Capitol report
 
March 28, 2020

FY21 Budget Finalized? Maybe Not

Today marks the 68th day of the legislative session. As this is written, the Legislature is locked in final negotiations in an effort to get out of Juneau and back to their home districts within the next 48 hours. While Alaska’s Constitution provides for a 121-day session, lawmakers have drastically accelerated the pace of legislative business. For the past several weeks the Capitol has been closed to the public, and the goal has been to complete essential tasks and adjourn to avoid complications from the COVID-19 crisis. While some legislators have suggested possibly returning to either resume session, or call a special session, the COVID-19 crisis makes long-term planning difficult. We expect legislative business to conclude today or tomorrow.
 
Conference Committee Finalizes FY21 Budget
This afternoon, the Conference Committee finalized their recommendations on the FY21 Operating and Capital Budgets. The agreement still must go back to the House and Senate for concurrence, and as we explain later, that may still be a problem in the House.
 
The committee set the University of Alaska’s state operating appropriation at $289.5 million unrestricted general fund (UGF), which is $12.5 million below the current year, and $12.5 million above the compact agreement. In discussing the change at today’s hearing, Rep. Jennifer Johnston stated that because no capital funds were appropriated to UA, the additional $12.5 million was for debt service and deferred maintenance, and not to be used to cover other operating expenses. UA’s funding will be divided into two separate appropriations - $237 million for UAF, UAA and Statewide; and $52.5 million for UAS and our community campuses. The committee also accepted three items of intent language introduced by the Senate:

  1. Limiting the use of Reimbursable Service Agreements (RSA) to reallocate funds between the community campuses
  2. Updating a 2011 joint study by the Alaska Center for Energy & Power (ACEP) and the Institute of Social & Economic Research (ISER) on the potential use of small scale nuclear reactors in Alaska
  3. Limiting indirect cost recovery charges on funding to the Future Farmers of America program

The Conference Committee took several actions however, that may still meet resistance in the House, including changing the funding source on several critical budget items, including the university. The committee shifted $1.1 billion or 20 percent of the entire budget from the General Fund, to the Constitutional Budget Reserve (CBR), in hopes of applying pressure to the 8-10 House members who have thus still been unwilling to provide the three-quarter vote threshold required to use the CBR. In total, $608 million in state agency operations were moved to the CBR. If this pressure tactic fails, the Legislature will be forced to come back later this year, or early next year, to pass a supplemental budget. Otherwise, most state agencies will run out of money 8-9 months into the year. The university is also potentially impacted, as $72 million (25%) of our FY21 state appropriation was moved to the CBR. The committee also put half this year’s PFD in the same predicament. If the CBR draw is not approved, October’s dividend will be cut from $1,000 to $500.
 
The CBR vote is also required to ensure that any fund account balances that get swept into the CBR at the end of the fiscal year in June, are “reversed” and put back into those accounts on July 1. This annual sweep is a constitutional requirement, until such time as the state has repaid any money previously “borrowed” from the CBR. You may recall that last year, we had a similar showdown that wasn’t resolved until July 29, and jeopardized the Higher Education Investment Fund which pays for the WWAMI program, Alaska Performance Scholarships and the needs-based Alaska Education Grant. Failure to obtain a reverse sweep, will impact over 50 separate accounts that fund critical state priorities like Power Cost Equalization, civil legal services, marine highway, oil spill response and others.
 
The House has failed twice this year already to achieve the 30 vote margin needed to access the CBR due to lack of support from the Republican Minority. Both votes occurred while considering the FY20 Supplemental Budget, the first vote failed last Wednesday 28-10, the second failed earlier this week 27-11.
 
The Conference Committee also removed funding to pay a $1,000 bonus Permanent Fund Dividend that had been added by the Senate during floor debate on the budget. Supporters considered the payment, a form of stimulus in response to the economic impacts of the coronavirus, which was to be paid in the next several months. However, the approximately $680 million appropriation would have required the state to exceed the 5.25% Percent of Market Value (POMV) limit on draws from the Permanent Fund Earnings Reserve. The committee also adopted language to induce lawmakers to access the Constitutional Budget Reserve (CBR) to fund this year’s spending plan. Balancing the FY21 budget requires using the CBR which needs a three-quarters majority vote in both the House and Senate.
 
Covid-19 Response Legislation Debated in Conference
Legislation extending the Governor’s Declaration of a Public Health Disaster Emergency will be further discussed in a Conference Committee for SB 241 this evening. The bill includes a myriad of provisions expanding the Department of Health & Social Services’ authority to respond to the COVID-19 Pandemic. Also included in the legislation are provisions for allowing for grace periods for utility, mortgage/rental payments and PFD eligibility.
 
Federal Stimulus Legislation Signed into Law
This week, Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act, and President Trump signed the legislation on Friday. Alaska’s Congressional Delegation has worked amongst their colleagues to ensure our state gets its fair share of relief funding. The CARES Act is the third federal stimulus package to come in response to COVID-19 crisis, and is the largest of its kind in history. The bill provides more than $2 trillion in assistance to states, individuals, industries and others.
 
The legislation includes more than $31 billion to establish an Education Stabilization Fund. This will provide funds to states, local school districts, colleges and universities to help cover pandemic-related expenses. Colleges and universities are also expected to benefit from more than $14 billion in funding through a new Higher Education Emergency Relief Fund. Ninety percent of that funding will be distributed based on a formula designed to aid students and institutions facing disruption of campus/class operations due to COVID-19. The remaining funds will be distributed to eligible minority serving institutions, and through a discretionary account to be managed by the U.S. Secretary of Education. The University of Alaska is expected to benefit from these fund sources once the President signs the bill into law, and the federal government begins the implementation process.
 
The CARES Act also makes significant changes to federal regulations, providing flexibility with implementing federal grants and for students and institutions utilizing programs under Title IV. The legislation has several tax-related provisions encouraging charitable giving and employer provided education assistance towards employees’ student loan debt. Numerous federal research agencies such as National Science Foundation, NASA, Department of Energy’s Office of Science, and the several of the National Institutes of Health will receive funding to address COVID-19 impacts. The National Endowment for the Arts’ Institute of Museum and Library Services and the National Endowment for the Arts will also get funding for direct grants to states.
 
Your UA Government Relations Team has in been constant contact with our Congressional Delegation throughout this process, and will continue to work collaboratively as these measures are implemented and future legislation is discussed.
 
Salute to UA Interns
As the legislative session comes to a close, we would like to thank this year’s cohort of UA students serving as part of the Senator Ted Stevens Legislative Internship Program. This year’s session has been unusual and unprecedented in many ways. Through it all, our students have distinguished themselves and been great ambassadors for our university in the Capitol.
 
Aidan Earnest, UAF - Rep. Grier Hopkins
Alex Jorgensen, UAA - Sen. Tom Begich        
Alexander Schroeder, UAA - Sen. Bill Wielechowski 
Calvin Zuelow, UAS - Sen. Jesse Kiehl
Christian English, UAS - Sen. John Coghill
Clare Baldwin, UAA - Sen. Cathy Giessel       
Darren Napoli, UAF - Sen. Josh Revak
Dawson Mann, UAF - Sen. Shelley Hughes
Dustin Elsberry, UAF - Sen. Josh Revak
Joe Greenough, UAF - Rep. Louise Stutes     
Josiah Nash, UAA - Rep. Jonathan Kreiss-Tomkins
Kasey Casort, UAF - Rep. Ivy Spohnholz        
Katie McCall, UAA - Sen. Mia Costello           
Michael Willis, UAA - Sen. Peter Micciche    
Teresa Wrobel, UAA - Sen. Scott Kawasaki