The governor’s vetoes fell heaviest on education, as Dunleavy eliminated more than $50 million from the state’s per-student education funding formula and tens of millions intended for major school maintenance projects.
Senate President Gary Stevens, R-Kodiak, and Speaker of the House Bryce Edgmon, I-Dillingham, said lawmakers are not likely to consider a veto override vote until January at the earliest, a schedule that will leave school districts with months of uncertainty.
“Statewide, districts will instantly need to find the equivalent of $200 per student to cut from their budgets. It remains to be seen what will happen as a result of this action from the governor, but certainly, emergency school closures are on the table for districts,” said Jharrett Bryantt, superintendent of the Anchorage School District, during a special school board meeting Thursday evening.
“If you haven’t captured it already, this is an education emergency,” he said.
It is the first time in state history that a governor has failed to fully fund the education formula, a precedent-breaking act akin to former Gov. Bill Walker’s decision in 2016 to veto part of the Permanent Fund dividend, which until then had been decided by a previously sacrosanct formula.
The governor announced his decision without comment; he did not hold a news conference, as is traditional, and his office said they would not be able to respond to a list of emailed questions until Friday.
The governor’s vetoes did not significantly change the size of the budget, and the amount of his vetoes was down from prior years.
“I wish there would have been more cuts, more vetoes, so that we could have a better budget. But that’s not what happened,” said Rep. Jamie Allard, R-Eagle River and a member of the House Finance Committee.
She said she suggested the governor veto additional grants to nonprofits.
Oil Prices Drove Vetoes, Dunleavy Says
In a prerecorded video released earlier Thursday, the governor said his vetoes were the result of depressed oil prices.
“The oil situation has deteriorated. The price of oil has gone down. Therefore our revenue is going down. Basically, we don’t have enough money to pay for all of our obligations. So as a result of that, you’re going to see some reductions in this year’s budget. It’s not an easy thing to do. It’s certainly not a fun thing to do, but it’s necessary,” he said.
Unusually, the governor’s vetoes appeared to be driven by a revenue forecast that wasn’t made available to lawmakers when they were crafting their draft budget.
Legislators typically rely on a spring forecast published by the Alaska Department of Revenue, and based on that forecast, the budget submitted by legislators to the governor — spread across three separate budget bills — had a surplus of about $56.5 million.
After the governor’s vetoes, the state budget now has a surplus of about $186 million, according to figures published by the Office of Management and Budget.
But that estimated surplus is based upon the spring forecast, and on Thursday, the Department of Revenue released a new estimate saying that projected oil revenue is down by $222 million from that prior forecast.
Legislators typically expect to make budget adjustments in the following year, in a supplemental budget, because oil prices can change radically. Dunleavy appears to have based his decisions on the new forecast instead.
“It is unusual,” said Senate President Stevens, of the governor’s strategy.
“We had a balanced budget, and we knew how low oil could be. It was not necessary, I don’t believe,” Stevens said of the vetoes.
Less than an hour before Dunleavy announced his vetoes, Israel began bombing Iran, an act that sent oil futures upward.
By that point, Dunleavy had signed his vetoes and the budget bills, making them official.
Education Vetoes Were Expected
The governor’s veto came less than a month after lawmakers voted to override a different Dunleavy veto and to increase the base student allocation, the education funding formula’s main component, by $700 per student.
If that formula were a bucket, Thursday’s veto by Dunleavy represents a choice to only partially fill the bucket. Last year, lawmakers and Dunleavy approved a $680 one-time increase to the BSA; Dunleavy’s veto cuts the increase to $500, a year-over-year decline.
“To go down from our $700 to $500, that’s going to be quite, quite devastating for the school districts and for kids,” Stevens said.
