANS said Alaska Commission on Postsecondary Education.                    
 Number 549                                                                    
 CHAIRMAN GREEN inquired as to Ms. Barrans' view on the WAMI and               
 WITCHE programs.  DIANE BARRANS noted that the commission has been            
 supportive of the WAMI program over the years.  Ms. Barrans                   
 expressed concern with the effort to make the WAMI program at least           
 partially a loan program.  The university is not organized to                 
 administer a loan program, but if that is the desired direction of            
 the program then Ms. Barrans believed it appropriate to leave that            
 with the agency which administers loan programs.                              
 CHAIRMAN GREEN requested that Ms. Barrans review the reasoning for            
 creating one line item for these programs.  DIANE BARRANS explained           
 that historically, the program began its first year on the                    
 Fairbanks campus as a State of Alaska program.  Currently, there is           
 a contract between the State of Alaska, the University of                     
 Washington, and the University of Alaska.  When the Fairbanks                 
 campus reorganized and downsized, the Fairbanks campus said that it           
 could not afford to have the program.  For a couple of years, the             
 entire four years of the program was in Seattle.  Then the                    
 University of Alaska decided that it would make sense for them to             
 have a biomedical program as well as the nursing program.  The                
 first year's funding in the University of Alaska's budget is                  
 dedicated to the biomedical program which is the first year                   
 training for the WAMI program.  Ms. Barrans clarified that since              
 the program is a State of Alaska program, the commission is the               
 agency that funds State of Alaska student aid programs so that the            
 second, third, and fourth year funding was placed in the                      
 commission's budget.  This was to ensure the funding would be                 
 independent from the university since the funding would not be used           
 on campus.                                                                    
 CHAIRMAN GREEN surmised that it would not necessarily be                      
 inconsistent that the funding be located in the university budget.            
 If the university has the first year, then it would not be                    
 inconsistent for the university to have the following years.  DIANE           
 BARRANS replied not necessarily.                                              
 SENATOR SALO noted that there are advantages to the state and there           
 are involvements between Alaska and Washington which go beyond the            
 tuition of the students in the medical program.  Therefore, Senator           
 Salo was leery of all the funding being placed in the university              
 budget.   Senator Salo did not believe the program would survive in           
 the university budget in the same way due to the pressures the                
 university faces.  She indicated that the connection between the              
 medical community in Alaska and a major medical hospital and                  
 university and the consultations are advantageous to the entire               
 state.  That advantage has very little to do with the students in             
 the program or the university.  Some of the functions of the                  
 program are a partnership between the states rather than between              
 the two universities.  For these reasons as well as the                       
 aforementioned possibility of the program moving to a loan status,            
 Senator Salo wanted to have more time with the bill.                          
 DIANE BARRANS informed the committee that the University of                   
 Washington School of Medicine does view itself as our regional                
 medical school as a state.  The relationship is broader than only             
 a relationship with the University of Alaska-Anchorage (UAA).  The            
 University of Washington has worked with the biomedical staff of              
 UAA and medical professionals in Anchorage for the last three years           
 in order to establish a family medical residency program.                     
 Number 489                                                                    
 SENATOR LEMAN asked if Amendment 1 was adopted.  CHAIRMAN GREEN               
 said that Amendment 1 was adopted.  Chairman Green explained that             
 Mr. Ford would include the remaining changes in the next workdraft.           
 SENATOR LEMAN asked if there was an existing student member on the            
 board and is this the same procedure.  Are there other universities           
 or colleges which offer course work; are those excluded by the                
 DIANE BARRANS explained that the institutions that are listed are             
 four year institutions that are public or nonprofit.  There is                
 another institution that has a junior college program.  Ms. Barrans           
 did not believe there to be an organized student government on any            
 other school campus than those listed.                                        
 SENATOR LEMAN noted that Whalen Baptist College exists.  What is              
 the rationale for naming only the ones in the bill?  DIANE BARRANS            
 said that she could explore the possibilities.  This structure has            
 been the most efficient structure providing nominees.                         
 CHAIRMAN GREEN interjected that it does not have to be limited to             
 those listed in the bill; it is merely the nominee.  She believed             
 that making the language more inclusive would be better.                      
 SENATOR LEMAN agreed with the list, but he wondered if it excluded            
 other nominees from being considered.  Senator Leman asked that               
 issue be reviewed.                                                            
 MIKE FORD said that it could be described generically as a four               
 year public or nonprofit institutions submit nominees.                        
 DIANE BARRANS suggested that the definition include language that             
 the institution have an organized student government in order to              
 ensure that the student be representative of the student body from            
 which they come.                                                              
 MIKE FORD asked if the committee wanted that change.  CHAIRMAN                
 GREEN said yes.                                                               
 CHAIRMAN GREEN said that this bill would be before the committee on           
 Monday as well as HB 465 and HB 540.                                          

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