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Alaska Legislature

Following vetoes, another $300 million in state services is threatened

  • Author: James Brooks
  • Updated: July 2, 2019
  • Published July 2, 2019

JUNEAU — On the heels of Gov. Mike Dunleavy’s decision to veto $444 million from Alaska’s state operating budget, fiscal observers are awaiting the verdict on several hundred million dollars in additional cuts that may be the consequence of a failed vote in the Alaska Legislature.

The failure of the “reverse sweep” vote, as it is known, may leave no money for a swath of programs, including ferry construction, the subsidy for rural electrical costs, and the state’s new tough-on-criminals legislation.

If placed in a lump sum atop Dunleavy’s budget vetoes, said Sen. Natasha von Imhof, R-Anchorage, this prospective defunding amounts to “scorched earth.”

Von Imhof was the only official willing to estimate the impact.

“In terms of what those funds fund across the capital and operating (budgets) … it’s about $323 million worth of programming and services,” she said.

It could be more than that. The issue for lawmakers and state officials is that the failure of the vote is so unprecedented, no one has a firm grasp on the scale of the defunding or how much money will be involved.

“We’re dealing with stuff we’ve never dealt with in the past,” said House Minority Leader Lance Pruitt, R-Anchorage.

The operations of state government rely on dozens of savings accounts used to pay for particular programs. Under a 1990 amendment to the state constitution, all of those accounts are supposed to be swept at the end of each fiscal year into the state’s Constitutional Budget Reserve.

But lawmakers rely on those funds when they build the state’s operating and capital budgets. This year, for example, the capital budget calls for the state’s Power Cost Equalization Fund — normally used to subsidize rural power costs — to also pay for House Bill 49, the state’s new tough-on-criminals legislation.

Ordinarily, that constitutional amendment isn’t a problem. Lawmakers get around the automatic sweep with a three-quarters vote that pulls the money right back out of the Constitutional Budget Reserve and back into the savings accounts. It gets swept by the constitutional amendment at 11:59 p.m. June 30, and at 12:01 a.m. July 1, it comes right back to where it was.

This year, the Alaska House minority voted against the reverse sweep as part of a strategy that made the state’s capital budget contingent upon passage of a traditional Permanent Fund dividend. No dividend, no capital budget and no reverse sweep.

“I was under the expectation that everything that was in a fund would be swept,” said Pruitt.

As it turns out, that hasn’t happened. The Office of Management and Budget and the Department of Law are in the middle of redefining and possibly expanding the number of funds covered by the reverse sweep. They’ve also delayed the sweep until mid-August.

“The governor is the one who initiates it,” said Rep. Tammie Wilson, R-North Pole and co-chairwoman of the House Finance Committee.

Wilson speculated that the delay would allow the governor to sign and fund the anti-crime legislation, then let other funding lapse with the sweep.

“When he signs HB 49 (the crime bill), you would think he would want the fiscal notes to be funded,” she said.

In 2018, according to information provided by the Legislative Finance Division, 31 savings accounts containing more than $430 million were preserved by the reverse sweep vote. Now, the administration could be adding the Power-Cost Equalization Fund, used to subsidize rural energy projects, and the state’s education endowment.

In total, von Imhof said, she estimates as much as $1.6 billion in savings accounts could be swept into the budget reserve. Of that, $323 million was earmarked for this year’s budget, she estimates.

“We do not have the list finalized, nor do we know the entirety of the impacts at this time,” said Laura Cramer, deputy director of the Office of Management and Budget, when asked what funds will be swept. “We continue to work diligently through this process with the Departments of Administration and Law. Right now, our best guess for having the full understanding and determination will be mid to late August.”

Until then, Cramer wrote, “I would say it is pretty much business as normal.”

It also becomes yet another matter for the Legislature to debate. The capital budget, of which the reverse sweep is only a part, remains mostly unfunded. Nearly $1 billion in road construction funding, as well as the reverse sweep, is on hold until lawmakers can muster a three-quarters majority.

“That’s a big problem,” said Rep. Harriet Drummond, D-Anchorage. “If we don’t fund the capital budget, there’s going to be big trouble in our transportation system statewide.”

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