Gov. Mike Dunleavy released a Fiscal Year 2020 supplemental appropriations bill Wednesday, Feb. 5, to cover the unanticipated costs from two natural disasters as well as higher costs in Medicaid services and programs that had been budgeted. The legislation also contains more funding for public safety, repair transportation infrastructure, and provide mental health and elder care services.

“The state has unanticipated and significant costs that will have to be covered this year through supplemental appropriation legislation,” the governor said in a statement. “We still have significant earthquake damage that needs to be repaired, in addition to last summer’s massive wildfires that drained the disaster account, and an abrupt change in direction by the federal government on Medicaid funding.

Dunleavy did not explain the change in federal policy on Medicaid. However, a key feature in the need for supplemental funds for Medicaid is that in 2019 the Legislature and the governor reduced funds for Medicaid in the FY 2020 budget. However, services continued to Medicaid recipients because under federal law those must be provided.

Medicaid is a joint state-federal health care program for Alaskans with low-to-modest incomes. The state administers the program, but the guidelines on qualifications and most of the service provided are set by the federal government, which also pays most of the costs. The underfunding in the current budget is for the state’s share.

The supplemental bill, in Senate Bill 174 and House Bill 234,totals $262.5 million in unrestricted general funds and $225 million in Federal matching funds for a total of $507.9 million. The cost to extinguish the wildfires, repair earthquake damage, and fund Medicaid services, accounts for $250.4 million of the $262.5 million in unrestricted general funds.

The increase in the current year budget is in the range of reductions achieved by the governor in the last Legislature, essentially wiping out any savings. However, about half of the increased costs result from unforeseen events like the 2918 earthquake and 2019 wildfires unlike than the decisions in 2019 to underfund programs.

“Hopefully, the lesson has been learned that deep cuts carry significant consequences and require careful analysis,” House Speaker Bryce Edgmon said in a statement.

“It is encouraging that the supplemental budget does not include backpay for an oversized (Permanent Fund) dividend, which would put our state’s financial future at risk.We are pleased that the supplemental budget gives coastal communities hope that the Alaska Marine Highway System will soon get back on track, and that other essential services like Medicaid and public radio are likely to get back some of the funding they badly need. However, it is unfortunate that many Alaskans unnecessarily faced a year uncertainty.”

Key items in the FY 2020 supplemental bill:

$110.5 million in State funds to cover expenses following last summer’s devastating wildfires in the Southcentral and Interior regions of the state

$3 million in State funds for infrastructure repairs from the 2018 Cook Inlet earthquake

$128 million in State funds for Medicaid services

$6.7 million in State funds to hire new Alaska State Troopers, Wildlife Troopers, and to purchase Trooper equipment

$1 million in State funds for the Pioneer Home Payment Assistance Program

$6 million in State funds to achieve full capacity at the Alaska Psychiatric Institute

$12.050 million in Marine Highway receipts for the Alaska Marine Highway System

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