Governor Signs 2020 Capital Budget and Will Call for THIRD Special Session - P.O.W. Report

Monday, August 19, 2019

Governor Signs 2020 Capital Budget and Will Call for THIRD Special Session

Governor Dunleavy Announces Final Piece of FY20 Budget – Eliminates One Third of State Deficit, Reduces State Spending by $650 Million

Will Not Veto Legislature’s Incomplete Dividend, Pledges Continued Fight for Full Statutory Formula Distribution in Next Special Session

Editors Note: The governor is doing a tough job by cutting a state government that needs to be cut and deep down regardless of political affiliation we all know that NEEDS to happen...we just don't WANT it to happen.  

Among the many cuts that he made, a few stood out that are unfortunate:  

  • Cuts to the VPSO program 
  • Cuts to the Rural Airport Maintenance 
  • Cuts to the REAA School Fund

August 19, 2019 (Anchorage, AK) – In a 10 minute address to Alaskans, Governor Michael J. Dunleavy today announced his final decisions on the FY20 budget through the enactment and targeted veto of HB 2001, legislation sent to the Governor earlier this month that funded an incomplete dividend and restored previously vetoed funds

Governor Dunleavy addresses Alaskans on the FY20 Budget, the decision-making process he went through, and the status of the PFD distribution (click image or here to watch).

In his announcement today, Governor Dunleavy made clear he would not veto the Legislature’s incomplete dividend, calling it a difficult decision based on three parts (see below):

Many have asked me to veto this incomplete $1,600 dividend passed by the legislature this year,” said Governor Dunleavy. “Others have asked me to accept this partial dividend and to continue our fight for a full PFD. And while this decision was not easy, it's not easy at all, I decided that I will not veto this incomplete dividend. I and many others view this as a partial payment, not a full PFD, and we will continue to fight for a complete statutory dividend going into this fall.”

The enactment of HB 2001, which includes approximately $156 million in budget restorations, brings to close a months-long discussion on the state budget, a billion-dollar-plus deficit, and the need to better align state revenues with state expenditures. As a result of the FY 20 budget, approximately one third of the state’s deficit has been eliminated through the reduction of $650 million in total state spending.

Key excerpts from Governor Dunleavy’s video address to Alaskans. A full transcription can be found here:

A Difficult Conversation

“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. 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.”

We Can No Longer Pretend the Problem Will Fix Itself

“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.” 

Result: Eliminated 1/3 of the Deficit, Reductions of $650 Million

“…important steps are being made to address our deficit, to right size our government and to put Alaska on a more sustainable path. Effective today, through the enactment of HB 2001, we have eliminated over 1/3 of the state's deficit through reduction of approximately $650 million in state spending. Reforms have been initiated to make services and programs, such as Medicaid, University of Alaska, and the Alaska Marine Highway System more efficient and more sustainable.”

Multi-Year Step Down Requires Us to Rethink the Way We Provide Services

The driver for these reductions continues to be Alaska's current fiscal outlook, requiring all of us to rethink the way we provide services, the way we prioritize limited state resources and the way we spend state dollars moving forward. While state savings will continue to be exhausted as we move into a multi-year step down, reducing our rate of spending must be a priority for all Alaskans. More must be done in the coming months, but we as Alaskans are resilient, and I honestly believe our future remains bright.

Budget Approach and Timing Caused Significant Angst Among Alaskans

I understand that this budget approach and timing, being so late in the legislative year, caused significant angst among Alaskans, I really do. This was certainly not our intention. However, certain programs, programs we value, got caught in a budget discussion that went on way too long. The seriousness of the deficit, the need to begin making reforms and the length of our legislative session all contributed to the level of uncertainty we experienced the past several months. We have listened and we have learned from this past year's budget process.

Reduction to State Spending of 8%

Overall, this year's budget limited 1/3 of the deficit, reduced state spending by 8% and began the difficult process of changing the way we deploy limited state resources. The discussion that occurred ultimately helped Alaskans understand the seriousness of our challenges, forced the conversation about priorities and, in the end, helped shape this year's budget.

PFD: Arbitrarily Set Political Football

Unfortunately, this process was thrown into chaos the past several years when oil prices fell. Too many in the legislature now treat the PFD as a political football, arbitrarily setting its amount rather than following the statutory formula Alaskans know and trust. For 35-plus years, Alaskans could rely on the system we had in place, a process outlined in law and immune from politicians who wanted more for government spending. Now some politicians in Juneau are attempting a complete takeover of the PFD, converting it into revenue for government and denying Alaskans their full statutory PFD.

                     Dunleavy: “The legislature has once again denied the people of Alaska the full statutory PFD.”

If I had the authority to add more money to the budget for a full PFD, I would. However, only the legislature, by Constitution, can appropriate these funds. The legislature has once again denied the people of Alaska the full statutory PFD.

                     “Veto Today Would Have Resulted in a Zero Dividend in October”

This decision was based on three parts. First, a veto today would have resulted in a zero dividend in October, leaving approximately 660,000 eligible Alaskans who expect the PFD with absolutely nothing, zero, not a dime. Over $900 million would have been taken out of the economy if I veto the PFD, hurting Alaskans businesses and exacerbating our recession.

