Legislature preps for lawsuit against Dunleavy

  • Alaska Senate President Cathy Giessel, left, speaks during a news conference on education funding held by state House and Senate leadership on May 28 in Juneau. Seated beside her is House Speaker Bryce Edgmon. The Legislature has authorized a lawsuit against Gov. Michael J. Dunleavy’s administration in the event he follows through on his pledge to withhold education funding if it isn’t included in the current budget being crafted in conference committee. (Photo/Becky Bohrer/AP)

After returning from Memorial Day weekend activities across the state, legislators promptly doubled down on their belief that they have properly funded education for the coming year by preparing for a lawsuit against Gov. Michael J. Dunleavy’s administration.

The House voted 23-14 and the Senate voted 14-4 May 28 to authorize the joint Legislative Council to file a lawsuit against the administration for withholding more than $1.2 billion in K-12 formula funding approved last year in House Bill 287. The move is presumptive, given the money cannot be dispersed until after the July 1 start of the 2020 state fiscal year.

Legislative Council chair Sen. Gary Stevens, R-Kodiak, said during a rare joint House-Senate press briefing that a suit would not be filed until after July 15, which is when the first round of formula-based yearly K-12 state funding is set to be dispersed to school districts.

The 14-member Legislative Council handles business and legal matters for the overall Legislature.

Dunleavy insists the Legislature’s actions last year to forward fund education violate the Alaska Constitution because, according to a legal opinion from Attorney General Kevin Clarkson, they improperly dedicate state revenue and attempt to usurp the governor’s line-item veto authority over budget matters. Based on those conclusions there is no K-12 funding for the administration to legally disperse, administration officials stress.

Dunleavy — who has repeatedly mentioned the prospect of vetoing portions of the budget the Legislature passes — has also vowed not to veto any education funding as long as it is added to the budget for the coming year.

Members of the minority House Republican caucus have sided with the governor on the issue and collectively voted against allowing the Legislative Council to consider a lawsuit.

The governor cannot sue the Legislature in this instance, according to legal experts.

The current iterations of the state operating budget being settled in a conference committee similarly forward fund education for the 2021 fiscal year.

Legislative leaders are adamant last year’s forward funding is legal; it’s something lawmakers did for 10 years before declining oil revenues led them to stop the practice in 2015. For them, it’s a separation of powers issue.

The issue has largely united Democrat and Republican leaders in the Legislature who for years have been at odds over how to fix the state’s large structural budget deficits.

“We have stood firmly on the forward funding that we appropriated last year for this coming year and we are hoping very much that no lawsuit will be necessary,” Senate President Cathy Giessel, R-Anchorage, said during the briefing.

“Education funding has been a political football over these past years when we haven’t forward funded. We want to take that football, put it on the ground and settle this issue.”

Legislators last sued the governor as a group in 2015, when former Gov. Bill Walker accepted federal Medicaid expansion funds without the Legislature’s approval. That lawsuit was dismissed by a state Superior Court judge in early 2016.

In an impromptu May 28 counter-press briefing Dunleavy said he has talked extensively with legislative leaders about the stalemate. He suggested the Legislature could add the 2020 education money to the budget and the administration could distribute the nearly $1.2 billion meant for the base student allocation, or BSA, payments to districts while withholding the $30 million, one-time supplemental payment also approved in HB 287 to spur “almost a friendly suit just so we can get clarification on things moving forward,” Dunleavy said.

“I’d ask the House and Senate to fund education and we can agree on an amount that can be withheld that would initiate a suit so we can get clarification; that way the school districts are certain that they’ve got funding,” the governor added.

The administration also submitted bills during the special session to make the BSA and $30 million supplemental appropriations outside the budget. While they seem to have little chance of passing, school administrators from across the state testified during Finance Committee hearings that forward funding education is very important as it allows them to make longer term plans and keeps districts from having to issue layoff notices to teachers each year lawmakers struggle to agree on a budget.

Districts are expected to issue “pink slips” if the current situation is not resolved by mid-July, and the year-to-year job uncertainty can make it difficult to retain teachers in a state where teacher turnover is already a pervasive issue, according to school district officials.

“Stable and predictable — that’s what our industries ask for. It seems reasonable to assure that to our education system as well,” Giessel said.

At the heart of the administration’s claim is the fact that forward funding of education in prior years was done with surplus existing revenue, while HB 287 draws anticipated revenue from the General Fund.

Legislators contend all budgeting — particularly for the State of Alaska where income streams are based on volatile oil and financial markets — is anticipatory.

The administration’s bills to repay forgone Permanent Fund dividend amounts over multiple years rely on the expectation that money currently in the roughly $19 billion Permanent Fund Earnings Reserve Account will be available when the draws would be made up to three years away, many have noted. However, those funds could dissipate if markets falter.

Sen. Bill Wielechowski, D-Anchorage, said during floor debate on the Legislative Council authorization that he believes the administration’s argument could apply to most appropriations the Legislature makes, but this situation is unique since the Supreme Court has determined lawmakers have a constitutional obligation to fund public education.

On other issues, the Legislature sent the omnibus criminal justice reform rollback legislation, House Bill 49, to the governor for his signature May 28, which Dunleavy thanked them for.

That leaves budget issues and the PFD outstanding in the 30-day special session that is quickly approaching its halfway point. Legislators are close to finishing a budget as the House and Senate versions of the operating budget were similar to start the conference committee — with overall cuts in the $200 million-plus range — but a final version has yet to be released.

The House is considering the capital budget that passed the Senate and will likely be minimal again this year, which leaves the PFD as the big hurdle for the Legislature.

House Finance co-chair Rep. Tammie Wilson has proposed legislation to pay a full, roughly $3,000 per person PFD this year according to the statutory formula with additional draws of roughly $1.4 billion from the Earnings Reserve and $500 million from the Constitutional Budget Reserve, while halving the PFD formula for future years. The idea was roundly dismissed during public testimony.

With the Senate approving a $3,000 PFD — but in an unbalanced budget — the House without a dividend appropriation and Dunleavy firm in his demand for a full payment, it remains unclear as to how the situation will be resolved before the June 15 end of the special session.


Elwood Brehmer can be reached at [email protected].

05/29/2019 - 8:33am