Rep. Rebecca Himschoot, I-Sitka, and co-chair of the House Education Committee, said that reduction is “nothing short of catastrophic for districts who’ve already submitted budgets. I think this could trigger, possibly, some school closures in rural Alaska, and I think also there could be some school closures in urban Alaska. What choice do they have? They’re going to make those cuts now and hope that we override or come up with a supplemental in January.”
Rep. Jeremy Bynum, R-Ketchikan and a member of the House Finance Committee, observed that Dunleavy had previously threatened to veto some of the BSA funding, and so Thursday’s action wasn’t a complete surprise.
He added that the cut was larger than he was expecting.
“It’s definitely going to put some real strain on a lot of our school districts across the state, and specifically it’ll put some strain on the schools in my district, so it’ll be something that we want to monitor, and we’ll work with our local school districts in our local communities to see how we can soften the blow,” he said.
In addition to the BSA veto, the governor eliminated lawmakers’ attempt to divert tens of millions of dollars from transportation projects to school maintenance issues.
Budget documents indicate that the governor vetoed those diversions because some of the money was already allocated for spending. In at least one case, the Alaska Department of Transportation didn’t announce spending plans until after lawmakers approved their version of the budget.
Last year, the governor proposed incentive grants for public school teachers. This year, lawmakers approved $554,000 for a different incentive grant program, but Dunleavy vetoed that idea.
Rep. Andy Josephson, D-Anchorage and co-chair of the House Finance Committee, said he was “disappointed” by the education vetoes overall.
“He claims to be a champion of education, but at some point — prove it. Just prove it,” Josephson said of the governor. “I just think it’s shameful and very hurtful.”
Other Vetoes Were Smaller
In a maneuver intended to reduce demand for general-purpose tax revenue, lawmakers used $100 million from the state’s higher education investment fund and $100 million from the accounts of the Alaska Industrial Development and Export Authority — the state’s investment bank — to pay for things like National Guard maintenance, road repairs on the Dalton Highway, and rifle-proof armor for state troopers.
Dunleavy vetoed the $100 million draw from AIDEA, so all $200 million now comes from the higher education investment fund.
“People shouldn’t get upset about that, because … the plan is to replace that money when we come back in January, to put that money back into the higher ed fund,” Stevens said.
Under his vision, lawmakers would take money from the Constitutional Budget Reserve and put it into the higher education fund to backfill it.
Stevens said he’s concerned by other vetoes, including a $5 million appropriation for the Alaska Seafood Marketing Institute, which helps Alaska fishers sell their fish internationally.
The governor eliminated $75,000 for a safe gun storage media campaign, $1.9 million in grants for child care centers, and $37 million intended to fill the state’s disaster relief and wildfire-fighting funds.
“I just was a little surprised to see it removed from the budget here up front, because it will be something that ultimately we will have to fund,” Bynum said of the vetoes to the disaster relief and wildfire funds.
In the state’s mental health budget bill, the governor cut $2.7 million intended to support infant learning programs and $100,000 for dementia education and prevention, as well as $3 million for programs that support disabled Alaskans.
Vote on Override Not Expected Until January
The leaders of both House and Senate said that while they believe lawmakers may override some or all of the governor’s budget decisions, they don’t expect a vote on those overrides to take place until January, when legislators reconvene the regular session in Juneau.
It takes 45 of the Legislature’s 60 members to override a budget veto, and in May, only 46 legislators voted in favor of an override of the education funding policy bill.
Sen. Forrest Dunbar, D-Anchorage and one of the 46, is on duty with the National Guard in Poland this summer, and other legislators are unavailable at different points of the summer.
“Unfortunately, it’s very difficult to get the Legislature all together in one place during the interim, so it’s more likely than not that we are going to have to wait until January to do that,” said Edgmon, the House speaker.
It’s also possible that lawmakers will have other vetoes to consider as well. Part of the education formula increase is contingent upon a bill changing the way the state handles corporate income taxes. Dunleavy has previously indicated that he might veto that bill, too.
This story first published in the Alaska Beacon. Read the original here.
