Capitol Report for April 24

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The Capitol Report: April 24, 2020

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  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.