Sen. Gary Stevens (R-Kodiak) expressed concern over Gov. Mike Dunleavy’s decision to veto significant funds from House Bill 2001 on Monday. Though the bill reinstates many programs previously cut by Dunleavy, Stevens said he is still worried about the effects of the $220 million in budget reductions imposed by the governor’s latest round of vetoes.
“I’m still concerned about some of the cuts. Some may seem minor in dollar amount, but still they are extremely important,” Stevens said.
The governor chose to cut $5 million added to the Alaska Marine Highway System in HB 2001. By doing so, Dunleavy jeopardized the continued ferry service to Kodiak through the winter, Stevens said.
The governor also vetoed $335,000 from the Alaska judiciary budget. The veto is a response to the Alaska Supreme Court’s rulings, which ensured Medicaid funding for abortions.
“The governor has reduced the court system based on the belief that they have made some incorrect decisions,” Stevens said. “I think (Dunleavy is) just circumventing the democratic process that we have.”
“There are three branches of government, and none of the three have complete power over the others,” Stevens added. “Whether you agree or not on why he did that, it’s a mistake for the governor to get involved in vetoing the courts because he doesn’t like a decision they make.”
Another budget cut that is set to affect Kodiak is a 50% reduction in School Debt Reimbursement, which leaves a $2.6 million budget gap in the Kodiak Island Borough budget.
“It does sound that it means some mill rate increase to everyone in Kodiak. And that’s a shame,” Stevens said. “In one way or another, people are going to pay for it. Whether it’s through the state funds or through local property taxes. I don’t think it’s necessary, and I wish the governor would have left that alone.”
Last week, the governor announced a decision to reduce funding cuts to the University of Alaska. This led to the University of Alaska Board of Regents to end financial exigency Tuesday.
Financial exigency “is really a red flag for the rest of the country that we are in horrible strates. You don’t really want to have financial exigency. It’s just not a healthy thing for any university or college to have to declare,” Stevens said.
Dunleavy’s original cuts would have reduced the UA budget by $136 million this year. A deal negotiated between Dunleavy and UA officials has led to a total cut of $70 million over a three-year period.
Though Stevens said the deal avoided disaster for state universities, he added that he is concerned about the governor’s direct negotiation with UA. Only the legislature can determine state budget allocations, Stevens said.
“That’s really not his job. That’s our job. We write the budget, and we would be more generous to the university than the governor might be,” Stevens said. “In the end, the legislature is the only entity that can put money into the budget. And you see that in terms of the permanent fund dividend.”
THE FUTURE OF
The governor signed off on the $1,600 dividend put forward by the Legislature on Monday, but promised to push for a full $3,000 dividend during a special session in the fall. Stevens said that he will not support an increase to the $1,600 dividend.
“The House and the Senate believe that any amount beyond the $1,600 would be unsustainable and would draw more money out of the permanent fund than should be drawn,” Stevens said, noting that drawing more than 5% annually from the fund would be unsustainable.
“If we gave a $3,000 dividend, we would have to draw more than 5%, which of course damages the permanent fund itself. That’s one of the most important things we have in this state. We just cannot draw more money out of it that it can sustain,” Stevens said.
Dunleavy has indicated that he will call the Legislature back into special session in October or November, focusing solely on the PFD amount.
“I’m not sure what that does because I don’t think the Legislature is going to change in terms of how much we think we can afford to put into the permanent fund dividend,” Stevens said. “Do we want to take a $3,000 dividend out of the permanent fund or do we want to have a smaller dividend and maintain services? It’s really a simple equation.”
Stevens said that maintaining a smaller PFD could be the key to avoiding a state income tax.
“I think we have been very fortunate in the fact that we have not had an income tax for many years in Alaska. If we are wise and we make use of that permanent fund wisely, we can avoid an income tax,” he said.
The current value of the Alaska Permanent Fund is around $65 billion, but it’s estimated that it will be valued at up to $100 billion in 15 years, Stevens said.
“The money used from the permanent fund, a sustainable amount, would be used for three things. It would be used for a dividend, it could be used for services — university, schools and all that — and it could also be used to inflation-proof the permanent fund,” Stevens said. “If we’re smart about it, we can avoid an income tax in the future. Most states would kill to have $65 billion in the bank.”
