Dunleavy signs capital budget and reverse sweep

Alaska Governor Mike Dunleavy signed Senate Bill 2002, which funds the capital budget for Fiscal Year 2020, into law on Thursday, August 8. An important component of SB 2002 was the reverse sweep, necessary to unlock money from savings accounts swept into the Constitutional Budget Reserve at the end of Fiscal Year 2019. Dunleavy also exercised his line-item veto authority, cutting over $30 million from the budget.
The capital budget includes $73 million for highways and airports and $12 million for rural water and wastewater projects, needed to secure millions in matching federal funds. It appropriates $13.5 million for the Alaska Marine Highway System vessel overhaul and certification necessary to keep the ferries running. Also included in the capital budget is funding for House Bill 49, a criminal justice reform bill that essentially repeals and replaces Senate Bill 91.
In his remarks about the bill, Dunleavy mentioned that it funds grants for homelessness and mental health programs. This is true: there is money for the expansion and relocation of the mental health unit at Highland Mountain Correctional Center as well as for the Alaska Housing Finance Corporation’s Rental Assistance for Victims Program, Homelessness Assistance Program and senior citizen housing. However, among his largest line-item vetoes were $10 million in matching grants for Alaskan addiction treatment facilities. Because these are competitive grants, Paul LaBolle, chief of staff for Representative Neal Foster (D-Nome) said it is impossible to know whether communities in the region would have received them. What is certain, however, is that there is less money for addiction treatment throughout the state as a whole. Additionally, Dunleavy cut $3.6 million from the Alaska Housing Finance Corporation’s Homelessness Assistance Program.
In an earlier response to SB 2002, Dunleavy said he planned to use his line-item veto power “where necessary.” In sum, his cuts to the capital budget totaled $34.7 million. LaBolle said the impact of the vetoes will be revealed over time. While the cuts were significant, the overall response of the budget is that “It’s not as bad as the operating budget,” he said. While the largest cut was to addiction treatment facilities, another significant veto was $5,000 in matching funds for Code Blue Project, which helps rural healthcare providers purchase essential emergency medical services equipment. Dunleavy also vetoed $750,000 from the Alaska Housing Finance Corporation’s Cold Climate Housing Reach Center, which seeks to make energy efficient cold-climate infrastructure. The Denali Commission’s Clean Water and Safe Sanitary Sewer Disposal program was reduced by $200,000. Again, it is unclear where the projects would have been launched, but grants typically go to rural areas. LaBolle pointed out that cuts are not limited to rural Alaska, citing vetoed items such as matching funds for Public and Community Transportation, but Dunleavy’s operating and capital budgets have both been disproportionately tough on remote areas.
Despite this, undoubtedly the biggest news in the capital budget for rural Alaska is good news: the restoration of the Power Cost Equalization Fund. The governor previously said he did not plan to veto the reverse sweep clause, but the sweep was not official—meaning accounts were still empty—until he signed the bill. With his signature, the PCE, a program that provides energy subsidies for rural Alaska residents, is officially funded again. Rural Alaskans saw a spike in their energy bills for the month of July, because the account was empty due to the House’s failure to get the supermajority necessary to pass the reverse sweep vote. August utility bills will likely include PCE credit, according to Nome Joint Utilities System Manager John Handeland. There is the possibility that the Alaska Energy Authority, the entity that runs the PCE program, will administer credit retroactively for the missed month. Handeland said there is nothing official yet, but he will be working to try to provide customers with back pay.
Dunleavy still needs to act on House Bill 2001, which reached his desk on August 7. The governor said that he will be working “diligently and quickly” to make decisions regarding the revised operating budget bill. LaBolle said on Monday he expects Dunleavy will announce his actions later this week.
HB 2001 would reverse about 80 percent of the governor’s line-item vetoes from the operating budget and pay a $1,600 Permanent Fund Dividend check per eligible Alaskan. In an earlier statement, Dunleavy said that while he will review HB 2001, he for the most part plans to stand behind his line-item vetoes. The governor referred to the restoration of funds as “yet another attempt to blow up the size of government.” The governor announced on Tuesday that he plans to restore funds to Alaska Senior Benefits Payment Program, which provides aid for low-income residents 65 and older, and fund Pre-K and Head Start grants. Along with funding the senior benefit program at its previous level, the administration will grant payments retroactively for the month of July.
Dunleavy is also critical of a PFD that is not the size designated by the traditional formula, which comes out to roughly $3,000 this year. In his words, HB 2001 “robs Alaskans of a statutory Permanent Fund Dividend.” Since the Legislature is not currently in session, Dunleavy has 20 days excluding Sundays to decide whether to veto the entire bill, make line-item vetoes, or accept it in its entirety.
Finally, the issue that has loomed over Alaskan lawmakers this summer, the size of this year’s PFD check, has yet to be decided. The governor, members of the House minority as well as a few Senate Republicans and one Democrat, Anchorage Senator Bill Wielechowski, are in favor of using the traditional formula to determine the amount. However, many lawmakers across the political spectrum support a smaller PFD. According to LaBolle, the likelihood of a special session “depends on who you talk to” and will be determined in part according to what Dunleavy decides to do with HB 2001. Speaker of the House Bryce Edgmon and Senate President Kathy Giessel sent a letter to the governor requesting another special session in which to take up the PFD. Dunleavy responded early last week, stating that, at least for the immediate future, he does not plan to call a third special session. Legislators can call themselves in, but this requires that two-thirds of lawmakers agree to do so. The Legislature and governor have until August 31 to come to an agreement on the size of the PFD in order for the checks to be sent out by their traditional October date. However, this deadline is flexible and PFD payments could go out as late as December. If Dunleavy were to announce a special session, he must give legislators 30 days notice.
On the same day Dunleavy signed the capital budget, a campaign formed to remove the governor from office released its initial numbers. According to a press release, Recall Dunleavy collected 18,198 signatures in its first week, including over 320 from Nome. However, campaign spokesperson Meda DeWitt said that the reported number is only a portion of the total signatures; there are a few communities from which she had not yet received signature sheets. Counting these, Recall Dunleavy collected about 20,000 signatures within one week, according to DeWitt. This puts the campaign nearly three-quarters of the way to the 28,501 signatures they need for the petition application to be reviewed by the Director of the Division of Elections.


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