The meeting of the Interim Joint Committee on Education was held on Monday, June 9, 2008, at 1:00 PM, in Room 149 of the Capitol Annex. Representative Frank Rasche, Co-Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Ken Winters, Co-Chair; Representative Frank Rasche, Co-Chair; Senators Walter Blevins Jr., Gerald A. Neal, R.J. Palmer II, and Jack Westwood; Representatives Larry Belcher, Hubert Collins, Leslie Combs, Ted Edmonds, C. B. Embry Jr., Bill Farmer, Tim Firkins, Jim Glenn, Jimmy Higdon, Charles Miller, Harry Moberly Jr., Russ Mobley, Rick G. Nelson, Tom Riner, Carl Rollins II, Charles Siler, Dottie Sims, David Watkins, Alecia Webb-Edgington, and Ron Weston.
Guests: Clyde Caudill, Kentucky Association of School Administrators and Jefferson County Public Schools, Gary S. Cox, President, Kentucky Association of Independent Kentucky Colleges and Universities; and Hilma Prather, KET.
LRC Staff: Audrey Carr, Sandy Deaton, Janet Stevens, Ken Warlick, and Lisa Moore.
Representative Rasche addressed house keeping issues and welcomed all the members. He noted that the subcommittee memberships for the members were located in the meeting folders.
Representative Collins shared with members that two schools in his district, Johnson County Middle School and Johnson Central High School, became the international future problem-solving champions.
Representative Rasche recognized Hilma Prather from KET in the audience. He then introduced Mr. Malcolm Wall, Executive Director; Mr. Bill Wilson, Executive Director for Education and Outreach; Ms. Kathy Quinn, Director of Education; and Mr. Chuck Duncan, KET Distance Learning Physics Teacher, to present an overview of KET Services. Mr. Wall thanked the committee for the past 40 years of support. He said Kentucky is recognized across the nation for having created and sustained the best model of a statewide education network in America.
Mr. Wall said KET is the only federally licensed and federally regulated state agency. He said the authority, which is chaired by Ms. Prather, hold the licenses that are granted by the FCC. He said Kentucky was among the first statewide networks in the nation to convert to digital transmission and digital production. He also noted the date of February 17, 2009 as the last day for analog television and the official launch of digital television.
Mr. Wall had the members watch several short videos about KET and its services provided to the Commonwealth. Mr. Wall said KET is the only statewide broadcast medium in Kentucky, connecting the Commonwealth and reaching 3.5 million households in eight states. He said more than a million adults and children watch and use KET services each week.
Mr. Wall said KET is Kentucky's most accessible and comprehensive educational institution, and a leading example of how state public television can work with education systems to improve teacher's skills and students' learning. He said more than 800,000 viewers watch one or more of KET's broadcast services every week, and more than 32,000 donors provide loyal support toward advancing KET's mission.
Mr. Wall said KET provides four important assets: access, equity, impact, and engagement. He said KET's top-notch P-12 resources are used by 97 percent of Kentucky schools. All KET classroom resources - including KET EncycloMedia, KET ED, and Arts Toolkits are aligned to Kentucky's academic standards. Teachers report that these resources are having a direct impact in raising student test scores.
Mr. Wall said that 80 percent of Kentucky's teachers are using EncycloMedia in their classrooms, and over 75 percent of Kentucky school districts have applied for the server for it. EncycloMedia is aligned to state standards, and offers thousands of downloads and streamable videos, photos, clip art, quizzes, lesson plans, an interactive atlas, a "this day in history" calendar, and many other resources.
Mr. Wall said the KET Arts Toolkits is an award-winning multi-media project, providing high-quality videos, lesson plans and other resources in dance, drama, visual arts, and music, all aligned to state standards and designed to help teachers integrate the arts into the classroom experience. He said this is a result from the innovative collaboration between Kentucky's arts and education communities and has expanded student experiences and engagement in the arts, boosted teacher preparedness, and improved test scores.
