Friday in the Sun (April 24): The Things They Vetoed edition

Friday in the Sun is here

Welcome to Friday in the Sun, our weekly column attempting to make sense out of the political news and rumors of the week. Confusion and uncertainty are particularly high as the state sorta kinda maybe but not entirely gets back to some limited form of business.

I make no promises whether the following typo-ridden and grammatically troubled column will help clear any of that confusion up but I at least hope it’s entertaining while we all ponder whether this six additional weeks of hair growth is starting to look good and maybe we should just go with it?

And hey, whether it’s sarcastic or not, please don’t go injecting yourself with bleach.

Have a nice weekend, y’all.

What did the governor know and when did he know it?

Oh, surprise, it turns out that Gov. Mike Dunleavy’s plan to supplant hundreds of millions of dollars in vetoed payments to local communities and schools is just as bogus as everyone figured. Well, everyone but Attorney General Kevin Clarkson, but what else is new?

After promising that millions of state dollars in community assistance, school bond debt payments and K-12 education—all long-standing programs with very direct impacts on local budgets and property taxes—could somehow be made up with federal money that was specifically tagged for unexpected costs due to COVID-19, the governor reversed course this week when the feds released guidance that confirmed pretty much we all knew on day one.

“When I publicly stated CARES funding could be used to replace state funding, I was working with the best available information at the time (the ever-convenient advice of AG Clarkson) which led many (me) to believe CARES act funding could in fact be used to offset revenue loss,” he said in a statement, parentheticals added by us. “Today, there continues to be a lack of clarity (there’s not) whether the use of CARES act funds can be used to fill lost revenue as a result of the pandemic.”

Or to put it in the words of former U.S. Secretary of Energy Rick Perry: “Oops.”

Based on Clarkson’s apparent advice, Dunleavy had planned on funneling districts replacement funds under the guise of making up for lost revenue.

As for this purported “lack of clarity” here’s what the federal guidance says about backfilling lost revenue:

“Funds may not be used to fill shortfalls in government revenue or to cover expenditures that would not otherwise qualify under the statute. Although a broad range of uses is allowed, revenue replacement is not a permissible use of fund payments.”

Which to us sounds pretty crystal clear but then again, we don’t have the unassailable legal opinion of AG Kevin Clarkson on our side. Or to put it in the words of Lloyd:

The precise impact on local governments and schools isn’t entirely clear. Also, what’s not entirely clear is just how the administration reached the amounts each community will receive from the $1.25 billion in CARES Act funding or whether we’ll ever get a look the numbers that went into making those decisions.

Today, the House Finance Committee got to hear from Office of Management and Budget Director Neil Steininger who talked at length about an increasingly fuzzy “economic activity metrics” that led to the allocation of money. He said he’d be willing to walk individual legislators through the numbers for their communities.

Fairbanks folks are particularly rankled by the comparatively little amount the Fairbanks area’s three governments would be receiving under the plan. Taken together, the funds the governor’s plan has allocated for the city of Fairbanks, the city of North Pole and the Fairbanks North Star Borough amounts to about $44.5 million or $460 per person.

Meanwhile, Juneau will receive $53.2 million or about $1,656 per person.

There’s also a world of difference between state funds and strings-attached federal coronavirus relief funds. Federal money must be used on unexpected COVID-19 costs though it now can go to some economic relief efforts. Still, from today’s hearing it’s not entirely clear whether some local governments will even have enough COVID-19-related expenses to be able to even spend all the aid.

It’s created a situation where communities not only have new expenses to be covered but also existing bills to be paid—the COVID-19 pandemic doesn’t relieve municipalities of more than $100 million school bond debt payments—while the available funds have their limitations and, in some cases, don’t even make up for the vetoes.

That’s the case for the Northwest Arctic Borough, where the CARES Act funding outlined in Dunleavy’s plan will be significantly less than what the governor vetoed.

