Dunleavy admin takes new shot at university scholarship fund despite protections he signed

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The fate of the endowment fund set up to provide Alaska students with needs- and merit-based scholarships may be back up in the air after Gov. Mike Dunleavy’s administration requested the Alaska Supreme Court take another look at a ruling that recognized a new law—which was signed by Dunleavy—protects the fund from being automatically liquidated.  

The Higher Education Investment Fund was one of several funds targeted for liquidation by the Dunleavy administration through a greatly expanded reading of the Alaska Constitutional Budget Reserve’s repayment provisions, known to Alaska budget wonks as “the sweep.” It, like the Power Cost Equalization Fund, drew lawsuits challenging the decision with the courts finding the PCE fund to be protected from the sweep while the Higher Education Investment Fund was not.

The main issue, as Superior Court Judge Adolf Zeman wrote in a ruling that was upheld by the Alaska Supreme Court, comes down to where the funds are located according to state law. The PCE fund was specifically located outside of the state’s general fund, while the scholarship fund was explicitly within it. While there are other issues that affect a fund’s sweepability, that’s become the main issue.

Zeman wrote at the time the solution was simple.

“The programs the HEIF currently helps fund … do not have to become obsolete following the Court’s decision here today. If the legislature believes these programs should be funded, it possesses the power to establish the HEIF as a separate fund outside the general fund or to appropriate money from other sources … to fund the programs in the future.”

The Alaska Supreme Court even agreed to take up the appeal on an expedited basis with the understanding that the Legislature would have the time to pass necessary legislation if they ruled that the fund was subject to the sweep under the previous laws, which the court ultimately did on Feb. 22.

And that’s just what the Legislature did, approving House Bill 322 that set up the scholarship fund as well as a fund for the Alaska Marine Highway’s vessel replacement program according to Judge Zeman’s directions, outside of the general fund and thus free from fear of future sweeps.

The Alaska Supreme Court took note of the legislation in a full order published on Sept. 30, recognizing the key problem at the heart of the lawsuit had been solved.

“The legislature has since amended the HEIF statute, removing the HEIF from the general fund and thus making it ineligible for the sweep. Our decision reflects the statutes in place during the proceedings underlying this appeal,” explained the footnote.

It would seem like everything has been settled and Alaska students could breathe a sigh of relief that the $400 million endowment fund that pays for their scholarships as well as their participation in some Outside medical schools via WWAMI program would be guaranteed for the foreseeable future.  

That was until a Dunleavy’s Department of Law filed a petition for rehearing on Oct. 7—just days after Dunleavy signed the legislation setting up the funds outside of the general fund—that essentially argues that the Alaska Supreme Court overstepped the case and the fund’s status should remain in limbo.

“If the court’s comment is correct, the legislature can avoid the sweep via a statutory drafting device passed by a simple majority vote, avoiding the three-quarters majority that the constitution requires,” argues the state’s motion. “The court should grant rehearing to remove the dicta on this point, leaving the issue for another case.”

The motion also suggests an alternate footnote that would explicitly leave the question of the fund’s future to be decided in another lawsuit.

In responses to the motion filed by the Legislature and a group of University of Alaska students who brought the lawsuit in the first place, which were published by the Alaska Beacon (they’re not yet on the court website), the two argue that the intent of the rehearing motion by the Dunleavy administration is clear.

“Although the executive branch does not say it directly, the petition implies that the executive branch somehow believes that the current version of the (Higher Education Investment Fund) is subject to the annual CBR sweep under (previous caselaw),” the filing for the students argues. “The court should deny the executive branch’s petition for rehearing. It is accurate to state that a fund (like the HEIF is now) that does not exist in ‘the general fund’ is ‘ineligible for the sweep.’ In fact, any conclusion to the contrary would completely unravel (the legal precedent’s) two-part test that this court just upheld at the executive branch’s behest.”

The response from the Alaska Legislative Council points to several parts of the Department of Law’s original arguments that relied on the idea that the general fund should be one of the deciding factors in whether a fund is sweepable. The Council’s filing also goes on to note that the Alaska Supreme Court’s ruling was not setting new precedent but was, instead, merely recognizing the reality of the new law.

There is currently no timeline to for the Alaska Supreme Court to decide this issue.

Stay tuned.