                     Veto: “Win for those wanting to eliminate the PFD in its entirety.”

A veto would have been a win for those wanting to eliminate the PFD in its entirety. I'm not about to give them that win. Quite the contrary, I'll continue to fight and I will not let up for Alaskans until they receive what they are due.

                     The Legislature’s Job is Not Over

“By funding an incomplete dividend, the legislature understands that their job is not finished. Many in the legislature know that this incomplete dividend must be fixed as soon as possible. I have begun the conversations with legislators to map out a path to appropriate the funds remaining for the full PFD. I anticipate a special session this fall to complete this process. I'll introduce legislation to provide for a full statutory PFD through a payment from the Earnings Reserve Account.

                      PFD Will Be Sole Focus of the Next Special Session

Finally, now that the budget has been addressed, the full PFD will be the focus in this next special session, the sole focus. I will not let up until the remaining funds are appropriated for the full statutory PFD. I know Alaskans understand this decision and I appreciate all of your input.

House Bill 2001 as passed by the legislature, added $375 million to the FY 2020 operating budget, which represents an unsustainable level of spending. Through line-item vetoes to HB 2001, Governor Dunleavy reduced spending by $220 million. With these vetoes, the FY 2020 operating and mental health budget, including previously enacted legislation, totals $4.193 billion Unrestricted General funds (UGF), $883.6 million Designated General funds (DGF), $702.1 million Other State funds, and $2.7 billion Federal funds.

Key programs and services restored in HB 2001:

  • $21.5M to Senior Benefits Program
  • $110.25M to the University of Alaska
  • $8.8M to Early Learning Programs, including Head Start, Early Childhood Grants, Parents as Teachers, and Best Beginning
  • $759,100 to Alaska Legal Services Corporation
  • $809,100 to Online with Libraries and Live Homework Help
  • $3.8M to Alaska State Council on the Arts
  • $100,000 to Office of Veterans Affairs for an additional Veterans’ Services Officer
  • $2.2M to Human Services Matching Grants and Community Initiative Grants
  • $533,500 to reopening the Utqiagvik Law Office
  • $2.7M to Agricultural Programs

*A restored items of interest document can be found here.
*A restored items summary be found here.

Line-item vetoes in this bill include:

  • The elimination of unconstitutional commitments of future year funding;
  • The elimination of optional Medicaid services to ensure adequate funding for federally required Medicaid programs; and
  • The elimination of debt payments on behalf of other entities, which are not a core function of the State.

*A vetoed items of interest document can be found here.
*A vetoed items summary be found here.

Click here for additional information on the enacted House Bill 2001, including change records, summaries, and more.

Additional Comments from Legislators on the Vetoes: 

From POW Rep: Jonathan Tomkins:

ANCHORAGE – Gov. Mike Dunleavy today signed House Bill 2001 with a series of vetoes that essentially reject the Legislature’s effort to block the most damaging aspects of the governor’s budget.

The governor also accepted the payment of a $1,600 PFD, the maximum amount the State of Alaska can afford without jeopardizing the long-term viability of the Permanent Fund or making the sort of devastating reductions to programs and services that Alaskans rejected in public demonstrations and testimony this year.

Rep. Bryce Edgmon: 

Regarding Governor Dunleavy's action today on HB 2001, in a way, the signing of HB2001 represents good news for Alaskans. We will officially receive a $1,600 dividend - more than we have received in many years since the program’s inception. The governor also decided to follow the Legislature’s leadership and restore some programs and services that are essential to elders and children across our state. At the same time, the governor made many cuts without analysis of the impacts on people and our economy, and he continues to perpetuate the myth that we can afford the largest PFD in history without significant negative consequences.

Senator Shelley Hughes:

Important announcement from Gov. Dunleavy and a few of my thoughts this afternoon regarding the final budget reductions, budget restorations, and the partial PFD amount. (See link to his video at end of my post.)
First for those curious: the $1600 was accepted as a partial PFD with plans to work on the remainder later this fall. I hope this work will include a long term solution, a constitutional amendment - this circus ride we've been on the last five years needs to stop.
Very glad to see the safety net for seniors is back in place, that the industrial hemp industry opportunities will go forward, that the Pittman-Robertson match is intact, and that major revisions will be underway regarding the university, the ferry system, and Medicaid.
It's been a tough year but excellent progress has been made to begin to turn the big ship in the right direction. 
It's all about a budget that our small population can afford and that provides the services we need. Someday, depending what happens to oil prices and production in the future, we may need new revenues: we don't want that need to be so overwhelming that what we'd need to collect would be so overbearing for individuals and for businesses that it would trigger a mass exodus. It's our job now to prepare for the future. The goal of aligning our spending with our existing revenues is a good goal, plain and simple. It's not an easy goal, but it is a good goal, the right goal, as we think about those that will follow us.
BTW, in this budget cycle, nobody got exactly what they wanted - and that is what we call compromise.

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