April 24, 2020

The Capitol Report: COVID-19 Relief Funding

The Alaska Legislature has been in an extended recess since the end of March, and today is technically the 95th day of the session. Legislative leaders opted to leave session open in case additional pandemic response measures became necessary. Such an occasion has arisen and activity is beginning to pick back up within state government.
 
Federal Guidance for COVID-19 Relief
Earlier this week, the Department of Education released additional guidance for funding in the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The guidance provides additional details for the Education Stabilization Funds that are available to colleges and universities through the Higher Education Emergency Relief Fund (HEERF). On April 9th, the department issued its initial guidance on the first 50 percent of the funds allocated for emergency student financial aid and today they issued guidance on the remaining 50 percent of funds authorized for direct relief to institutions. To receive institutional relief funds, universities must submit a new certification agreement through Grants.gov for this aid.

Before applying for these funds, institutions must have already completed the certification agreement for the previously released emergency student financial aid. The department also released FAQs today on both institutional funds and student financial aid. The campuses are finalizing distributions of the funding to address COVID-19 related costs. Below is a breakdown of the funding by campus as distributed through the formula in the CARES Act. 

President Johnsen and Regents Brief the Alaska Congressional Delegation
Last week, Board of Regents Chair Sheri Buretta, Vice Chair Karen Perdue, Regent Gloria O'Neill and President Jim Johnsen briefed the Alaska Congressional Delegation on the impacts of the Coronavirus to the university and its students. Chair Buretta discussed the actions UA has taken to ensure the safety of students, faculty and staff as well as the continuation of course delivery across all campuses and programs during this uncertain time.

Regents Perdue and O'Neill highlighted student financial hardships, budget impacts, as well as the efforts that our faculty and staff have made to assist response efforts. President Johnsen provided an analysis of the financial impact to students and campuses of the recently passed CARES Act. Additionally, President Johnsen provided the delegation recommendations for the next COVID-related aid packages to address the university’s long-term debt as well as internet accessibility and affordability at our rural campuses.  
 
President Trump Signs Small COVID-Related Aid Package
Earlier today, President Trump signed into law a recovery package providing nearly $500 billion in additional relief funds. The bill provides $321 billion infusion to a small business rescue fund, the Paycheck Protection Program. It also funds $60 billion in economic disaster loans for small businesses, $75 billion in emergency relief for hospitals and $25 billion for Coronavirus testing. This bill is the fourth legislative package passed to address COVID-19 impacts, and brings the total of federal aid to more than $3 trillion.  
 
Governor and Legislators Debate Federal Relief Funding
On Tuesday, Governor Dunleavy announced his plan for distributing federal funds received under the CARES Act. The State of Alaska will receive more than $1.25 billion in federal aid. Through provisions in the law, the Higher Education Emergency Relief Fund, the University of Alaska will receive at least $7.8 million. How most of the rest of the funding will be allocated is a major issue for lawmakers heading into the summer.
 
The Governor’s proposal would direct more than $562 million to municipal governments, distributed through a community assistance formula from the Department of Commerce, Community & Economic Development (DCCED). The department would also receive $400 million to both enhance loan funds supporting small businesses, and for direct relief to commercial and charter fisheries. The Department of Health & Social Services (DH&SS) would retain $337 million of funding in “reserves” to provide for continued response and contingencies related to the pandemic.   
 
To allocate these funds, the Governor is attempting to use a unique mechanism in state law called Revised Program Legislative (RPL) process. This process provides the Governor a way to accept additional federal funds for items previous approved in the current state budget. Under state law, the Governor must send a letter to the Legislative Budget & Audit (LB&A) Committee requesting approval to accept these funds. However, even if the committee does not agree with the Governor’s request, they cannot deny but only delay distribution by 45 days. Since only the Legislature can make appropriations, RPLs are limited to pre-existing programs and traditional only utilized when the Legislature is not in session. 
 
RPLs are a nuanced budget mechanism, and the use in this circumstance has raised eyebrows amongst lawmakers. Doing so has the effect of partially bypassing the Legislature in decisions on how to allocate incoming federal relief funding. The Governor has previously suggested federal relief funds could be used to backfill the more than $210 million he vetoed from the FY21 state budget. Senate President Cathy Giessel and Senate Finance Co-Chair Natasha von Imhof subsequently sent a letter to U.S. Treasury Secretary Steven Mnuchin asking for clarification how relief funds can be utilized.
 
Senate Finance Committee Co-Chair Bert Stedman announced earlier this week that the Legislature will reconvene, and exercise its appropriation authority on federal relief funds. This may avert the RPL process, which initiates a 45-day timeline on April 29. This approach is already being discussed by legislators.
 
The House Finance Committee held two hearings this week reviewing the mechanics and legality of the Governor’s proposed RPLs action. Legislative Legal Director Megan Wallace said that the RPLs are only appropriate for funds going to DH&SS, because the Legislature granted that department specific authority to accept federal dollars for COVID-19 response. She further suggested any other use of these funds would require appropriation by the Legislature. These links will allow you to view the House Finance Committee’s hearing for Wednesday and Friday.
 
