The Legislature’s Budget and Audit committee is set to take up just six of Gov. Mike Dunleavy’s 11 requests to spend federal CARES Act funding on Friday after its legal and financial experts raised legal concerns about more than $1 billion in proposed spending.
The issue is largely technical instead of political and rests with how the legislative approval process for unexpected federal funding and spending works, but it will delay $562.5 million in payments to local communities, $300 million in small business relief and $100 million in economic stimulus to Alaska’s fisheries. The LB&A Committee is scheduled to meet Friday.
The memo for the meeting doesn’t go into the specific reasons that the five items were rejected but the Legislature’s legal and financial analysts have previously argued the LB&A’s revised program legislative process, better known as the RPL process, can only be used to approve increased federal spending for existing federal spends approved by the whole Legislature. It cannot create new appropriations.
For example, if the feds for some inexplicable reason created a surprise program for states to build their own waterparks but the state didn’t have any existing waterpark-related spending in its budget, then the governor would have to wait until the full Legislature could meet to approve a wholly new budget line. This would still be the case if the Legislature had a waterpark in its budget but only had allocated state funds to the project.
A real-world example of a permissible use of the RPL process would be Gov. Bill Walker’s unilateral decision to expand Medicaid in 2015 because the Legislature had already approved Medicaid with accompanying federal receipt authority.
So, all that is to say that five of the governor’s requests are more waterpark than Medicaid, at least in the eyes of the Legislature’s RPL process.
The sidelined spending includes the following items: $562.million for direct payments to local governments, $300 million for a small business relief program, $100 million in economic stimulus for Alaska fisheries, $49 million for statewide aviation and rural airport systems and $3.03 million for the Whittier Tunnel.
What remains to be considered by the LB&A Committee on Friday are the following items: $48 million in federal education funding for Alaska’s K-12 schools, $5 million in federal agriculture funding for K-12 schools, $421,500 in National Endowment for the Arts funding for education, $3.5 million in public safety funding, $29 million in federal transit grants and $5 million for the University of Alaska.
The memo lays out the purpose, previous legislative action, timing issues and budgetary issues with each request. It also includes a comment from a legislative fiscal analyst on each item with the common thread being “This appropriation has existing federal (money attached to it).”
Why it matters
The Legislature finds itself in a tricky spot as general distrust of the Dunleavy administration and legitimate legal issues run up against the need to swiftly respond to the COVID-19 pandemic. Before leaving Juneau, Dunleavy had requested broad authority to spend federal relief money however he saw fit. That was roundly rejected by the Legislature, which gave him specific yet broad spending authority in the realms of public health, education and disaster response.
The concern with the governor’s spending decisions seems to be warranted after the governor issued millions of dollars in vetoes to local community payments and K-12 education and wrongly claimed the vetoes could be backfilled with the pending federal aid. It’s an error that the Dunleavy administration finally acknowledged last week after the feds released additional guidance on how state relief aid could be spent, specifically nixing his plan to backfill lost revenue with the aid.
The vetoes have now created a new mess at a time that schools and local communities are facing extreme unexpected costs after the governor shut down schools for the remaining school year.
Even if the governor’s latest plan for direct municipal relief is eventually approved, the federal funding can only be spent on new and unexpected public health and economic costs related to COVID-19. Legislators have worried that spending outside those guidelines could leave the state on the hook to pay the feds back.
As for disbursing the money, the Legislature is in the process of preparing a return to Juneau in some form to approve a supplemental budget that will create the necessary budget lines for this spending. Though it’s politically unlikely, the Legislature could also take a try at overriding the budget vetoes.
Legislative leaders at recent meetings have called for cooperation between the Legislature and administration for the swift approval of this spending, but have urged caution and transparency.
The House Finance Committee is set to meet this morning at 9 a.m. to hear from several mayors and city managers from local communities about the COVID-19 response and federal funds.