With less than a week left in a special session and three weeks until Alaska’s government shuts down, some of the biggest issues to be decided by the Legislature and Gov. Mike Dunleavy are far from resolved. And although that may seem like nothing new, it could be a big deal for Alaskans if no resolution is reached about the state budget, Permanent Fund dividend and other items of contention. Here’s a short list of what’s still up in the air.
A political football that has defined Gov. Dunleavy’s first several months in office and poisoned the Legislature’s budget discussions, the Permanent Fund dividend has been the fundamental issue stymying resolution of the special session. Gov. Dunleavy said he’ll veto any dividend that is below the full statutory amount. That would mean a dividend check this year in excess of $3,000 per eligible Alaskan, for a total PFD expenditure of about $1.9 billion. Because the Legislature’s operating budget is far more modest in its cuts and transfers from local government revenue than the governor’s plan, that would mean spending at a substantial deficit. Even the alternative plan favored by some legislators, which would pay a $1,600 dividend (the same amount as last year under the percent-of-market-value plan formula established by Senate Bill 26),would mean deficit spending, albeit a considerably smaller amount. Proponents of both amounts point to established law on their side, and both claim to be more responsible. The reality is that this is an ideological battle, not a legal one, over the role of the PFD in Alaska life. It’s an important conversation for the state to have, but the level of entrenchment on the issue makes a government shutdown a real risk.
A government shutdown
If a budget isn’t passed by the Legislature and signed by the governor before July 1, Alaska’s government will shut down. Like federal government shutdowns, this would have some immediate impacts and others that Alaskans will feel the longer the shutdown is in effect. What’s more, if the Legislature and governor can’t come to terms by the end of this week, layoff notices will be sent to thousands of state employees. The economic impact of thousands of laid-off government employees in Alaska will quickly affect not just those employees and their families, but also the economy more generally, as the state is one of Alaska’s largest employers.
A variety of state services will be curtailed or stop entirely if the government shuts down. As the ADN has previously reported, ferry service could halt, and the Whittier tunnel would likely close. Sport and commercial fishing openings regulated by the Department of Fish and Game would be interrupted. State parks and campgrounds would close. And a host of administrative functions performed by the state would be put on hold, such as the issuance of marriage and birth certificates — and, ironically, potentially even processing of Permanent Fund dividends.
An education crisis
Related to the budget fight but also separate from it is a constitutional crisis that could lead to a school shutdown in the coming year. Gov. Dunleavy has refused to disburse funds for education passed last year as part of a two-year forward-funding plan for state schools — he says passing elements of a budget more than a year in advance of when they would be spent unconstitutionally allocates revenue and restricts the governor’s ability to exercise veto power(the two-year education allocation was approved by former Gov. Bill Walker). The Legislature, for its part, holds that its forward-funding was a legitimate exercise of its allocation powers, and the fight is likely headed to court. Absent an injunction that mandates funding while the suit is pending, it could mean no funds for schools until the matter is settled. Gov. Dunleavy and the Legislature must ensure that doesn’t happen; the constitutional question is important to sort out, but not at the expense of the education of a generation of Alaska’s children.
No fiscal plan
One of the most disappointing aspects of the current state of affairs is that a year after the same debacle played out last year (and five years after the oil price slump that caused the current fiscal crisis), we appear to be no closer to a long-term fiscal plan that balances the state’s revenues and expenditures. There is a yawning chasm between the governor’s vision for the state (big PFDs, big cuts to services) and that of the majority caucuses in the Legislature (similar services to present levels, reduced PFDs). That’s a reflection of an Alaska populace that is sharply divided about whether budget cuts or increased revenues are the better path forward for the state. Although it’s an indictment of our Legislature that they haven’t been able to hammer out a workable compromise instead of kicking the can down the road for another year, it’s their constituents — us — who have driven them to brinksmanship and irreconcilable policy differences. Collectively, we have hard choices to make about what we want and need as a state, and we can’t make progress by digging in our heels and refusing to budge.
Fortunately, there are still weeks left before the worst consequences of the state government’s inability to function efficiently start to take effect. But there’s no time to waste. There could still be a showdown between the governor and Legislature over vetos to the budget or other items, and the ramifications of not having Alaska’s fiscal house in order by the end of the monthare serious. Whatever the resolution, having a plan in place July 1 is better than playing chicken with the state as calamity lies on the horizon.