Oil Price Crashes, Fiscal Outlook Worsens
The State of Alaska’s fiscal outlook has taken an unprecedented downturn in recent weeks. The pandemic and its economic impact have caused drastic changes in the price, and even potential future production, of oil. On Monday, the price of Alaska North Slope Crude plunged, and for the first time in history, closed below zero at -$2.68. While prices rebounded the following day, and closed at $11.55 yesterday, this is a harbinger of very difficult times ahead the state.   
 
Even before this price drop, Alaska faced a combined budget deficit of $1.3 billion through the remainder of this fiscal year ($527 million) and FY21 ($815 million). Back in December, the price of oil was expected to average $63.50 per barrel through the end of the current fiscal year. Today it is trading at less than one-third of the projected price of $37 per barrel for FY21. This precipitous drop in price creates a staggering decrease in revenue. At current production levels, a price of $79 per barrel is needed to balance the state budget.
 
On Wednesday, Legislative Finance Director Pat Pitney presented an updated fiscal outlook to the House Finance Committee. The presentation showed that even under an optimistic price and production forecast, the State of Alaska will likely exhaust the Constitutional Budget Reserve by June 2021. The continued pandemic crisis has also had serious implications on the financial markets, which provide Alaska revenue through Permanent Fund earnings as well as industries such as tourism and resource development. The takeaway is that lawmakers will have very limited options to balance the budget during the 32nd Alaska Legislature.
 
President Johnsen and UA Researchers Brief Lawmakers
On Wednesday, UA President Jim Johnsen addressed a joint hearing of the House and Senate Education Committees. The President briefed lawmakers on the impacts the Coronavirus pandemic has had on our university, and actions UA has taken to protect our students and contribute to response efforts statewide. The meeting also featured testimony from K-12 School Districts and the Alaska Department of Education & Early Development. You can watch the full hearing here.
 
This afternoon, UA researchers briefed the House Labor & Commerce Committee on the effect Coronavirus has had on Alaska’s economy. The hearing featured presentations from the Institute of Social & Economic Research (ISER) and UAA’s Business Enterprise Institute. You can watch the full hearing here.
 
Governor Announces Phased Reopening Plan
On Tuesday, Governor Dunleavy announced his plan to reactivate segments of the Alaskan economy. Beginning today several non-essential businesses will be able to open under prescribed occupancy, and health and safety restrictions. Since signing the Public Health Disaster Emergency Declaration on March 11, the Governor has issued 17 Health Mandates forming the state’s response to the pandemic. His announcement signals the first of a five-stage reopening process, which during the next few weeks will incrementally revisit those mandates and their restrictions on commerce, travel and community events.
 
TVEP Reauthorization Bill Signed Into Law
Governor Dunleavy has signed legislation extending the Technical Vocational Education Program (TVEP). The bill (HB 235) by Representative Adam Wool reauthorizes the current program and funding structure for one year. TVEP uses a portion of employee unemployment insurance contributions to fund high-demand career and technical education programs. It brings in more than $6 million to UA each year and is a vital to for our workforce development programs. Thank you to Rep. Wool for sponsoring this legislation, and to UA Associate Vice President for Workforce Development Teri Cothren for helping shepherd the bill through the Legislature. We will be working with lawmakers again next year to reauthorize this important program.
 
Remembering Mary Jane Fate
Former UA Regent and native leader Mary Jane Fate passed away earlier this month. She is remembered for her numerous contributions and tireless service to the people of Alaska. Fate was one of the first Alaska Native women to attend the University of Alaska, and dedicated her life to advocating for the health and equity of Alaska Natives. Her impact was felt across Alaska. She advocated for passage of the Alaska Native Claims Settlement Act, and served as the first female co-chair of the Alaska Federation of Natives. In addition to being a UA Regent from 1993-2001, Mary Jane Fate served on the U.S. Arctic Research Commission, Alaska Judicial Council, and was the first woman to serve on the board of directors of Alaska Airlines. Our thoughts and prayers are with her family. 

April 7, 2020

The Capitol Report

Governor Signs FY21 Budget
Governor Mike Dunleavy signed the FY21 Budget (HB 205) today, and used his line-item veto authority to reduce the Operating Budget by $210 million in unrestricted general funds (UGF). These vetoes include reducing state funding for the University of Alaska by $12.5 million below the amount appropriated by the Legislature.
 
The Governor’s action sets state funding for UA at $277 million UGF. Funding is separated into two appropriations - $224.5 million for UAF, UAA and Statewide; and $52.5 million for UAS and our community campuses. UA’s final budget amount is $25 million below current year levels, and $50 million below FY19. In reducing UA funding, the Governor cited the 3-year budget compact signed by the Board of Regents and the Governor last August. In his remarks today, the Governor justified several of the vetoes based on the assumption that replacement federal funding would be forthcoming through the Coronavirus Aid, Relief, and Economic Security (CARES) Act. However, the funding amounts Alaska may receive through the CARES Act are still unknown, and the timing of those payments uncertain.
 