Mr. Duncan showed the members a demonstration of the virtual physics lab. He said KET has offered the distance learning physics class for the last 19 years, and started Advanced Placement and honors physics courses in 2000. He attributed the popularity of the class to the low number of science teachers in the state and the enormous cost of lab equipment in the classrooms.
Mr. Duncan said the new on-line virtual physics lab will be available this year to all Kentucky schools. Each legislator has his or her own ID and password number to be able to navigate the program on-line at the time of his or her choice.
Mr. Wall said KET produces more than 1,200 hours of original Kentucky programming each year, and serves as Kentucky's public forum and celebrates Kentucky's culture. He said KED is delivering local content on multiple digital platforms with more than 6,600 individual episodes of programming available online by videostreaming or podcasting. He also noted that KET produces more than 900 hours of gavel-to-gavel coverage of Kentucky legislative sessions and committee meetings, which is very impressive compared to other states nearby.
Mr. Wall said the KET 2009 fiscal year operating budget of $15.5 million, contains $13.2 million in general funds. Over the last eight years, the general funds have been reduced by $4 million, and most recently cut by $1.8 million, which will certainly challenge KET's services to the public and to the classrooms. He said the cuts in the state budget will initially be absorbed through a 19 percent reduction in personnel, as well as operating reductions across the agency. Personnel cuts of this magnitude will necessitate a structural reorganization in order to bring operations into alignment with available resources.
Mr. Wall said budget reductions through the Council on Postsecondary Education (CPE) will result in the discontinuance of KET services to 4,100 adult students that have been taking college-credit courses via KET. He also said that KET will employ new digital capacities to improve its performance and bring new opportunities to the Commonwealth.
Mr. Wall discussed future challenges for KET. He said that there will be no funds available to replace senior level staff that are retiring from the agency in the summer of 2008. He also said KET must respond to public demands of adding more local content.
Mr. Wall said KET's future involves multiple platforms, including a growth in online content and mobile video. He said KET needs to find $6 million to support the new video content for the new GED test in 2011, and there is great need for an expansion in the production facility.
Representative Rasche asked if KET derived income from the GED online programming. Mr. Wilson said they did and the income is used for three purposes: 1) sales from out-of-state are used for services provided in-state; 2) it is used for future product development; and 3) it is used for other agency type of activities.
Senator Winters said the general population is unaware of some of the great services that KET provides, and the regional opportunities for the colleges is just a tremendous opportunity, including independent universities in certain regions. He stressed for KET and members of the committee to communicate to the institutions of higher education the possibilities provided through KET.
Mr. Wall said the broadband pipe is big enough to create a wireless system statewide. He said the pipe is divided into four channels currently, but the opportunities are rich for the future.
Senator Winters asked if the bulk of the additional financial burdens for KET would be attributed to staffing and manning the regional bureaus, as opposed to production itself.
Mr. Wall said the proposal was to create four regional bureaus, with six employees in each bureau that would cover a 20 - 25 county area. He said the equipment is very small and is a modest investment that could provide wonderful opportunities for these regional bureaus.
Representative Mobley asked what percentage of KET's budgets is derived from corporate and public advertising. Mr. Wall said KET cannot offer commercial airtime, but does offer underwriting opportunities for corporations and businesses at around $600,000 annually.
Representative Glenn taught KET classes at the community college for the last 20 years and was upset to hear that these classes would no longer be available to students in the next year. He asked if KET was moving away from partnering with the community colleges.
Mr. Wall said KET has had a long-standing and a great working relationship with community colleges across the state through the CPE. The CPE was funding the necessary dollars to lease the programs that would be broadcast, but they decided to cut those funds during the last budget session. He said KET would not be able to continue the program past the fall of 2009, even though they would have been delighted to.
Mr. Wilson said since the inception of the program at the community colleges, KET has provided resources to over 138,000 students throughout the state of Kentucky. He also said tuition-assistance generated through the courses was sent back to the respective universities at approximately $2.1 million a year. He said KET experienced great sadness in cutting the program, especially in light of the fact that the budget KET was receiving from the CPE for the program was about $182,000. He noted that KET communicated with the colleges that they could continue the courses on their own. There is still enough carry forward money to continue the telecourses through the fall of 2009.
