Dunleavy repeats many vetoes that fueled the recall, betting federal COVID-19 aid can replace some

Gov. Mike Dunleavy announces hundreds of millions in vetoes, claiming that many of the holes can be filled with federal COVID-19 money.

Update 4:14 p.m.: This story has been updated to clarify some of the uncertainty about the governor’s claims on how school bond debt payments qualify under the COVID-19 response.

Gov. Mike Dunleavy today announced hundreds of millions of dollars of vetoes to state programs, renewing several cuts that served as the legal basis of the recall and drove tens of thousands of Alaskans to sign the recall petition.

Dunleavy’s vetoes hit K-12 funding, pre-K grants, the University of Alaska, public broadcasting, the ferry system, bond debt reimbursement payments to municipalities, the courts, Medicaid, fisheries management and even state money intended to fight COVID-19. In all, the governor’s veto pen removed $210 million in program spending from the operating budget.

At a news conference detailing the budget, the governor claimed that some $1.25 billion in federal relief funds headed to Alaska can be used to cover the holes he created in the budget. Asked about what programs would and what programs wouldn’t be replaced by those funds, Dunleavy was vague.

Documents released alongside his announcement show the plan to replace funds is limited in scope, addressing just a handful of more than 100 separate line item vetoes. The documents state the following vetoed spending programs “will be funded through the Federal Coronavirus Aid, Relief and Economic Security (CARES) Act”:

  • $30 million in payments to local governments under the state’s community assistance program
  • $100.1 million in school bond debt reimbursement to municipalities that took out loans for school construction and major renovations with the expectation the state would pick up a portion of the check, as well as $2.3 million in “non-mandatory municipal debt reimbursement”
  • $30 million in one-time funding for K-12 schools
  • $36.7 million in funding for Regional Educational Attendance Areas
  • $2.7 million for Anchorage’s response to COVID-19
  • $5 million for the Alaska Housing Finance Corporation’s homelessness grant intended to cope with COVID-19

Other programs, like public broadcasting, the University of Alaska, the ferry system and pre-K grants are cut without any apparent intention to restore the funds. The vetoes also repeat the $334,700 veto of the Alaska Court System Dunleavy made last year as retribution on the court system for overturning an anti-abortion law though he doesn’t specifically mention that law this time, instead focusing in on legislative intent language that calls for no Medicaid money to be used for abortion. That veto last year spawned its own lawsuit and is one of the legal grounds for the recall.

The governor’s plan to substitute in federal coronavirus relief money from the anticipated $1.25 billion in the federal CARES Act was met with skepticism from reporters and other elected officials, who noted that the federal government has placed guidelines on how that money can be spent. The National Conference of State Legislatures released guidance this guidance last week saying that the money can only be used for costs that “are necessary expenditures incurred due to COVID-19” and that they cannot be spending covered in the state’s last budget.

The community assistance, school bond debt reimbursement, one-time K-12 funding and REAA funding were all included in the budget legislators approved last year.

Asked specifically how his plan to substitute in federal money for the $100.1 million in school bond debt reimbursement, half of which Dunleavy vetoed in last year’s budget resulting in higher property taxes for most municipalities, met the federal guidelines, the governor had this to say:

“We’re gonna have folks who are going to have a difficult time paying their taxes because they’re out of a job. We’re going to have situations where municipalities are gonna have a difficult time doing their business because the tax base is shrinking as we speak right now,” he said. “It’s a direct result of this virus and this shutdown. And the monies coming in from the federal government have to do with relating directly to the virus and, again, the result of the shutdown economically and for jobs.”

Despite the governor’s claims, it’s unclear how restoring the school bond debt reimbursement will help communities cope with the new financial stresses of COVID-19. The cuts to the program last year created their own challenges for local governments, which were forced to cut spending, tap into savings or raise taxes to cope with the higher-than-expected debt payments. Restoring the funding would only return local governments to their status before Dunleavy became governor.

Dunleavy made no mention of plans to provide any additional funding to communities and the federal law doesn’t require the state to pass any of the $1.25 billion on.

It’s also unclear when any of the federal funding is expected to be deployed to states. The state’s operating budget goes into effect on July 1.

Asked if he was planning on using any of the $1.25 billion for a supplemental cash payment directly to Alaskans akin to the dividend, Dunleavy claimed that the administration hadn’t even considered such a use of the money (last week he said they were looking at their options) and turned his attention to the Legislature, calling on them to approve a bigger payout out of the state’s dwindling savings.

The governor’s vetoes nix the Legislature’s plan to transfer $1.05 billion from the Alaska Permanent Fund’s earnings reserve account to the constitutionally protected corpus, a move he said would allow them to approve a bigger dividend.

House Speaker Bryce Edgmon, I-Dillingham, raised concerns about the governor’s plan to substitute in federal money for spending that was intended well before the COVID-19 emergency became a reality, warning that it could hamper the state’s ability to deal with the actual issues raised by COVID-19.

“From our initial understanding, federal funds can only be used for expenditures incurred due to COVID-19, not expenditures unrelated to the COVID-19 response. The governor’s vetoes gamble with vital programs like Medicaid, community assistance, school bond debt reimbursement, K-12 education, homeless grants, the Alaska Marine Highway System, public broadcasting, the university, and more,” Edgmon said in a prepared statement. “There is no guarantee that the federal government will pick up the tab. This approach is incredibly troubling to me.”

Edgmon was also critical of the governor’s use of the COVID-19 emergency to repeat several deeply unpopular cuts he made in 2019.

“Unfortunately, not only did the governor veto his own supplemental budget requests, he is also using the COVID-19 crisis as justification to veto items he never supported,” Edgmon said. “We need to hear more from the administration on the conversations they’ve had with the federal government about the sideboards around the federal money Alaska is receiving. The governor needs to ensure Alaskans that these essential services will be paid for by the CARES Act.”

Dunleavy asked reporters to refrain from asking budget questions at his daily COVID-19 press briefings.

Meanwhile, activity in the Recall Dunleavy Facebook group picked up as several members asked where they can sign.

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