The vetoes are very disappointing. While UA’s final FY21 state operating budget amount is consistent with the compact, there was bi-partisan support in the Legislature to assist the university during these difficult times. We appreciate the Legislature’s hard work this year and their recognition of the complex financial challenges facing the university. Annual debt service and facilities maintenance are financial obligations that must be met, and both severely limit our flexibility. In recognition of the lack of capital funds for the university this year, the Legislature had appropriated an additional $12.5 million in operating funds for that purpose. The Governor’s veto leaves UA without any additional state funding to address deferred maintenance or debt service, despite strong support in the Capitol this year.
 
In addition to the reducing UA’s budget, the Governor vetoed substantial funding for K-12, the Alaska Marine Highway System, Medicaid and other items. You can see a full list of the Governor’s vetoes here.
 
State Releases Revenue Forecast
Yesterday, the Alaska Department of Revenue released the Spring 2020 Revenue Forecast. The report updates state projections for oil price and production, and is used by policymakers to assess budget decisions based on expected revenue. The figures presented in the report are very concerning and foreshadow tough decisions the State of Alaska will have to make in the coming year.
 
Alaska faces serious financial difficulties and a combined budget deficit of $1.3 billion through the remainder of this fiscal year ($527 million) and FY21 ($815 million). In December, the price of oil was expected to average $63.50 per barrel through the end of the current fiscal year. It is now expected to remain below $30 per barrel through June. This precipitous drop in price, and a projected average price of $37 per barrel in FY21, creates this staggering decrease in revenue.
 
Complicating this difficult situation is the tremendous uncertainty around and unprecedented nature of the COVID-19 pandemic. The crisis will have other serious implications on the financial markets, which provide Alaska revenue through Permanent Fund earnings as well as industries such as tourism and resource development.
 
Prior to yesterday’s grim announcement, the Legislative Finance Division was projecting the CBR would only have $400 million left at the end of the FY21 fiscal year. This means policymakers will have limited options to balance the budget during the 32nd Alaska Legislature. It’s understandable that these new projections weighed heavily on the Governor’s decisions today with regard to the budget vetoes.

March 30, 2020

The Capitol Report: Legislature Goes Into Recess

Legislature Adjourns For Now
The Legislature has concluded its business and recessed for the foreseeable future. Today is only the 70th day of the 120-day session, but the COVID-19 crisis has seriously disrupted the process and lawmakers became increasingly concerned with working in close quarters in the State Capitol. House Speaker Bryce Edgmon called this one of the most uncertain periods in the state’s history. Legislators and their non-Juneau staff, will be transitioning home over the next several days. 

It’s important to note that the Legislature did not adjourn Sine Die, the formal motion to conclude a legislative session. The House and Senate have merely recessed, providing flexibility to return to work as necessary any time before Tuesday, May 19  (the 120 day constitutional limit). Any bill that didn’t pass before the recess, can be taken up at that time. Meeting after May 19  will require either the Legislature or the Governor to call a special session.

Lawmakers Fund FY21 Spending Plan
Floor sessions ran into the early hours Sunday morning, concluding with a House and Senate agreement on a FY21 spending plan. Before sending the plan to each chamber for concurrence, the budget Conference Committee made several structural changes designed to pressure lawmakers into supporting a draw on the Constitutional Budget Reserve (CBR). Had the budget failed to achieve the three-quarter-vote threshold necessary to access the CBR, state agency budgets would have only received 75 percent funding, the Permanent Fund Dividend would have been reduced to $500, and funding for several important University of Alaska programs would have been jeopardized.

In the end, a number of House members reluctantly agreed to support using the CBR to balance this year’s budget. The House approved the budget on a 23-13 vote, but the more critical CBR vote was 30-6, just enough to meet the 30 vote requirement. Once the bill is transmitted to the Governor, he will have 15 days to conduct his review and to sign the budget.

The budget includes $289.5 million in unrestricted general funds (UGF) for the University of Alaska. This is $12.5 million below the current year, but $12.5 million above the compact agreement. Unless the Governor takes action to the contrary, the Legislature’s three-quarter vote on the CBR, ensures a “reverse” sweep will occur on July 1, guaranteeing that fund balances swept at the end of the fiscal year, are returned. This includes the Higher Education Investment Fund, which is the funding source for the WWAMI program, Alaska Performance Scholarships and the needs-based Alaska Education Grant. Had the Legislature failed to obtain approval for the reverse sweep, 50+ separate accounts could have been drained, impacting critically important funding for a wide-range of programs like Power Cost Equalization, civil legal services, the Alaska Marine Highway System, oil spill response and many others.

COVID-19 Disaster Legislation
Aside from the budget, the majority of this week was focused on passing legislation to help address the COVID-19 crisis. By the end of the week, most legislative proposals were rolled into SB 241 and finalized in a Free Conference Committee Saturday. Authorizing a Free Conference is an extremely rare legislative procedure, typically only used when lawmakers need maximum flexibility in a short period of time.