Representative Glenn said it concerns him that a program is cut from the budget that only cost $188,000, and generated $2.4 million in revenue from tuition that was returned to the university, while servicing 4,000 students. He said these telecourses are the only way some students, particularly pregnant and working women, can complete their college degree without having to travel back and forth to campus. He also said it deeply saddens him at a time when Kentucky is trying to double the numbers of students completing college, that a program could be cut that virtually pays for itself.
Representative Rasche asked if the four channels offered by KET are only available to people whose cable system chooses to air all four as he currently only receives one KET station. Mr. Wall said anyone who has a digital receiver can receive all the channels over the air, and it does not matter whether you have cable or satellite. He also said the cable companies will be required after February 18, 2009, to carry all of KET's multicast services.
Representative Miller thanked KET for the many programs offered in Metro Louisville, and said the state should help KET to upgrade its production facility and move out of the basement of the school in Louisville. He asked if the schools were going to incur the $40 - $60 cost for the converter box needed to go digital, or are most schools' televisions digitally ready. He asked about transition costs to the homes in the community to switch from analog to digital.
Mr. Wall said he believed most Kentucky schools were equipped to go to digital. He said the biggest concern for the homes is the senior citizens that have probably used the same analog television for years and years. They can still use that same television if the converter box is attached. He said there is a coupon available from the federal government to purchase the converter boxes, and they are readily available at commercial outlets across the state. He said another challenge is that the box is not the final solution, as many people because of terrain issues are also going to have to have an antenna to make it work. He said KET is doing the best job of the country in trying to communicate the message to people about what to expect early next year.
Ms. Quinn said Kentucky schools were transferred to digital televisions starting back two or three years ago. She said school paid around $500 for the converter box, and all except for 120 schools in the state were able to access KET's digital signal. She said the other 120 schools were not able to receive the signal due to terrain issues, purchased on-3 boxes, which is a video digital receiver that allows all schools to receive KET programming.
Representative Miller said the GED program on-line is a wonderful program, particularly in Jefferson County. He said the program has facilitated a lot of young people on the path to a good job and higher wages.
Senator Blevins said Kentucky is the only state in the nation to utilize the Arts Toolkits and the physics virtual lab, and wondered if these items or a DVD could be sold to other states to replicate its success.
Mr. Wall said KET owns the products and wants to test them thoroughly, but does see the opportunity to share them on a national platform. Senator Blevins encouraged them to do so.
Representative Rasche introduced Ms. Jo Carole Ellis, Vice President, Government Relations and Student Services, and Mr. Edward J. Cunningham, Executive Director and CEO, Kentucky Higher Education Assistance Authority (KHEAA), to give committee members an update on the status of financial aid in Kentucky. Mr. Cunningham said the organizations that they represent assist thousands of constituents in Kentucky as they achieve the dream for higher education. He is proud of the impact of the programs on individual's lives and wants to share successes and challenges of the program.
Ms. Ellis said Kentucky's three major student financial programs include: the College Access Program (CAP) grant, which provides access to students with financial needs; the Kentucky Tuition Grant (KTG), which offers students with financial need a choice of attending an independent institution; and the Kentucky Educational Excellence Scholarship (KEES), which recognizes student based on grade point averages (GPA's) and ACT scores. She said as set fourth in KRS 154A.130, nearly 100 percent of net lottery proceeds, minus $3 million for literacy initiatives, are earmarked for these programs, with KEES receiving 45 percent, and CAP and KTG, 55 percent.
Ms. Ellis discussed some changes made to the KEES program during the 2008 General Assembly. She said Senate Bill 2 added a new supplemental award to the program for students in high school who are eligible for free and reduced lunch and make qualifying scores on the Advanced Placement (AP) or the International Baccalaureate (IB) exams. The awards range from $200 - $300 and the first disbursements will be made in 2009-2010. The costs of the supplemental awards was not included in the biennial budget for KEES because they were not aware of the change at that time. She said they do not expect a huge impact in the first couple years of the program, but if it is successful in future years as hoped, additional general fund provisions may be needed to pay for the supplemental awards.
