Dunleavy signs second, funded capital budget with vetoes

Gov. Mike Dunleavy signed the capital budget Thursday afternoon during a brief and somber ceremony at the Associated General Contractors of Alaska headquarters in Anchorage.

The bill signing came on the heels of the news that state Sen. Chris Birch, R-Anchorage, had died unexpectedly late Wednesday.

“Today is cause for celebration but it’s a tempered celebration with the loss of Sen. Chris Birch yesterday. It was a shock to all Alaskans. It was certainly a shock to us,” Dunleavy said.

In signing the capital budget, Senate Bill 2002, the governor restored roughly $115 million of funding from various state accounts for programs such as Power Cost Equalization, which subsidizes high power costs for rural residents, the Alaska Performance Scholarship and the University of Washington medical school partnership Alaska participates in with other western states known as WWAMI.

“Today’s action represents only one part of the equation — a properly funded capital budget that we see as significant progress for fulfilling our commitments to Alaskans, encouraging growth within our economy, and working together on moving forward,” Dunleavy said in prepared remarks.

The funding for those programs and others had been moved into the state’s $1.9 billion Constitutional Budget Reserve fund on July 1, as required by law, but lawmakers initially failed to muster the votes needed to perform what has been dubbed the “reverse sweep” to pull the money back out of the budget reserve so it can fund the various programs.

While the reverse sweep vote historically has been a noncontroversial technicality, accessing the Constitutional Budget Reserve, or CBR, requires a three-fourths supermajority affirmative vote from both the House and the Senate. House minority Republicans at the time refused to approve the reverse sweep until lawmakers passed a $3,000 per person Permanent Fund dividend.

Dunleavy first signed the $1.2 billion capital budget July 8, but that version of the key spending bill was only partially funded because it largely relied on funding from the CBR and lawmakers in the 40-member House couldn’t muster the 30 votes needed to access it.

The capital budget primarily funds infrastructure projects for the 2020 state fiscal year that began July 1.

There was also much concern amongst legislators that further delay in passing a fully funded capital budget could cause the state to miss out on roughly $1 billion in federal funds for numerous programs that require a state match if it was not passed by the end of July. For example, $73 million in state matching funds in the 2020 budget unlocks approximately $750 million in federal transportation money for road construction and airport improvement projects across the state.

However, Sen. Dan Sullivan’s office indicated to the Anchorage Daily News after discussions with federal officials that the capital budget was not as time-sensitive a matter as once thought.

Still, the Senate approved the second iteration of the capital budget July 20 on a 19-0 vote and by the House July 29 on a 31-7 vote.

Dunleavy did not sign the first capital budget without vetoes to the tune of $10.6 million and the second go-round was no different. The governor vetoed more than $34.7 million from part or all of 26 line items in the budget bill, including $5 million for the Alaska Housing Finance Corp.’s popular home weatherization program.

Dunleavy also vetoed $10 million in statewide addiction treatment facility matching grant funding, cut $3.6 million from AHFC’s Homeless Assistance program and $70,000 for cameras in Soldotna Police patrol cars, among other spending reductions.

Dunleavy vetoed $444 million from the state operating budget June 28, a move intended to provide more money for PFDs that also drew sharp criticism from across the state.

On the vetoes, he said during the capital budget signing that a sudden decline in oil prices — from about $85 per barrel before last year’s election to less than $60 today — necessitated significant reductions.

“Had (oil) held at $85 we’d probably be having a very different conversation in Alaska, at least for a while,” Dunleavy said.

The majority of legislators have pushed for modifying the PFD formula instead of significantly cutting state services, while Dunleavy has long championed the current PFD and it’s that disagreement that has led to the current, prolonged fiscal debate.

Anchorage Democrat and Senate Minority Leader Tom Begich called the capital budget vetoes "truly antithetical" to the governor's priority to improve public safety in Alaska in a statement following the budget signing.

"This was a bare-bones capital budget to bring in federal dollars and help alleviate some of Alaska's infrastructure needs and to keep Alaskans working. It was carefully crafted with the entire Legislature's input, which is why it passed with significant support — twice," Begich said. "I'm disappointed in Governor Dunleavy's acitons today, and they will only hurt our economy and make Alaskans less safe."

Dunleavy stressed that his vetoes are not intended to harm Alaskans, as he said has been suggested. Rather, “What’s going to harm Alaskans is to pretend we have no budget deficit,” he said.

Dunleavy did not take questions from reporters after making his comments.

The $4.4 billion operating budget passed by the Legislature left the state with roughly a $600 million expected surplus at the time but did not appropriate funding for PFDs.

Lawmakers officially sent House Bill to Dunleavy Wednesday to pay PFDs of approximately $1,600 per person and restore most of the funds he vetoed from the operating budget.  A statement issued Tuesday by Dunleavy’s spokesman Matt Shuckerow says the governor will “make a determination on a certain number of additions to the budget, but he largely considers a vast majority of the (fiscal year 2020) budget settled."

It’s not known when or if he will sign HB 2001.

Elwood Brehmer can be reached at [email protected].