Intense negotiations in the state capitol in Juneau earlier this week produced bills in the state House late Wednesday that restored many funds cut from the budget by Gov. Mike Dunleavy, including $110 million of $131 million vetoed from the University of Alaska funds.
However, a bill to enact a Permanent Fund Dividend ranging between $1,300 and $1,600 was still pending, along with agreements on a three-quarters vote of House members to reverse a “sweep” of special funds and a similar margin to fund the state capital, or construction, budget from the Constitutional Budget Reserve.
It will be the weekend before the state Senate can deal with any of this, however, and it’s possible the governor may veto the restored spending if a $3,000 PFD is not agreed on by legislators.
Mat-Su’s five-member delegation in the state House provided the core of the House Republican minority’s support for a “fully funded” $3,000 PFD and opposition to a three-quarters vote in the House to access the Constitutional Budget Reserve and to reverse the sweep.
“Fully-funded” is a codeword for calculating the PFD according to a 1980s-era formula in state statute. Opponents, mainly the House majority, argues the formula is obsolete and can no longer be afforded given reduced oil revenue.
The ranks were thinning among opponents in the CBR vote, however. In the House floor vote last Sunday 27 members voted “yes,” six voted “no,” and seven lawmakers were absent for various reasons (an absence counts as a no vote on major actions). Thirty “yes” votes of the 40-member House are needed by legislators physically present to reach the three-quarters threshold.
The next day, Monday, the measure was brought back on reconsideration, with 29 voting “yes,” seven “no” and with four absent. Three Anchorage Republican minority members switched their votes Monday: Reps. Laddie Shaw, Josh Revak and Sarah Rasmussen.
Rep. Kelly Merrick, R-Eagle River, had switched earlier.
Oddly, House Minority Leader Lance Pruitt, R-Anchorage, voted with the majority, and for the CBR draw, on both Sunday and Monday.
Meanwhile, the state capital, or construction, budget is not the only hostage in the impasse. A proposal to reverse a budgetary procedure known as the “sweep” to restore special funds for designated purposes also requires a three-quarters vote, and the House minority is withholding support on that as well.
Dunleavy opposes reversing the sweep, budget director Donna Arduin told the Senate Finance Committee last week, arguing that the state is better served with a simplified budget, which the sweep accomplished.
The governor is instead proposing to pay for programs financed from the voided special funds with ordinary state general fund revenues, but the approval to do that is tied up in the budget bills that are now pending.
If negotiations fail, there will be no money for rural Power Cost Equalization payments or scholarships to the University of Alaska for college students this year. A fund for emergency vaccines to combat disease outbreaks is also a casualty of the sweep, but the money cannot be restored due to a technicality.
There may be no PFD this year, either, if legislators can’t reach agreement.
Meanwhile, University of Alaska officials, armed with a declaration if financial emergency from the Board of Regents, are at work on a major restructuring and downsizing to deal with a 41 percent, or $130 million, cut the university’s budget ordered by the governor.
Some of the money could yet be restored as part of an overarching budget deal — and if Dunleavy agrees — but it’s uncertain whether Dunleavy will support the $110 million being restored.
Given that, the university is proceeding with its restructuring UA president Jim Johnsen told the Regents last Monday.
It is unlikely that Mat-Su community college will escape the effects of a major university restructuring. Dunleavy said earlier that the state’s smaller university units, which operate like community colleges, will be largely spared.
That’s because the Legislature approved two UA budgets this year, one for the main University of Alaska Fairbanks and University of Alaska campuses and a separate budget for the smaller college units and University of Alaska Southeast.
Dunleavy’s vetoes only applied to the UAF-UAA budget, the governor explained.
Things may not work out that way, however. Under the state Constitution the university’s Board of Regents allocates funds once they are appropriated. Under this reasoning the regents’ control, legally, how cuts are made across all campuses, not the governor.
Dunleavy may not see it that way and could direct the Office of Management and Budget to block cuts to the smaller campuses, but this will likely to spark a lawsuit from the regents, sources familiar with the university’s budget procedures say.
Meanwhile, Johnsen and other top UA officials are looking at different scenarios for restructuring, one involving a total redo, inventing a “new” university structure; and a second that preserves the basic structure of the three main campuses and allows the chancellors at each to lead the reorganization.
Johnsen is favoring the first option, the total redo, while the chancellor, and faculty, favor option two, arguing the chancellors understand the regional institutions better than administrators at UA’s statewide management.
Some of the regents favor this approach, too. They questioned whether a major reorganization can be done it time, at least intelligently, and whether it would really save money.
UAA’s chancellor, Cathy Sandeen, told the regents Monday that she has been through major reorganizations at other universities and understands how they can be done.
UAA started work earlier this spring when the scale of the governor’s reductions became known, she said, and has already cut $3.8 million from its budget including $500,000 in administrative costs.
“We are well along in this and we’re able to make further reductions quickly as soon as you give us a number” meaning a budget target, Sandeen told the regents’ at the meeting.
Regent Karen Perdue warned against “simplistic” moves like eliminating major programs at one campus or the other
er, such as consolidating engineering at either UAA or UAF. Each campus now has its own engineering program.
“We think it will save money,” but eliminating one of the two would disadvantage large numbers of engineering students in either Anchorage or Fairbanks.
“We would expect students to have to go to one or the other,” she said, which would have major effects on enrollment.
It’s a tough problem and time is short: Johnsen must have a conceptual plan for the regents by July 30 and a detailed plan by mid-September.
The timing is particularly bad because the university is locked into class offerings and spending, and commitments to students who have enrolled, for the fall semester. That means the bulk of the $131 million cut, if it winds up at that, will have to be absorbed in the spring semester.