Ms. Ellis discussed Senate Bill 75 and the renewal eligibility for college students. She said students with GPAs between 3.0 and 2.5 will still receive full KEES awards if they are "on track to graduate." She said "on-track to graduate" means hours earned compared to hours needed to complete a bachelor's degree by the end of eight terms, or 10 terms if a program requires five years. She also said institutions must add "on-track to graduate" status of students with KEES reporting.
Ms. Ellis explained the fiscal year 2009-2010 biennial budget. She said when KHEAA prepares the biennial budget request, they start out at the current funding level, and then add to the growth request what is projected to be the increase in the Kentucky lottery projections, which leaves the KEES and CAP and KTG 55/45 split. The CAP and KTG programs also include an amount the KHEAA projects as unmet need, which is derived from all the students in the Commonwealth who complete the free application for federal student aid and qualify for CAP and KTG, but the state is out of money to fund their applications. She noted that KEES was fully funded in the final budget for the next biennium, and the CAP grant was basically level funded from where it was this year because KHEAA did not receive the projected increase in lottery funds for CAP or KTG.
Ms. Ellis discussed the CAP and KTG fiscal year projected disbursements and unfunded awards. She said $62.5 million will be disbursed for the CAP amount, but this leaves $54 million in unfunded awards, and $32.5 million will be disbursed for KTG, and $ 4 million will be left unfunded.
Mr. Cunningham discussed the student loans and borrower benefits. He said KHEAA distributed $640 million to student borrowers and their families last year for education finance in the Commonwealth, of which 71 percent represent borrower's loans, primarily, the Federal Family Education Loans (FFELP). The average student borrower in the Commonwealth of Kentucky left school last year with outstanding federal loans of just over $15,000, and this number is increasing although it is less than the national average.
Representative Rasche asked if that figure was for all students or only students who graduated. Mr. Cunningham said the figure was for students who graduated.
Mr. Cunningham said KHEAA managed 70 percent of the federal loans consummated in the Commonwealth last year. He said they are an open lender, and will lend to any student, at any institution, for any program, if the school will certify that student and that loan. He said there is no discrimination and this could be why they demand such a large part of the market. Under normal conditions, loans would be advanced between $400-500 million annually to new and returning borrowers. He said this money is in serious jeopardy this year.
Mr. Cunningham said borrower benefits come in two primary arenas. The front-end benefits that are provided at the inception of a student loan include KHEAA paying the origination costs for the borrower, but KHEAA is required by the Federal Department of Education to collect the one percent guarantee fee and a one percent origination fee. He said KHEAA cannot under legislation charge these fees to the borrower.
He said KHEAA did have a very comprehensive and aggressive back-end benefit program. These programs were developed in conjunction with the legislature because the Commonwealth of Kentucky identified a shortage of specific teachers, nurses, and public service attorneys. The programs were designed to pay interest and partial principal reductions for individuals in the above identified disciplines who stay and work or teach within Kentucky. KHEAA distributed $36.5 million in benefits of loan deductions last year alone, and in the last five years, $147 million has been contributed to loan reductions.
Mr. Cunningham said last year's back-end benefits were $23.3 million and impacted 6,561 qualified applicants, so the average individual received a reduction of approximately $3,500 in their outstanding debt. He explained the different ways in which the loans were financed.
Mr. Cunningham said this past year has been the most tumultuous year he has seen in the last 35 years of the organization's existence. He said in February 2007, the United States Department of Education (USDE) unexpectedly reduced special allowance payments to the Kentucky Higher Education Student Loan Corporation (KHESLC). In September 2007, additional cuts were made with the enactment of the College Cost Reduction and Access Act, which: cut federal subsidies paid to KHESLC; reduced default reimbursements to KHESLC; increased the fees KHESLC pays to the USDE; and reduced account maintenance fees paid by USDE to KHEAA. He said together, these cuts total at least $20 million annually. It also appears a push is under way in Washington to favor the Direct Loan Program.