SB 241 was  originally introduced to extend the Governor’s Public Health Disaster Declaration from March 11 to November 15. But by this weekend, the bill included a diverse range of provisions to help Alaskans deal with the economic and health impacts of the COVID-19 epidemic. The bill recognizes that many Alaskans are facing immediate financial hardship brought on by the economic fallout, and containment measures implemented to impede spread of the virus. For those facing serious economic hardships, the bill provides protections during the emergency against eviction, foreclosure, repossessions, utility shut-offs, and ensures access to basic life and safety needs. The legislation also grants the Lt. Governor flexibility in conducting state elections, including the potential to expand mail-in voting if warranted.

The University of Alaska helped advance two important provisions included in the final version of SB 241. The first provision, contained in Section 28 of the bill, addresses the recently passed federal stimulus bill (CARES Act). This federal legislation contains $31 billion in emergency funding to help stabilize K-12 and higher education from the tremendous disruption caused by the COVID-19 crisis. To receive these funds, the Governor must apply for them, and must make assurances to maintain state funding for education. SB 241 mandates that the State of Alaska apply for any emergency education funding made available in the CARES Act, and states the Governor shall make reasonable efforts to ensure UA is allocated the maximum funding allowable under the new law. In addition to this provision, UA may qualify for over $8 million in direct federal assistance, which can be used to cover costs in the delivery of class instruction and provide financial relief to students incurring expenses caused by the disruption of normal campus operations.

The second provision of SB 241, Section 32, provides Good-Samaritan protection for Alaska manufacturers trying to help address the critical shortage of Personal Protective Equipment (PPE) available for our first responders and health care professionals. UAA’s Business Enterprise Institute and Manufacturing Extension Partnership in working with Alaska’s hospitals and health care providers, identified a concern over locally produced PPE products meeting stringent national standards. This provision will help ensure local manufacturers can contribute to equipment shortages by exempting healthcare organizations and manufacturers from liability, when acting in good faith and utilizing the best available PPE. 

Legislation That Didn’t Make It
To date, lawmakers have enacted 66 bills during the 31st Alaska Legislature. The abrupt end to this historically short session seriously curtailed the number of bills that made it over the finish line. Even as late as yesterday, several major pieces of legislation were still in play, but ultimately ran out of time. Two big legislative priority bills – Senator Peter Micciche’s reform of Alaska’s alcohol laws (SB 52) and Senator Click Bishop’s legislation to increase in the state’s fuel tax regime (SB 115) – didn’t make it through the entire process.

Among the stranded bills were two university priorities. SB 30, Senator Gary Stevens’ legislation expanding Middle College programs that allow high school students to take university courses for both college and high school credit. And HB 268, Representative Bart LeBon’s bill expanding the Alaska Municipal Bond Bank’s authority to loan money to the university . We will continue to look for opportunities to advance these bills should the legislature reconvene prior to the May 16 deadline, and next session if necessary.

Boards & Commission Appointees Service Extended
Before adjourning, the Legislature provided a blanket extension to the Governor’s appointees on state boards and commission who are still waiting to be confirmed by the Legislature. UA’s Student Regent Cachet Garrett, is one of the Governor’s appointees that was awaiting confirmation this session.

Typically, the legislature convenes the joint session to consider the governor’s appointees towards the end of the 90 or 120 regular session. Unfortunately, the coronavirus health crisis forced the legislature to recess early, before they were able to convene the confirmation joint session. They did not Sine Die the 2nd Session of the 31st Legislature last night, they merely recessed, which gives them the flexibility to return to work as necessary, any time before the Tuesday, May 19 (the 120 day limit). On Thursday, they passed SCR 14 allowing them to recess for longer than 3 days. However, at this time, it’s still not clear when and if they may be able to hold such a session before having to adjourn.

Under current law, if the legislature doesn’t take up confirmations in a joint session before the regular session adjourns, appointees are considered to have been declined.  To accommodate for this unique situation, the legislature passed HB 309 temporarily extending the time for holding a joint confirmation session. The bill gives the legislature more time to convene a joint session – the earlier of 30 days after the expiration of the Governor’s coronavirus health disaster emergency declaration or by January 18, 2021. The bill provides temporary relief to appointees that are pending confirmation, by clarifying that the joint session having not yet occurred “is not tantamount to a declination of confirmation.” Appointees can continue to serve until a joint session is convened.

Legislature Recognizes UAS Chancellor
The Legislature has passed a citation honoring UAS Chancellor Rick Caulfield for his many years of service to the university. Chancellor Caulfield has led UAS for 5 years and also served as Provost. In addition, he previously served as a tenured professor at UAF and Dean of the UAF Community & Technical College. Congratulations Chancellor on your upcoming retirement, and thank you for all your service to our university. You can view the citation here.

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  

March 24, 2020

The Capitol Report

Senate Passes Budget
Yesterday the Senate passed the FY21 Operating and Capital Budget (HB 205), setting the stage for a conference committee between the House and Senate to finalize this year’s spending package.
 
During floor debate, several senators proposed an amendment to fund a supplemental Permanent Fund Dividend of $1,300 to all Alaskans who received the 2019 PFD. After lengthy debate the amendment was defeated by a vote of 9-10. Later in the floor session, the Senate did pass an amendment by Sen. Mike Shower appropriating funds for an economic stimulus payment of $1,000. The payment is intended to address the economic impact of the COVID-19 crises, and would also be directed to every Alaskan who received last year’s dividend. The amendment was adopted by a vote of 12-7. Senate Finance co-chair Sen. Natasha von Imhof later moved to rescind that amendment, citing the strain additional spending would have on state finances. Her motion was defeated by a vote of 8-10.
 
