Capitol report

The Capitol Report: June 14, 2019

Budget passes, Legislature adjourns

Yesterday the legislature adjourned the special session having reached agreement on an operating and a portion of the capital budget for the state fiscal year that begins a little over two weeks from today, on July 1st.

Lawmakers did not resolve differences on the size and funding for this year’s Permanent Fund Dividend (PFD), so not surprisingly, Governor Dunleavy immediately issued a proclamation calling them back into a special session to begin July 8th. The Governor has identified Wasilla Middle School in the Mat-Su Valley as the session location, but a final decision on location is heavily dependent on the House and Senate concurring to do business outside of Juneau, where they have existing infrastructure and staff support. The Governor held a press conference in front of the Wasilla Middle School this morning to discuss his decision, which can be viewed here.

Operating Budget 
On Monday, both the House and Senate concurred with the conference committee recommendations on the FY20 Operating Budget (HB 39). The University of Alaska’s budget remains unchanged from our May 17th Capitol Report. We are funded at $322 million UGF over two appropriations - $265 million towards UAF, UAA and Statewide and $57 million towards UAS and our community campuses.
Last night, the operating budget was transmitted to the Governor for his review and consideration. This morning the governor said he will be  “scrutinizing the budget to see where we can make reductions” and that a statement on those decisions should be coming shortly. He said they he would not be sending out “pink slips” to state employees today, as would be required, if budget action wasn’t expected to be finalized before June 30th. So while the governor technically has until July 6th (20 days excepting Sundays) to sign the bill or exercise vetoes, the approaching end of the fiscal year has compressed his review period.

Capital Budget
Yesterday the Senate concurred with the House’s changes to the FY20 Capital Budget (SB 19). For the university, the House transferred $2.5 million of our $10 million deferred maintenance funding to the Alaska Earthquake Center’s USArray Initiative at UAF. This action reduced our deferred maintenance appropriation to $7.5 million. However, the House also changed the funding source for the USArray and $2.5 million of the maintenance appropriation to the Constitutional Budget Reserve (CBR).
These changes were part of a larger shift of more than $160 million in project funds from state general funds, to the CBR. Spending money out of the CBR, requires a higher vote threshold (3/4) versus the normal majority vote.  Ultimately, the House could not garner the 30 votes necessary, and so all CBR projects failed on a vote of 23-13. As a result, the bill that will be transmitted to the governor only contains $5 million in deferred maintenance funding for UA.
The budget as passed included several controversial items. In addition to the CBR funded projects, the budget also included unusual items impacting federal highway funding, the Power Cost Equalization, and potentially even the Higher Education Fund. While this is disappointing, both the governor and several legislators have expressed a desire to revisit these capital budget items after an agreement is reached on the PFD later this summer. We will be working with lawmakers and looking for new opportunities to address our critical capital needs at that time.

PFD Issues Remain
The major sticking point this session has been the amount and funding source of the 2019 PFD. Governor Dunleavy has insisted on a full $3,000 PFD per the traditional calculation formula in statute. Both the House and the Senate have rejected this proposal, citing both the deficit spending it would create and the other important state law that such a large draw would violate – the Percent of Market Value (POMV) statute that limits draws on the permanent fund’s earning to 5.25 percent annually.
The operating and capital budgets approved by the legislature this week – have no money in them for this year’s PFD. Resolving that issue will be the focus of the special session the governor called yesterday.
In preparation for that conversation, earlier this week the House and Senate appointed a Bicameral Permanent Fund Working Group to review policy options surrounding management of the Permanent Fund and the annual PFD. The group consists of four members of the Senate and four members of the House and will be co-chaired by Senator Click Bishop and Representative Jennifer Johnston. The group met twice this week and expects to present recommendations to the legislature by July 5th. You can view their most recent meeting here.

New Student Regent
Governor Dunleavy has appointed Cachet Garrett as the student representative to the UA Board of Regents. Garrett is an alumna of UAS and is currently pursuing a master’s degree in communications at UAF. We welcome Catchet to the board, and thank her for her service to the university.

Tania Clucas, chief of staff for Rep. Grier Hopkins presents President Jim Johnsen with a citation recognizing the 20th anniversary of the UA Scholars  program.

Tania Clucas, chief of staff for Rep. Grier Hopkins presents President Jim Johnsen with a citation recognizing the 20th anniversary of the UA Scholars program.

UA Scholars Celebration
Last week UA President Jim Johnsen and the Board of Regents hosted a reception honoring the 20th anniversary of the UA Scholars Program. Former scholars, faculty and local dignitaries attended to celebrate the remarkable impact the scholarship has had enhancing higher education in Alaska. The event also included presentation of a legislative citation in the program’s honor.