Mr. Cunningham said KHESLC's net revenue has been severely impacted by the recent "credit crunch" in the financial markets. The tightening of the worldwide credit markets has caused a steep rise in the interest rates KHESLC pays to bondholders while overall earnings have decreased. The total impact is estimated at $15 million for fiscal year 2008.
Mr. Cunningham discussed possible solutions to the student loan liquidity crisis. He said House Resolution 5715 ensures continued access to the Student Loans Act of 2008. This commitment from the USDE ensures that purchase loans from lenders are made or originated for the upcoming 2008-2009 academic year, and provides lenders with short-term liquidity to make loans with the option to sell loans to the department. He also said House Resolution 5914 would utilize the Federal Financing Bank in the Student Loan Access Act, and House Resolution 5723 would utilize the Federal Home Loan Bank in the Emergency Student Loan Market Liquidity Act.
Mr. Cunningham concluded by saying there were no guarantees whether there will be any money available this fall for the thousands of families in the Commonwealth that need help in financing higher education. He said KHEAA remains steadfast in its mission to make higher education more accessible by providing student aid programs, outreach, and low-cost student loans using all available financial resources.
Representative Miller asked a question about a student's GPA and losing KEES scholarships in college. He asked if a student fell below the 3.0 GPA, but above the 2.5 GPA, would he or she lose half of their KEES award for the next year.
Ms. Ellis explained that the change in the KEES money will not affect any students until they enter college in the 2009-2010 year. She said students who make a GPA between 2.5 and 3.0 would lose half of their KEES money in the upcoming academic year. She said the change in KEES would allow a student to not lose the 50 percent if he or she were considered on track to graduate within four years from that particular school.
Representative Miller asked if a student brings their GPA back up to a 3.0, can he or she receive the full amount of the KEES scholarship. Ms. Ellis said a student will receive the full amount at the end of the academic school year.
Representative Rasche said the worst case scenario is that all students are in a direct loan system next year and the best case scenario is that KHEAA is providing just the basic loans next year.
Mr. Cunningham said full funding would be much better than partial funding as many people are going to be unhappy if the system operates as a first come-first serve basis. He said there is a real effort in Washington to take over the system, but he feels the system is better left in control of the Commonwealth.
Senator Neal is trying to understand the rationale of the federal government and the role of California and Massachusetts in making the decisions involving the direct loan system. Mr. Cunningham said the CCRA bill introduced this concept as a way to increase health funding across the board at the expense of the greedy bank lenders. He explained that Kentucky lost income that it would have normally received from USDE and those funds were reallocated within the USDE. He said Kentucky's delegation was split on the vote for CCRA.
Representative Rollins asked if KHEAA had estimates for the total cost of the changes made in the 2008 General Assembly regarding AP/IB exams and the changes to the KEES scholarship fund. Ms. Ellis said she did not have the figures, but said both were relatively minimal, and she will forward the exact numbers to him.
Representative Rollins asked how Kentucky compares to other states in contributions to needs-based and merit aid scholarships. Ms. Ellis said Kentucky compares very well, and is in the top quarter of the states for the percentage of money contributed to those types of programs.
Senator Winters said that Senate Bill 2 proposes to double the number of students taking AP courses, so the assumption is that it will money will be there. He asked for input from the organizations on their thoughts on funding needs-based versus merit aid scholarships. He realizes there is a strong difference of opinion within the General Assembly on the issue, so he would like input from people that work in that field prior to the 2009 General Assembly.
Senator Winters asked about the last dollar program and would like to know if other states are utilizing the program. Ms. Ellis said this program focuses on students receiving money from all eligible sources and then the state funds the remainder of the amount of money still needed for college based upon each student's family budget. She said this is a discussion that is taking place nationally and Kentucky will take a closer look at it. Senator Winters asked for the data KHEAA collects to be shared with the committee members.
With no further business before the committee, the meeting adjourned at 2:50 p.m.