Also during floor debate, Sen. David Wilson introduced an amendment adding intent language to the University of Alaska’s budget. The language would require UA to limit the indirect costs for federal grants billed to the Future Farmers of America program, which is managed the UAF Cooperative Extension Service. The amendment was adopted by a vote of 10-9, and will get further review by the conference committee.
 
The budget passed the Senate by a vote of 17-1, with Sen. Lora Reinbold casting the lone opposition vote. The House rejected the Senate’s changes to HB 205, and both bodies have appointed members to a budget conference committee which will bridge the differences between the two versions of the bill. The committee includes:
 
Sen. Bert Stedman, Chair (Senate)
Sen. Natasha von Imhof
Sen. Donnie Olson
Rep. Neal Foster, Chair (House)
Rep. Jennifer Johnston
Rep. Cathy Tilton
 
We anticipate the conference committee to convene in the coming days to address the differences between the House and Senate budgets including funding and intent language for the University of Alaska.
 
Senate Finance Advances TVEP Extension
The Senate has unanimously passed House Bill 235 to extend the Technical Vocational Education Program (TVEP). The bill was amended in the Senate Finance Committee to reauthorize the program for only one year versus three years as was initially proposed. Legislators will need to revisit TVEP again next year to continue this important program. The bill has been sent to the House for concurrence, and will then go to the Governor for his signature.  
 
Bond Bank Legislation Passes House
The House passed legislation to expand financing options available to the University of Alaska. HB 268, sponsored by Rep. Bart LeBon, gives the university access to the Alaska Municipal Bond Bank Authority’s strong credit ratings. The bill also raises the cap for UA bond financing from $87.5 million to $500 million. The legislation could help the university fund major infrastructure projects. It could also create savings through the refinancing of existing university debt. HB 268 has been referred to the Senate Finance Committee.
 
Regent Garrett Confirmation Hearing
Wednesday. March 25 at 8:00 a.m., UA Student Regent Cachet Garrett is scheduled for her final confirmation hearing before the House Education Committee. The hearing will be streamed live via the Legislature’s website.
 
By law, the Governor’s appointments to Boards and Commissions are brought before a joint session of the Legislature for confirmation. With the expedited completion of the legislative session, and concerns about gathering the entire Legislature in one room given the current health crisis, the House has passed legislation which would extend appointees service until a joint-session later in the year. 

March 23, 2020

Capitol Report

Senate Finalizes FY21 Omnibus Spending Package
On Saturday, the Senate Finance Committee amended its version of HB 205, the FY21 Operating Budget. The House has already passed its version of the budget, and the Senate has been working on modifications since March 4. Earlier this week, the committee introduced initial recommendations in a substitute bill, which incorporated a significant portion of the Governor’s FY21 Capital Budget (SB 154). Typically, the operating and capital budgets move as two separate appropriations, but given the legislature’s desire to expedite the budget process, and to conclude their business next week, the Senate chose to combine everything into HB 205.  
 
The Committee began Saturday evening’s hearing with a somber presentation from Legislative Finance Director Pat Pitney. The economic fallout from the ongoing health crisis, driven by steep declines in both oil prices and financial markets, will have devastating consequences to the State of Alaska’s finances. The state budget already relies almost exclusively on two revenue sources - Permanent Fund Earnings (~60 percent) and oil taxes (~40 percent). Both sources are being seriously diminished by the ongoing pandemic.
 
Pitney’s briefing provided lawmakers with updated projections and context on the state’s current and future financial health. This is intended to help inform legislators before they make final decisions on this year’s budget, any COVID-19 related financial stimulus package and next year’s Permanent Fund Dividend. The presentation contained several startling projections. Without a serious economic recovery in the next 12-18 months, the state could be forced to make annual draws from the Permanent Fund Earnings Reserve that are substantially higher than the statutory interest income being earned by the fund. You can watch the presentation here.
 
Following Pitney’s presentation, the committee adopted several changes to the budget. You can watch the amendment process here. In two separate amendments, the committee added an additional $96 million in capital funding for three programs that are perennial priorities for rural Alaska:

• Village Safe Water & Wastewater program ($52 m Fed/$13 m GF)
• Rural Power Upgrades ($13 m Fed/$5 m GF)
• NPR Impact Grants ($13 m GF)

In a third amendment, the committee added $680 mill to fund the FY21 Permanent Fund Dividend, an amount estimated to be sufficient to pay a $1,000 dividend. An amendment offered by Senator Bill Wielechowski to add a $1,000 emergency supplemental PFD to be payable in June failed on a vote of 4-to-3. This action was the first the legislature has taken to fund the FY21 dividend. The House has yet to address next year’s dividend. Governor Dunleavy has proposed a full statutory dividend of ~$3,000 next year, and this week he proposed an emergency $1,309 PFD as COVID-19 stimulus.
 
