Governor Dunleavy proposes massive budget cuts

On Feb. 13, Governor Mike Dunleavy rolled out his budget proposal that includes budget cuts to the tune of $1.6 billion. Dunleavy ran on a platform of paying a full Permanent Fund Dividend to eligible Alaskans, on cutting government spending, but also on being tough on crime.
After amending the existing budget by cutting $20 million out of the FY19 education budget a week prior to unveiling the FY20 budget, the state braced for massive budget cut proposals from the Dunleavy administration. Dunleavy said he built the budget on the premises that expenditures cannot exceed existing revenue, that the budget focuses on core functions that impact a majority of Alaskans; that it maintains and protects Alaska’s reserves; and that the budget does not take additional funds from Alaskans through taxes or the PFD.
To that end, the proposed cuts of the operational budget include elimination of Pre-Kindergarten and Head Start grants, Best Beginnings program, State Council on the Arts, Senior Benefits program, Alaska medical school and elimination of the Civil Air Patrol and the Power Cost Equalization fund.
Cuts would include reduction of school funding by 25 percent, ca. $333 million, cutting University funding by $155 million, State troopers $21 million, VPSO’s $3 million, cutting Pioneer Homes by $19 and increasing fees for residents, cutting Alaska Psychiatric Institute by $3.2 million, and more.
Region-specific concerns include the threat to eliminate the Power Cost Equalization fund. According to the Alaska Energy Authority, which manages the PCE, the program provides economic assistance to customers in rural areas of Alaska where the kilowatt-hour charge for electricity can be three to five times higher than the charge in more urban areas of the state. “PCE fundamentally improves Alaska’s standard of living by helping small rural areas maintain the availability of communications and the operation of basic infrastructure and systems, including water and sewer, incinerators, heat and light.  PCE is a core element underlying the financial viability of centralized power generation in rural communities,” states the AEA’s website.
The statute that governs the PCE says that the fund is established as a separate fund from other state accounts. It would take a legislative act to change it. Currently the PCE has tad over $1 billion in its account. The principal of the money is not used for PCE payouts, rather the earnings from the invested principal.

The process
The governor’s budget is a proposal. The Alaska constitution gives the Legislature the power of the purse. According to Paul Labolle, the long-time chief of staff to Representative Neal Foster, the governor’s budget is a starting point of the entire legislative process to pass a budget. The budget bill proposed by the governor then goes to the House and the Senate. There, the respective finance committees of those two chambers split up into budget subcommittees. These subcommittees then “deep-dive” into state department and report back to the finance committees with recommendations. Once the finance committees have that information, they consider changes to the governor’s proposed budget and then it goes to the House or Senate floor for a vote.
If the House and Senate bills have differences, which is usually the case, a conference committee comprised of selected Senators and Representatives is used to find compromises and hammer out a bill that is agreeable to both sides. Then the bill goes to the Governor’s desk to be signed into law. The governor can veto the entire budget or make line-item changes. If the legislature disagrees and is still in session, they can override the governor’s veto if there is a three-quarter majority of the joint House and Senate. If the legislature is adjourned, it must call itself back into session and then again, come up with a three-quarter majority to override the governor’s veto.

While people have not fully analyzed the outfall of Dunleavy’s budget, Nome agencies have expressed concern. Executive Director of the Nome Community Center Rhonda Schneider said in an email to the Nugget that potentially all of NCC’s programs are at risk. NCC administers the emergency shelter NEST, the Children’s Home, the Boys & Girls Club, the Foodbank and the XYZ Senior Center. “It is a bit too early to tell what the actual impact will be, but I would say that the NEST programs (housing, homeless prevention and the shelter) and the senior programs are definitely at risk.  We are hopeful that advocacy efforts that are forming result in a favorable outcome for rural Alaska,” Schneider said. Brian Wilson, executive director of the Alaska Coalition on Housing and Homelessness said that it’s not just the cuts to housing programs that concerns him, but the cuts to supportive service programs such as mental health, substance abuse treatment and prevention programs. The Alaska Housing Finance Corp. administers a housing assistance program, HAP for short, that supports Nome’s NEST shelter with $122,000. Last year’s budget to finance the statewide HAP was $7.9 million. Dunleavy’s budget slashed it to $955,000.
While the Republican leadership lauded Dunleavy’s proposal, rural and Democrat lawmakers expressed shock. “The Senate Majority is committed to protecting the Permanent Fund and dividends for future generations of Alaskans, passing a sustainable budget in both the short and long-term, increasing jobs and growing the economy, and keeping Alaskans and their families safe,” said Sen. Stedman. “Now that we have the governor’s proposal, we can get to work taking it apart and understanding the impacts.”
Senator Donny Olson (D-Golovin) took exception to the proposal. “The draconian cuts to the Health & Social Services budget are not just an attempt to dismantle Medicaid and Alaska’s healthcare system but is an outright full assault against those who are the most vulnerable; the young and the elderly. It deepens the divide between the haves, and the have nots. It strikes rural Alaskans more acutely, forcing them to leave their communities and head to the metropolitan center. Many of these Alaskans will become homeless in Anchorage, adding to that socially-marginalized population,” he said in a press release.
“Governor Dunleavy’s proposed budget, if enacted, would destabilize Alaska’s health care system, eliminate access to health care for tens of thousands of Alaskans, and make Alaska less safe and less secure,” said the Alaska State Hospital and Nursing Home Association CEO Becky Hultberg.
In addition to the cuts, Dunleavy proposed SB 57, to change the long-standing authority that allows municipalities and boroughs to collect taxes on all property within their jurisdiction. Senate Bill 57 would allow the State of Alaska to collect the entirety of taxes on petroleum property, depriving municipalities and boroughs of a reliable revenue stream that has funded schools and essential public services for decades. “This bill asks the Alaska Legislature to approve a tax scheme that treats petroleum production property differently than other types of property. We would never consider telling the business hubs of Anchorage and Fairbanks that they can’t tax commercial properties anymore because the State needs that money,” said Rep. John Lincoln (D-Kotzebue).

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