“We are all suddenly faced with a budget shortfall in a time of decreased revenue and an uncertain future. If possible, the NWAB will be required to supplant the funding previously committed to be paid by the state,” NWAB Mayor Lucy Nelson said in a prepared statement. “Essential borough services which protect the life, health and safety of our residents will have to be reduced or eliminated. … Basically, local governments are being asked to do more work with less money during a national health emergency and an economic crisis.”

Meanwhile the Legislature been furiously researching this whole issue as they prepare for what looks like a return to Juneau in a week and a half. While they’ve generally spared the administration of a fiery public rebuke, it’s telling that the main concern that has been floated is the federal oversight on the funds.

Rep. Jennifer Johsnton, R-Anchorage, closed the meeting with a reminder that if the money is not spent in line with the federal government’s guidelines by either the state or the local governments, it could be the state that’s left on the hook with the feds for the money.

“I think transparency and cooperation between the Legislature and administration is very, very important,” she said. “I think we need to get these funds out as soon as possible but we also need to be aware that we actually have a huge liability in how we get them out and we need to be very transparent.”

Still, at the end of the day, the $1.25 billion is just one segment of many in federal funds.

Things could be made significantly better if Congress either amends the rules for the CARES Act funding to give it more flexibility or passes a new appropriation containing more flexible funding. Of course, it’s on precisely this issue that Senate Majority Leader Mitch McConnell suggested that states should just declare bankruptcy.

Or to put it other words: Who knows.

$968.2 million

That’s the latest estimate of deficit in next year’s budget, according to an updated outlook by the Legislative Finance Division that was presented on Wednesday to the House Finance Committee. And that’s with a $0 PFD. Yikes.

It’s a combination of the slumping oil prices and the stock market crash that’s driving down the value of the Alaska Permanent Fund and therefore the percent of market value draw from the Earnings Reserve Account. Finance Division Director Pat Pitney said to expect that draw to be at least $300 million lower for several because of the COVID-19 market crash and that’s only if the market crash lasts for a year and the Alaska Permanent Fund returns to its 7 percent return.

So, big oof. Very big oof.

That likely goes a very long way to explaining legislators’ general nervousness when it comes to playing around with the federal spending that might put the state on the hook later. There’re really no great answers here, and Pitney was pretty clear that the state has a statutory structural deficit that will require changes to both statutorily driven spending and statutorily driven revenues.

So, how about that additional direct-to-state aid?

Very good authority

And as if things weren’t alarming already, here’s what Rep. Ben Carpenter had to say during that Wednesday hearing:

“I have it on very good authority that we are days away from slowdown in production. If the economy doesn’t pickup nationwide to grow demand for fuel products then we’re looking at somewhere of a complete shutdown within the next 90 days, probably as soon as June,” said. “June-July timeline.”

Not sure what to say about it—the logistics of a TAPS shutdown are nightmareish—but it doesn’t at least coincide with some additional rumors that BP might be moving off with layoffs ahead of the handoff to Hillcorp in a response to slumping prices.

Today, Alyeska announced they’d be cutting TAPS by 50,000.

Alaska North Slope crude is up above $10 at a healthy $11.55.

For some understanding on just how dire it is, here’s the Legislative Finance Division’s slide on it the state of oil prices. Ten bucks is the cost just to get the transportation costs covered:

Happy World Book Day

And finally, the brain geniuses on the Mat-Su Borough School Board voted 5-2 to ban “The Things They Carried,” “I Know Why the Caged Bird Sings,” “Catch-22,” “Invisible Man” and “The Great Gatsby” from school curriculum. The jerks dispute the word “ban” and contend that they just removed them from the school curriculum, barring teachers from using them in classrooms. Right.

Among the reasons put into the board documents for the removal of the books from the curriculum are “’anti-white’ messaging” in “I Know Why the Caged Bird Sings.”

There’s plenty of bagging that we could do on them but, honestly, their own words do plenty. Check out the write up from the Frontiersman: School Board removes books from curriculum.

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