With the addition of dividend and these capital items, it is clear that the Senate expects this to be the final appropriation bill of this rapidly concluding legislative session. The FY21 Mental Health Budget (HB 206) has already been signed by the Governor, and the FY20 supplemental budget (HB 234) is awaiting transmittal.
 
With the added capital projects, HB 205 now includes 71 percent of the state funded, and 94 percent of the federally funded capital projects requested by the Governor. Total capital spending in the bill totaled $1.2 billion, $1.0 billion in federal funds and $200 million in state funding. The bill includes no capital funds for the university.
 
University of Alaska Budget Results
For the University of Alaska, the bill sets state funding for next year at $289.5 million unrestricted general funds (UGF), which is $12.5 million below the current year. The Governor’s budget, reflected the compact agreement, and proposed a $25 million reduction in FY21. The House accepted the $25 million reduction. The Senate intends for the university to use this additional $12.5 mill to modernize, reorganize, and to continue academic program reviews and efficiencies.
 
The Senate proposal splits UA’s funding into two separate appropriations - $237 million for UAF, UAA and Statewide; and $52.5 million for UAS and our community campuses. The bill includes two items of intent language, one calling on the university to limit the use of Reimbursable Service Agreements (RSA) to reallocate funds between the community campuses, and another requesting an update to the joint study published by the Alaska Center for Energy and Power (ACEP) and the Institute of Social and Economic Research (ISER) in 2011 on the potential use of small scale nuclear reactors in Alaska.
 
Unfortunately, the budget contains no capital funding for UA. The Senate failed to fund the $2.5 million request from the Board of Regents and supported by the Governor, for the USArray Initiative at the Alaska Earthquake Center. This is incredibly disappointing given the strong justification, available federal funding, and the bi-partisan legislative support this critical infrastructure project has received over the last two sessions. The bill also fails to provide any funding to address UA’s significant deferred maintenance needs and debt service costs, despite strong support in the Capitol for legislative funding this year.
 
HB 205 will be on the Senate Floor Monday for final debate and vote, before it returns to the House for a concurrence vote.
 
COVID-19 Response
Friday afternoon the House Finance Committee held a hearing on COVID-19 impacts to the Alaskan economy. The Senate Finance Committee held a similar hearing Saturday. John Bittner, executive director of the Alaska Small Business Development Center at UAA, participated in both hearings sharing local business perspective and discussing potential policy implications.

Yesterday, the Senate passed HB 308, which expands unemployment benefits for Alaskans in response to the coronavirus pandemic. HB 308 broadens the eligibility from 90 to 120 days, waives waiting periods, increases the weekly benefit per-dependent to $75 and makes the bill retroactive to March 1. The House is expected to concur today.
 
Bills We are Still Pursuing
There are two bills that we are hopeful the legislature will pass before it concludes business next week. HB 268, sponsored by Rep LeBon, expands the Alaska Municipal Bond Bank’s authority to permit the university to access the authority’s strong credit ratings. HB 268 is scheduled for a House floor vote today.

HB 235, sponsored by Representative Wool, extends the Technical Vocational Education Program (TVEP) and HB 235 will being heard Senate Finance Committee this morning beginning at 9 a.m. The committee is expected to adopt a new version of the bill which only reauthorizes the program for one year versus three years as was hoped. This means we will have to revisit the TVEP program again next year.

March 20, 2020

Capitol Report

Things are moving fast as the state and federal governments manage the COVID-19 crisis response. While today is only the 60th day of the regular session, lawmakers in Juneau have significantly expedited the pace, in order to pass critical legislation and address the immediate health crisis in hopes of concluding their work as early as the end of next week. If you haven’t already, make sure to visit the University of Alaska’s Coronavirus information website for up to date information. 

COVID-19 Response 
This week Governor Dunleavy issued a series of health mandates designed to prevent and slow the spread of the coronavirus. The orders closed most bars, restaurants and public entertainment in the state and suspended non-essential medical and dental procedures. Today the Governor introduced a COVID-19 Economic Stabilization Plan that proposes $1 billion in disaster relief fund, as well as a supplemental Permanent Fund Dividend of $1,306 to be paid this year. The Governor also announced he is working with banks to facilitate state-backed bridge loans for small businesses, and will expand unemployment benefits. He also will sign an executive order directing the Alaska Housing Finance Corporation to temporarily stop evictions and foreclosures.
 
Yesterday in Washington D.C. several leading higher education associations presented a unified plan to Congress for federal intervention to maintain higher education’s capacity to effectively serve students and advance their mission during this critical time. This plan has four pillars: 

1. Emergency aid to students and support for institutions
2. Access to low-cost capital
3. Funding for technology and infrastructure for rapid move to distance and alternative delivery means
4. Temporary flexibility from many statutory and regulatory requirements

Members of Congress are negotiating a trillion-dollar stimulus package that provides financial assistance to airlines, cargo and other industries. However, none of the proposals recognize the pandemic’s financial toll on institutions of higher education.
 
Senate Republicans released their proposed bill text (S. 3548) as well as a section by section summary of their proposals on health and education issues. Senate Democrats also released an outline of their proposal to aid student loan borrowers. While both plans would free up a small amount of institutional resources and help former students, neither plan would help institutions and current students with their acute, immediate financial needs.

