President Trump and Gov. Dunleavy.

There were few surprises in Gov. Mike Dunleavy’s final action on the Fiscal Year 2020 state budget. Dunleavy previously announced that he would restore some funds vetoed from the university and children’s education, but in his approval Aug. 19 of House Bill 2001, a bill passed by the Legislature in its recent special session the governor vetoed again many programs he had cut earlier this year.

In HB 2001 the Legislature restored most of those, but Dunleavy used his veto authority to cut them again. This time the Legislature is not in session and is unlikely to call itself back to undo the governor’s latest action.

Most of the cuts enacted Aug. 19 were to services to low income Alaskans such as in Medicaid, dental services for low-income adults and other public assistance, but public broadcasting, behavioral health treatment and village public safety funds were also vetoed. 

One veto that has not gotten much attention so far is Dunleavy’s “red-lining” of the Legislature’s $1.2 billion “forward funding” of state money for school districts next year in FY 2021. The governor has allowed the expenditure for school K-12 programs to remain in the budget for the current fiscal year, FY 2020, but his veto of funding for next next signals a big fight next spring over school funding that may be as sharp as the governor’s initial 41 percent cut to the university this year.

In a press conference earlier this year Dunleavy and state education Commissioner Michael Johnson said they will propose substantial cuts to K-12 school funding in the budget for FY 2021.

In total, Dunleavy appears to have cut $640 million from last year’s Fiscal Year 2019 spending of about $6.67 billion in state funds, for a total of $6.03 billion in state funds authorized for FY 2020, the state budget year that has been underway since July 1. Total state funds includes three categories of state funds including Undesignated General Fund spending that the Legislature typically focuses on; Designated General Fund spending where money goes to programs typically designated by statute in formulas, and “other” state funds expended that are required, like debt service on state bonds. 

The reductions make a big dent in a budget deficit estimated by Dunleavy at over a billion dollars earlier this year, but that assumed the Legislature would authorize funds for a Permanent Fund Division of about $3,000. However, lawmakers provided only enough money for a $1,600 PFD, so the projected deficit will be less by several hundred million dollars.

However, some of the state programs cut also resulted in loss of federal dollars. An estimate by the state Office of Management and Budget put the loss at $298 million in federal funds in FY 2020 compared with FY 2019. The governor also cut municipal school debt reimbursement by 50 percent, which was expected. This will add about $9 million in costs for the Matanuska Susitna Borough in payments on school bonds.  

In a video message broadcast Aug. 19, the governor said he would accept, for now, the $1,600 PFD with hopes of paying the $1,400 difference later this year after another special session Dunleavy said he will call for legislators to consider again the larger dividend. He decided to approve and not veto the Legislature’s appropriation for the smaller PFD because in doing that there would be no PFD paid out in October, Dunleavy said in the taped message. Under the state constitution only the Legislature can increase funds in the budget. The governor can only cut, using the veto power.

Vetoes made in the final budget include:

• $2.7 million cut from public broadcasting

• $3.4 million cut from the Department of Environmental Conservation for the “Ocean Ranger” program on cruise ships 

• $50 million cut from Medicaid, or medical service for low-income Alaskans 

• $6.1 million cut from behavioral health treatment and recovery grants, mostly related to drug treatment

• $7.5 million cut from Adult Public Assistance

• $2 million cut from the Nome juvenile detention facility

• $27 million cut for Medicaid coverage of adult dental service, for low-income Alaskans

• $3 million cut for village public safety

• $46.9 million cut from rural airport maintenance

In several areas the governor backed off from reductions he made in veto actions earlier this year. He restored $110.25 million to the University of Alaska, backing away from a $131 million reduction Dunleavy proposed originally. The Legislature cut university funding by a much smaller amount in its own budget enactment, so the effect of the governor’s approval is to leave money for the university at about what the Legislature appropriated, at least for this year.

The governor also restored $20.7 million for a senior benefits’ program; $8.5 million for early child learning programs; $759,000 for Alaska Legal Services, which aids low-income Alaskans; $809,000 for a program that supports Internet service to public libraries and homework help for school children; $3.86 million for the Alaska State Council on the Arts; $2.25 million for human services matching grants and community initiative grants, and $2.7 million for agricultural programs.

In a statement released Aug. 19 the governor said the extended budget deliberation have caused a difficult conversation among Alaskans.

“There is no doubt Alaskans got engaged, and a much needed and, at times, difficult conversation took place in the media, at the dinner table, and amongst friends and family,” the governor said. “I believed, and still believe, that in order for this discussion to be successful and to be taken seriously, we have to show Alaskans exactly what our fiscal picture looks like and what it will take to solve it.”

The budget problem will no longer fix itself, he said.

“Alaskans need to understand that we can no longer afford to spend at our current rates. We can no longer afford to deplete our savings and hope for higher revenues. We must begin making the long-term changes to put ourselves on a path to a more sustainable future, and we can no longer pretend the problem will fix itself. It will take difficult decisions to get us to a sustainable budget, and I am prepared to make those difficult decisions,” Dunleavy said in the statement.

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