Battle over purse power ensnares education

  • Alaska Senate President Cathy Giessel, right, speaks to Senate Finance Committee co-chair Natasha von Imhof during a break in a budget conference committee meeting on May 13 in Juneau. (Photo/Becky Bohrer/AP)

Gov. Michael J. Dunleavy’s administration is in a constitutional battle with three-quarters of the Legislature over education funding and the start of the special session has shown just how entrenched both sides are.

The administration insists the Legislature’s means of forward funding education last year for the upcoming state fiscal year is unconstitutional and therefore invalid. The Office of Management and Budget has indicated a belief that there will not be money to give to school districts in the 2020 fiscal year, which starts July 1, if the issue is not resolved.

Most lawmakers — other than the 15 in the minority House Republican caucus — contend the administration is trying to infringe on the Legislature’s appropriating authority.

House minority members have said they want to fund education at current levels, but have called on the rest of the Legislature to follow Dunleavy’s request.

The governor has asked for language in the 2020 budget to fund education for the upcoming fiscal year so, in his opinion, there can be money to disperse starting July 1.

Last year the Legislature passed and former Gov. Bill Walker signed House Bill 287, which funded K-12 education at approximately $1.2 billion for 2019 and 2020 with $20 million and $30 million lump supplemental payments to school districts for the respective years.

The bill directs the Revenue Department to transfer the money from the General Fund to the Public Education Fund in two tranches, the first on July 1, 2018, and the second July 1, 2019.

The 2020 budget passed by the House and Senate contains a similar forward appropriation for 2021.

The administration raised the issue when the House Finance Committee released its version of the budget without language to fill the Public Education Fund for 2020.

Attorney General Kevin Clarkson sent a letter to House and Senate leaders April 9 outlining the administration’s position that the particular approach lawmakers took to forward fund public schools in HB 287 is unconstitutional because it dedicates future revenues, which the Legislature cannot do, and nullifies the governor’s line item veto authority.

Legislators and their attorneys argue that HB 287 passes muster because while it was passed last year by the 30th Legislature, the 31st Legislature this year had the opportunity to repeal the law but chose not to.

Dunleavy originally proposed cutting the K-12 budget by roughly $300 million — to strong public opposition — but he has since promised not to veto education money in the budget as long as the Legislature agrees to add the desired funding language to the 2020 budget. Lawmakers have ignored that request; for them, it is a separation of powers issue.

Clarkson reiterated his stance in greater detail when he issued a formal seven-page opinion on the matter May 8.

“It is the Department of Law’s opinion that appropriations by the Legislature of future revenues for future years at the end of one governor’s administration in order to side-step the next governor’s line item veto authority violate the Alaska Constitution by improperly circumscribing the governor’s veto power,” Clarkson wrote in his May 8 opinion. “Otherwise, in anticipation of a new governor, an outgoing Legislature could appropriate future revenues for specific purposes for the next four years and negate the incoming governor’s line item veto power over those funds altogether for the entirety of his or her term.

“This type of end-run around the strong executive contravenes the clearly-expressed intent of the (constitutional) delegates and the structure of the constitution they created.”

The minutiae of the debate was fully fleshed out in May 20 and 21 hearings to consider the administration’s bills to repeal HB 287 and fund education for 2020 through their desired mechanism.

An emphatic Sen. Natasha von Imhof, R-Anchorage, said during a Senate Finance Committee hearing that the administration is actually asking the Legislature to do what Clarkson insists is unconstitutional in the governor’s bills to repay the forgone portions of past Permanent Fund Dividend payments. Von Imhof co-chairs the Finance Committee.

While those bills are unlikely to pass, they ask this Legislature to appropriate money from the Permanent Fund’s Earnings Reserve Account for dispersal over several years through 2022.

For the administration, it comes down to the specific source of the money chosen to fill the Public Education Fund in HB 287: the General Fund. Assistant Attorney General Cori Mills said that because the PFD repayment proposal would pull from the Earnings Reserve, which has roughly $18 billion, it spends existing revenue and could also be changed or repealed by future Legislatures. However, HB 287 “earmarks” revenue that is anticipated to be in the General Fund during the 2020 fiscal year.

Von Imhof retorted that every budget anticipates future revenue and the PFD bills just assume the money will be in the Earnings Reserve three years from now.

“There’s a lot of money in there now,” she said. “If the markets tank there will not be a lot of money. If this body decides to move a good portion of the funds into the principal there will not be a lot of money. So there’s a lot of unknowns at any given time whether it’s this body or your assumptions of where the money is going to come from,” she said, adding the state had the money to fund HB 287 when it passed.

Mills said the department doesn’t believe the PFD repayment plan requires annual budget language because it pulls money already in the Earnings Reserve; but it would need appropriations from a new source if the Earnings Reserve were unexpectedly dry when the draws were to be made.

The stalemate is likely to be decided by the Supreme Court. Legal experts note that the governor cannot sue the Legislature, so it would take a suit by the Legislature or a third party to spur the resolution.

Administration officials say if HB 287 had similarly been funded from the Earnings Reserve or a savings account the issue would be moot.

Mills noted that the Legislature historically forward funded education by overfilling the Public Education Fund and then drawing on that money in subsequent years.

She added that the administration’s education funding bills repeal HB 287 simply for “good drafting” purposes.

“We have our opinion, we think (HB 287) is invalid but just as when statutes are struck down or found invalid we prefer that they get cleaned up and you don’t have an existing law on the books that’s unconstitutional,” Mills explained.

Finance co-chair Sen. Bert Stedman, R-Sitka, asked why the potential problems with HB 287 weren’t raised when it was first reviewed by Law last year; Mills responded that it wasn’t scrutinized in that context.

She also said in response to Sen. Bill Wielechowski, D-Anchorage, that HB 287 would also be legal if it directed the money to be moved on June 30, the last day of the 2019 fiscal year, instead of July 1.

Legislative Legal Services Director Meg Wallace contended in a House Finance hearing that last year’s action does not dedicate a specific stream of tax revenue, for example, but simply appropriates from the General Fund, which comingles much of the state’s money.

“All budgeting is prospective, so in my opinion, if we strictly construed the opinion of the Attorney General we wouldn’t be able to prospectively budget even a fiscal year ahead if we had to wait for all of that revenue to be received by the state before we were able to appropriate those funds,” Wallace said, adding that it’s an open question as to how far out the Legislature can forward fund before it becomes a continuing appropriation.

She also noted that HB 287 was subject to a veto last year. That veto power is an authority delegated to the Governor’s Office, she said, but not a particular governor.

Association of Alaska School Boards Executive Director Norm Wooten said in an interview that he isn’t worried about a court fight preventing schools from getting the money they need for next fall after. Legislators have told him they would fund schools with stopgap measures if need be, according to Wooten.

“It may be month-by-month funding,” he said.

School administrators in public testimony mostly avoided taking sides in the legal fight, but stressed the importance of forward funding education for certainty in school district budgets.

Elwood Brehmer can be reached at [email protected].

05/22/2019 - 10:57am