We will be monitoring these proposals and working to secure disaster relief for the University of Alaska. UA is experiencing financial impacts from foregone revenue, emergency spending, fee/service refunds, and other unexpected expenses.
 
Budget Update
Currently, the FY21 Operating and Capital Budgets are before the Senate Finance Committee. Today’s Senate UA Operating Budget Subcommittee closeout was canceled, along with several other Senate subcommittee meetings that were planned for this week. Senate and House Finance leadership have noticed meetings throughout the weekend, and we expect movement on our budget in the coming days.
 
Bills on the Move
The House has passed HB 235 to reauthorize the Technical Vocational Education Program (TVEP). The legislation by Rep. Adam Wool passed by a vote of 34-1. The House version of the bill retains the current recipients and funding percentages, and reauthorizes the program for 3 years. TVEP brings in more than $6 million to UA each year and is a vital to UA’s workforce development programs. HB 235 has been scheduled pending referral in the Senate Finance Committee, and we expect it will be brought up for a hearing this weekend.
 
Tomorrow, the House will bring HB 268 by Rep. Bart LeBon to the floor for a vote. The bill would give UA additional tools to address debt obligations and access the Alaska Municipal Bond Bank Authority's strong credit ratings.
 
Next Wednesday at 8 a.m., UA Student Regent Cachet Garrett is scheduled for her final confirmation hearing before the House Education Committee.
 
Things are changing rapidly, and we will do our best to keep you updated on major developments in the Capitol.

March 17, 2020

Capitol Report

COVID-19 Response & Budget Updates 

Responding to the COVID-19 situation this past week has had sudden and chaotic impacts on state and federal government. Policymakers are taking swift action to try to arrest the growing crisis. The World Health Organization has officially characterized COVID-19 as a pandemic. President Trump has restricted travel to the U.S. from much of Europe and additional domestic restrictions have been discussed.

The Legislature has formed a Legislative Council Subcommittee on Emergency Response and Preparedness. They have also taken the unprecedented step of restricting access to the Capitol Building to legislators and staff. Lawmakers are also discussing initiating what is known as the “24-hour Rule.”  If adopted, legislative hearings could be publicly noticed just 24-hours in advance. In practice, this means hearings only need to be noticed by 4 p.m. the day prior, even if they are scheduled to begin early in the morning. This rule helps speed up the legislative process and prioritize must-pass legislation and quickly respond to the Covid-19 situation. 

Governor Dunleavy has declared a public health emergency and suspended K-12 schools for the remainder of March. The House and Senate fast tracked a supplemental budget bill appropriating $13.1 million in state and federal emergency funds. The Governor signed the bill yesterday. Earlier today his administration also announced the creation of the Alaska Economic Stabilization Team to protect Alaska’s economy from the growing impact of Covid-19 in Alaska, the team will be led by former U.S. Senator Mark Begich and former Governor Sean Parnell.

In Congress, the House passed a supplemental appropriations package on Saturday, the Families First Coronavirus Response Act, which is slated to be taken up by the Senate this week. Senator Patty Murray, ranking member on the Senate Health, Education, Labor and Pensions Committee, introduced the Supporting Students in Response to Coronavirus Act. The bill includes a $1.2 billion emergency financial aid program that can create or supplement emergency financial aid programs for students. The program would help students facing challenges when institutions have to temporarily close facilities, and address other impacts on students related to health care. 

State Financial Worsens

In addition dealing with a growing public health emergency, policymakers are also closely watching the pandemic’s impact on financial markets, oil prices and Alaska’s economy. State relies on two revenue sources, increasingly the earnings from the Permanent Fund and oil taxes. The pandemic’s sudden impacts on financial markets and oil prices have had a massive impact on the state’s finances, presenting new challenges for the budget process.

Last week, lawmakers heard from the Legislative Finance Division that the sudden drop in oil prices will likely add $300 million to the FY20 budget deficit, for a total of $931 million; and  $600 million to the FY21 deficit for a total of $2.1 billion. Alaska North Slope Crude prices closed yesterday at $29.30 compared to the Department of Revenue’s Fall Forecast of $63.54. This creates a substantial hole in the budget, and further exacerbates the math problem lawmakers have been battling the past several years -- balancing state services and determining what might be available for a Permanent Fund Dividend.  

Senate Budget Public Testimony

Our expectation is that the Senate Finance Committee budget subcommittee will conclude its work on UA’s FY21 Operating Budget. Prior to closeout, the committee will hold public testimony on the FY21 Operating and Capital Budgets this week. You can testify via teleconference at 1-844-586-9085. Here is the schedule:

• Wednesday March 18th
  • 9:00 a.m. - Juneau, Fairbanks, Unalaska, Nome, Bethel, Kotzebue, Utqiagvik, Tok, Delta Junction
  • 1:00 p.m. - Anchorage, Mat-Su, Off-nets
    
    
• Thursday March 19th
  • 9:00 a.m. – Ketchikan, Wrangell, Petersburg, Sitka, Kenai, Kodiak, Seward, Valdez, Homer, Cordova

TVEP Legislation Heard in House Finance

Yesterday, the House Finance Committee heard legislation to reauthorize the Technical Vocational Education Program (TVEP).

