Alaska's Public Universities May Declare 'Academic Bankruptcy'

Lawmakers failed to override the Republican governor's decision to cut 40 percent of the university system's state funding.
by | July 12, 2019 AT 1:03 PM
Students hold up and carry signs during a rally in support of the University of Alaska system.
Students protest the budget cuts for the University of Alaska system. (AP/Becky Bohrer)

SPEED READ:

  • Gov. Michael Dunleavy eliminated 40 percent of the University of Alaska system's state funding.
  • Lawmakers failed to override his budget vetoes.
  • The board of regents may declare a financial exigency on Monday.
  • Layoffs and program cuts are expected.
 

Alaska’s public university system will consider declaring a financial emergency in response to a 41 percent cut in their state funding.

On Wednesday, lawmakers failed to override Republican Gov. Michael Dunleavy’s line-item veto that eliminated $130 million from the state's share of the University of Alaska budget. Administrators are also preparing to lay off as many as 2,000 university employees, cut programs and possibly consolidate the three universities onto one campus.

University of Alaska's president, Jim Johnsen, will ask the board of regents on Monday to declare a financial exigency, a rarely declared condition sometimes described as an academic bankruptcy, which makes it easier to lay off tenured faculty.

“This declaration reflects a sharp turning point,” Johnsen said in a statement. “Financial exigency is an action I never anticipated that this great university or its regents would need to take. But every day we delay increases the size of the cuts required.”

Dunleavy’s cuts to the universities’ budget came as part of a bigger battle over Alaska’s budget, which depends almost entirely on oil tax revenue. A crash in the price of oil at the end of 2014 started the crisis, which continues today.

Alaska officials have tried to cut state spending to account for the drop in oil revenue. The state university system, for example, had already laid off 1,200 employees over the last five years before this year’s veto triggered another wave.

The first-year Republican governor used line-item vetoes to cut more than $400 million from the state's budget. As a lawmaker and now as governor, Dunleavy has railed against what he sees as excessive state spending.

“Over the past several years, we have used $14 billion from our savings to subsidize the government,” he said when announcing his vetoes. “This situation, everyone agrees, is not sustainable.”

He said his vetoes will eliminate half of the state’s annual deficit and make the budget “sustainable, predictable and affordable.” The lower state spending will also make it easier to restore the annual payouts that residents get every October from the state’s permanent fund -- a stockpile of excess cash the state has accrued from oil taxes over decades. Dunleavy is pushing to set the annual payments around $3,000, nearly twice what it’s been in recent years.

Still, the vetoes sparked a wave of protests around the state, calling on lawmakers to reverse the cuts. Doing so, though, is more difficult in Alaska than any other state in the country.

It would have required a three-quarters vote of the legislature -- 45 of its 60 members -- to restore funding. Further complicating the situation, Dunleavy called lawmakers back to Wasilla, a conservative town nearly 800 miles from the capital city of Juneau.

Most legislators met in Juneau instead, but they didn’t have enough present to reverse the governor’s cuts. Only 38 showed up, with 37 voting for an override. Meanwhile, a separate group of more conservative legislators met in Wasilla without taking any votes.

That may not be the end of the drama.

The university cuts are one of several unresolved issues -- including the permanent fund checks -- that are major priorities of the governor. House Speaker Bryce Edgmon, an independent, says House and Senate budget-writing committees are likely to meet soon to take stock of the situation and gather more information.

“I don’t think anybody in this state has any idea what those vetoes do, how many federal dollars are attached to them, how many private dollars are attached to these vetoed state dollars and what the carnage is -- not just from an economic standpoint, but from the standpoint of people’s lives, families and communities," Edgmon told the Anchorage Daily News.

Update: September 6, 2019

Robbie Graham, Associate Vice President in the Office of Public Affairs for the University of Alaska contacted Governing on September 6, 2019 with this statement:

"The governor and the university's Board of Regents signed an agreement in August that allowed for a $70 million budget reduction over 3 years rather than $136 million in one year."

"The board terminated its declaration of financial exigency and directed the president to draw up a plan to de-duplicate programs across the system and reduce senior administrators. That plan goes to the board next week."