The American Rescue Plan contains an estimated $358.7 million for K-12 schools and another $33.8 million for the University of Alaska, but the state could miss out on a big chunk of that funding because of deep, ongoing cuts to the university.
That’s because the federal cash requires the state to maintain what’s called a “maintenance of effort” to keep funding for both K-12 and the University of Alaska roughly even to pre-pandemic levels, a measure that seeks to stop states from cutting budgets and swapping in the federal money that’s intended to cover additional costs. The measure runs directly into the compact between Gov. Mike Dunleavy and the University of Alaska Board of Regents that determined stepped cuts through this upcoming budget year.
Legislative Finance Division Director Alexei Painter told the House Ways and Means Committee during a hearing today that federal guidance on the money is continually evolving, but that as it currently stands the state could miss out about a third of the federal funds, a combined $129.5 million, because of the cuts to the University of Alaska. While the K-12 funding is likely to pass, he said, the state would need to “significantly” increase funding for the University of Alaska to meet the test. Under the compact, the state has cut its funding by $25 million cut since the start of the pandemic and another $20 million cut is scheduled for this year.
He said the state may be able to get a waiver, arguing that the cuts were not driven by the arrival of the pandemic money but by the precipitous drop-off in state revenue prior to the pandemic.
“The argument the state would make would probably be, ‘we instituted the compact before covid and so it’s not a response to covid and it was not a response to the federal money,’” he said. “The federal government was concerned that states would reduce these programs and use the federal money to substitute it. That’s clearly not what we did. We started cutting the university before any of this money was available. However, based on the simple reading of it, we are clearly funding the university at a smaller percentage of our budget in FY22 than we were in FY17 to FY19. We would have to significantly increase funding to pass that.”
In a hearing last week, Painter told the committee that the University of Alaska’s annual state funding has been cut by nearly $120 million since July 1, 2014.
Painter noted that there may be other things at play that could help or hurt the state in meeting the test for this money—such as contributions to the state teacher retirement account—but like with most things related to federal stimulus money there’s more unknowns than knowns. It’s a problem that legislators have been meeting at almost every direction when looking at the more than $1.1 billion coming the state’s way from the most recently passed federal legislation.
Painter said that he expects the federal government to issue more guidance in mid-May, a little more than a week before the end of the 121-day legislative session but noted that even that can continue to change. As it stands, he says, the outcome isn’t clear.
“We don’t yet have guidance on how the waiver system would work,” he said. “At this point there’s substantial uncertainty whether we’d able to pass that provision.”
The issue came up in the Senate during a presentation on the American Rescue Plan last month. There, senators expressed some support for increasing funding for the University of Alaska above the compact as they have done in recent years. Those previous efforts, though, were vetoed by the governor.
The American Rescue Plan funding is set to arrive in stages and gives the state, University of Alaska and local school districts several years to spend the money in recognition that the effects of the pandemic are likely to be felt for years. Painter said it’d be the third and final disbursement that would be endangered by the cuts to the University of Alaska.