The bill, House Bill 235, had a previous referral in the House Labor & Commerce Committee. That committee adopted a new version of the bill, extending the program for 5 years and increasing the amount of funds made available to the program from unemployment insurance receipts. The new version also altered the funding percentages of recipient training centers, creating a new allocation for the Kodiak Seafood & Marine Science Center (KSMSC). The center is a university facility operated by UAF’s College of Fisheries & Ocean Sciences. KSMSC’s addition as a standalone TVEP recipient has generated discussion amongst lawmakers, and that decision will likely be reviewed further as the bill moves through the legislative process.

Thank you to Associate Vice President for Workforce Development Teri Cothren, UAF Provost Anupma Prakash, and UAF Vice Chancellor Julie Queen for presenting UA’s TVEP projects and answering legislators’ questions. You can view the hearing here.

Senate Finance Moves Middle College Bill

Today the Senate Finance Committee advanced legislation to grow UA’s mission to bring dual enrollment programs to Alaskan students. Senate Bill 30 expands Middle College programs partnering our university with local school districts, and creating opportunities for high school students to take college level classes. The bill now goes to the Senate Rules Committee for scheduling on the Senate floor.You can view the hearing here.

Student Regent Confirmation Hearings

On Thursday, two legislative committees will hold confirmation hearings for UA Student Regent Cachet Garrett. The Senate Education (9 a.m.) and House State Affairs (3 p.m.) Committees will consider Regent Garrett’s appointment, and forward it to a joint session of the Legislature later in session.

State Prosecutors File Charges Against Rep. Gabrielle LeDoux

Last week state prosecutors announced they intend to pursue criminal charges against Anchorage Representative Gabrielle LeDoux for violations of the state’s election laws. The charges stem from a multi-year investigation by the state and FBI regarding voter misconduct during the 2014 and 2018 elections.

March 6, 2020

Capitol Report

Operating Budget Passes House
The House passed the FY21 Operating Budget on Tuesday on a vote of 23-to-16. The budget appropriates $4.5 billion in unrestricted general fund spending, and largely reflects the Governor’s request of $4.4 billion. Currently UA’s FY21 state Operating Budget stands at $277 million unrestricted general funds (UGF), consistent with the 3-year budget compact signed in August.
 
At 43 days, this is the fastest that an operating budget has ever passed the House. The budget, House Bill 205, has been transmitted to the Senate, and we expect action by the Senate Finance Committee and its budget subcommittees in the coming weeks. President Johnsen was in Juneau for meetings with legislators and the administration on Thursday, and your government relations team will continue to be engaged in the budget process.

Governor’s Cup Hockey
UAF welcomed several state leaders last weekend for the Governor’s Cup hockey matchup between the UAF Nanooks and UAA Seawolves. Lt. Governor Kevin Meyer dropped the puck to open last Friday’s game, and Representative Adam Wool did the honors on Saturday. It was also great to have Representative Bart LeBon in attendance. Thank you to Chancellor Dan White and the UAF Athletics Department for hosting these VIPs.

Bills on the Move
As the 31st Alaska Legislature goes into its final stretch, we are monitoring more than 30 pieces of legislation that impact UA. This week we saw action on legislation to expand middle college programs (SB 30), change the WWAMI program (HB 159), and consider adding a faculty member to the UA Board of Regents (HB 180). Next week we expect action on legislation to reauthorize the Technical Vocational Education Program (TVEP) and the introduction of proposed state fiscal plan which could benefit our university. We will provide more information on these developments in next week's report.

February 28, 2020

Capitol Report

 

 

 

Bills Moving in the Capitol
During the 31st Alaska Legislature 648 bills and resolutions have been introduced, of which 65 have passed both bodies. The personal bill deadline for individual lawmakers to submit legislation passed last Monday February 24. This procedural deadline allows the Legislature to narrow in and prioritize bills as it moves towards the second half of session. Here are a few of the UA related bills we will be tracking and engaged in next week.

• HB 155 - Adds career and technical education to the list of subjects high school students can pursue to qualify for the Alaska Performance Scholarship

• HB 159 – Changes the service and reimbursement requirements for the WWAMI Medical Program

• HB 193 - Adds a second verse to Alaska’s State Song which is held in trust by the UA Foundation

• HB 235 – Reauthorizes the reauthorizes the Technical Vocational Education Program (TVEP) 

• HB 282 - Creates an Office of Public Policy Events at UA Campuses

• SB 30 – Expands Middle College and dual enrollment programs

• SJR 19 - Recommends changes in UA’s organizational structure to have chancellors report directly to the UA Board of Regents

 
Capitol Happenings
The Senate Finance Committee held its confirmation hearing for UA Student Regent Cachet Garret on Monday. You can view the hearing here. Regent Garret’s appointment has been referred to the House and Senate Education Committees, and will ultimately be considered along with other boards and commissions nominations at a joint session of the Legislature later in session.