A proposed Alaska Constitutional amendment that failed to pass the 28th Alaska Legislature by accident is advancing toward a final vote in the 29th Legislature.
Senate Joint Resolution 2, brought forward by Sen. Anna MacKinnon, R-Anchorage, proposes amending the Alaska Constitution to allow the state to issue general obligation bonds on behalf of the Alaska Student Loan Corporation. The net effect would be to lower the interest rate for student loans taken by Alaskans from the corporation.
“We’re trying to achieve a lower cost in the market,” said Diane Barrans, executive director of the Alaska Student Loan Corp.
Because the state is considered a more reliable borrower than a student with no collateral, it can take on debt at a lower interest rate.
If Alaska has an AAA credit rating, the difference would be 1.2 percent interest for borrowers. At an AA rating, which seems more likely than an AAA rating given the state’s $4 billion deficit, borrowers would save 0.97 percent interest.
SJR 2 would change Article IX, Section 8, which was last changed in 1982 to allow the state to issue bonds to pay for veterans housing.
The constitutional amendment would appear on this fall’s general election ballot if approved by lawmakers. Critically, the amendment only provides authority, not any money. Voters would have to approve the loan program at the polls again in 2018, that time to appropriate money.
In the 28th Alaska Legislature, a version of SJR 2 received widespread support but was pushed to the bottom of the priority list.
“I messed that one up,” said Sen. Charlie Huggins, R-Wasilla and chairman of the Senate Rules Committee in a 2014 interview.
It passed the Senate but didn’t have time to work its way through the House before the Legislature adjourned.
Sen. MacKinnon, then known as Sen. Fairclough, vowed to propose the bill again if she won re-election to her Senate seat. She did, and the proposal is moving more quickly this time around.
It cleared the House Education Committee on Wednesday and will go to the judiciary and finance committees before a floor vote.
While the bill is moving more quickly than its ill-fated predecessor, it’s not a sure bet.
To send a constitutional amendment to voters requires a two-thirds majority on the House floor.
“That is not necessarily going to be an easy one to get,” said Rep. Jim Colver, R-Palmer and a member of the education committee.
Colver and Rep. Liz Vazquez, R-Anchorage and vice-chairwoman of the education committee, said they were concerned that a constitutional amendment is a big action that can’t be easily reversed. Furthermore, Colver and Vazquez said, they’re concerned about raising the state’s debt level.
Article IX, Section 8 specifically allows the Legislature to borrow money without a popular vote to pay for “meeting natural disasters,” and Colver said he worries that the state’s ability to do that would be hampered if its debt level rises too high.
Barrans said by phone that if the amendment passes muster with voters, the corporation would ask for permission to borrow up to $300 million, but it wouldn’t borrow that much to start.
Barrans testified that she expects demand for student loans to rise in the coming years. The state’s deficit means cuts to the University of Alaska, and tuition is expected to rise as a result.
“In the foreseeable future, it is realistic to expect that the university will have to increase tuition, and therefore demand for loans will increase,” Vazquez said in agreement.
The student loan corporation is also planning to begin a program later this year that would allow Alaska students to consolidate all their student loans under the state corporation.
Furthermore, the Senate Finance Committee has proposed eliminating the state’s performance scholarships and need-based scholarships to pay for state retirement programs. That would increase the need for Alaska students to borrow money.
“I would hope that we’d proceed with trepidation about using that as a revenue source,” Colver said Thursday morning about tapping the scholarship fund.