Stevens said that it’s hard to predict what will happen at the fall special session, but that he hopes the session will address the formula by which the dividend is calculated. The formula has remained unchanged in recent years, and according to Stevens, it no longer reflects the realities of Alaska’s growing population and the increased value of the permanent fund.
According to Stevens, if the formula is discussed at the special session, there is a likelihood that it will be changed in order to provide sustainable dividends to Alaskans in the future. However, the governor may choose not to address the formula at the special session.
“If we totally disagree with the governor, and if the only point is raising the dividend with no change in the formula, I think there is a chance we might meet for one day and then adjourn and go home. But if there is a chance to discuss it, then we might be able to stay and try to find a solution,” Stevens said.
If the formula is not discussed at the special session, Stevens said he hopes to discuss it early in the Legislature’s January session.
Also during the special session, the Legislature may choose to attempt to override any of the governor’s vetoes. Once the special session begins, legislators will have 10 days to corral a three-quarters vote to override any of Dunleavy’s line-item vetoes, requiring 45 out of the state’s 60 legislators to support an override.
“It would be pretty hard for us to do that unless we found out that there was something really egregious, that a terrible mistake has been made,” Stevens said.
By the time the special session begins, legislators will have more information about the effects of the governor’s budget cuts, and try to override the cuts that seem more egregious, Stevens added.
“Frankly, the administration did not look carefully at what these cuts means,” Stevens said. “As time passes, before we come back either in October, November or in January, we will know more about the impacts of the cuts the governor has made.”
HB 2001 reinstates some state services previously vetoed by the governor, such the Senior Benefits Program, which provides monthly payments to low-income senior citizens in Alaska. If the program had been cut, 800 Kodiak seniors would have stood to lose their monthly payments.
“I think the governor realized that the cuts he had originally given would just be devastating to so many people,” Stevens said. “For some of the folks we give money to, who are seniors and have low incomes, it’s only $75 a month. But for many people that’s the difference between paying the rent or buying food.”
Dunleavy’s signature on HB 2001 also reinstates $3.8 million in funding to the Alaska State Council on the Arts, which provides significant funding to the Kodiak Arts Council.
“My wife and I have always been involved in the arts council,” Stevens said. “We have always supported it. It’s part of what makes Kodiak such a great place to live, that there are things happening and performances are coming to Kodiak.”
Stevens said that he supports all programs restored through HB 2001.
“It’s not excessive spending,” Stevens said. “I think (Dunleavy is) responding to the enormous backlash he’s received from the public over some of the cuts, and also of course the number of folks who are signing recall petitions.”
Looking forward, cooperation between the governor’s office and the Legislature is critical, according to Stevens.
“The governor has hardly been available. There’s been very little communication with the Legislature this entire year. Past governors have been meeting with legislators more often, getting our input, trying to understand where we’re coming from, how budget cuts are affecting our communities. There has been very little of that this year,” Stevens said. “I’m hoping there will be more in the future.”
AN EYE ON K-12
With the new school year just around the corner, Kodiak students don’t need to worry about extensive budget cuts. But that might change next year, Stevens said.
There were no budget cuts to these programs for the current fiscal year because they had been forward-funded by the Legislature in previous years. However, the governor attempted to override the forward-funding, claiming that it is unconstitutional. The Legislature is in the midst of a lawsuit against the governor to address this dispute, a process that Stevens said will likely take a few months.
“I’m hoping that it’s resolved fairly quickly, but once something goes to court, you never know how long it’s going to take, and you never know whether you’re going to win or lose,” Stevens said. “We want to protect K-12. We want to make sure our kids have every opportunity to get as good an education as possible.”
If K-12 education funding is hit with budget cuts, “we will have an enormous statewide disaster on our hands,” Stevens said. K-12 education in Alaska is particularly expensive due to Alaska’s small population that is spread out over large, difficult-to-access territory, Stevens added.
“I think that K-12 should be very worried about what’s going to happen next year. It was sort of off the table this year,” Stevens said. “I would not be shocked next year to see the governor do a massive cut to K-12 education.”