Without agreement on CARES Act money, local communities are left waiting for relief

Something might be going on in there.The Alaska State Capitol building as photographed in 2010. (Photo by Kimberly Vardeman/Creative Commons)

Is Gov. Mike Dunleavy’s plan to disburse millions of dollars in federal coronavirus relief money to local governments, small businesses and fisheries exactly legal? No, not really.

Is there an alternative that has widespread support of the Legislature? No, not really.

So, when can local governments, small businesses and fisheries expect to have millions of increasingly critical dollars in hand to respond to the public health crisis, the economic crisis and whatever other unexpected disasters the COVID-19 delivers? Eventually.

Nearly $1 billion in federal CARES Act money still sits in the state’s coffers today after legal issues and internal disagreement in the Alaska Legislature once again sidelined the governor’s efforts to distribute the money. A Legislative Budget and Audit Committee was scheduled to meet today to consider the requests, but that meeting was cancelled and pushed to Monday.

The action comes after LB&A Chair Rep. Chris Tuck, D-Anchorage, made it clear he didn’t intend to bring up several big-ticket requests out of concerns they didn’t align with the laws governing the committee and would represent the Legislature abdicating its responsibility to oversee the budget.

He and several others have argued the Legislature should return to the still-in-session session in Juneau and pass wholly new budget bills that outline the spending in greater clarity and detail.

“The problem that I have is that this is an illegal process,” Tuck told KTOO ahead of the meeting. “The programs aren’t established. That’s the Legislature’s constitutional responsibility. And I don’t want to skirt around that responsibility. We are in session right now. There’s no reason why we can’t go down there and get our work done.”

Not all legislators agree with Tuck’s position, including Senate President Cathy Giessel who’s argued that the COVID-19 pandemic is a unique crisis and requires a unique response. And that’s not to mention the internal quarrels in both chambers of the Legislature and legislators’ concerns about travelling during the pandemic that would make returning to Juneau both politically and logistically difficult.

To be clear, the governor’s proposal to use the Legislative Budget and Audit Committee’s RPL process to distribute the money to local governments, small businesses and fisheries is not legal, at least according to the analysis by the Legislature’s legal and financial teams.

They point out that the RPL process is specifically tailored to increase federal spending that already exists in budgets approved by the whole Legislature. The committee doesn’t have the power to add federal dollars to existing spending or to create wholly new spending.

The legality of the appropriation process—as well as issues about how the federal money can be spent—were the topic of today’s House Judiciary Committee meeting, which was intended to give legislators a look at both sides of the issue. The committee had hoped to hear from the administration to explore its reasoning for this approach, but no one from the administration participated in the hearing.

Legislative Legal Affairs Director Megan Wallace told the committee that the governor’s requests, which were revised late last week, still don’t pass the legal muster for the law and may not stand up in court. However, Wallace acknowledged that she’s providing her legal analysis and not advocating for a specific course of action with the funds.

“My comments today on the RPL process or the CARES Act should not be viewed as advocating for or against any particular process for appropriating or expending these CARES Act funds,” she said. “The Legislature has found itself in unprecedented circumstances and has incredibly difficult policy decisions to make as a result of these circumstances.”

In the committee’s closing moments, Rep. Chuck Kopp, R-Anchorage, said it’s the Legislature’s goal to distribute the money “in the most lawful manner possible and not risking legal upheaval after the fact.” He, like others in the House Majority Coalition, called on both the Legislature and governor to work together on an agreeable solution that allows the money to go out quickly as possible.

The Legislative Budget and Audit Committee has been rescheduled for Monday.

It’s unclear what would happen if the Legislature ultimately moves ahead with the legally dubious plan to use the RPL process to distribute the money but it would almost certainly require legal intervention to halt. Such a lawsuit could be potentially brought by the Legislature, which doesn’t seem likely, or by communities who feel slighted by the spending plans.

Ultimately, the Legislative Budget and Audit Committee is not an insurmountable challenge to spending this money. State law allows the governor to move ahead with spending even if the committee objects as long as he abides a 45-day waiting period and provides a written justification for pushing ahead to the Legislature.

Why it matters

The need for the money is absolutely clear. The Legislature has held several hearings to gauge the impact of the COVID-19 pandemic on communities, local governments, education and businesses, including another one this morning, and the need across the board is dire.

Local governments and businesses are in tremendous economic pain with the near-total closure of the tourism season and health mandates that have halted most other economic activity while other communities are bracing for the unknown as the summer fishing industry gets underway. Everyone’s facing unexpected costs.

The matter for local governments been complicated by Dunleavy’s vetoes of more than $100 million in state funds, which he falsely claimed could be easily replaced with the federal CARES Act money. The federal government has released guidance that allows the funds to be spent broadly but replacing lost revenue, which was the governor’s plan to help communities cope with his vetoes, is explicitly forbidden.

It’s created a situation where local governments not only need to factor in the losses and new expenses due to COVID-19 but also grapple with the sudden loss of millions of dollars in state funds, which local governments have said will require higher taxes, cuts to services or drawing down on savings.

Several communities have called on the Legislature to return to session and restore those vetoed funds, which is only something the Legislature can do through a regular budget bill.

Alaska Municipal League Executive Director Nils Andreassen testified today to the House Community and Regional Affairs Committee, explaining that the needs for each community are different but that the one constant is the need for additional resources sooner than later. Many communities, he said, are currently responding to the COVID-19 pandemic with their own, limited funds and are hesitant to act until they have more certainty on the funding.

City of Fairbanks Chief of Staff Mike Meeks testified at the hearing that the estimated loss in revenue for the city is at $5 million and growing as the economic fallout and loss of the tourism season continues to grow. He said it’s likely that the city’s pandemic-related costs that are eligible to be covered with CARES Act funding will only be a fraction of that $5 million so it’s likely that the city will use much of its money as direct grants to the community to help with the economic fallout.

He said, though, without clarity from the federal government, the state, the governor or the Legislature, it’s too risky for the city to undertake such a program.

“What is the final number? When will we have that number? And will the state add additional strings on for what it can be used for? It’s very difficult to plan right now and try to be in front of this when we don’t know what those three elements are,” he said. “The longer we push the decisions to the right, the more challenging it is going to be for us to execute any kind of grant program.”

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