State budget could mean 15,000 layoffs

Gov. Bill Walker signed a partial state budget May 18, a move that could force the layoff of about 15,000 state employees and lead to a partial government shutdown if legislators can’t reach a budget deal.

Left with few options, the governor vetoed much of the nearly $5 billion of state expenditures in the operating budget bill that passed April 27, House Bill 72, before signing it to bring it in line with the approximately $1.9 billion available to draw from in the Statutory Budget Reserve, he said. Because the bill was transmitted to him earlier this month, Walker had to act on HB 72 before 11:59 p.m., May 19, or the full bill would have become law.

A visibly tired Walker said at a press briefing after he signed the bill that most state agency funding would be cut by 72 percent under the enacted budget. The departments of Corrections and Public safety are fully funded for the 2016 fiscal year, which begins July 1, as is the state judicial system, debt service and the Legislature’s budget, he said. The Department of Health and Social Services is funded for six months.

“The only responsible thing for us to do is what we’ve done — to prepare for the worst-case scenario and hope and pray we don’t get there,” Walker said.

Vetoing the budget entirely was not an option, he said, as it includes supplemental funding for the rest of the current fiscal year.

A full veto would have initiated “complete chaos” in state government nearly instantly, Office of Management and Budget Director Pat Pitney said.

The governor also sent a letter to state employees early May 18 explaining his actions.

“Later today, I will sign the budget bill the Legislature passed in April. However, I have little choice but to veto the unfunded items in the bill,” Walker wrote.

He continued: “One consequence of HB 72 being unfunded for 2016 is most state employees will receive a layoff notice in early June if the Legislature fails to pass a fully funded budget by that time.”

A fight in the House over state spending and Medicaid expansion has led to normal legislative procedures being thrown aside. House minority Democrats are demanding the restoration of $47 million cut from education spending, among others, and approving the governor’s Medicaid expansion and reform package, House Bill 148, be passed before they will vote to approve a draw on the Constitutional Budget Reserve, a state savings account that requires a three-fourths majority to access.

Drawing on the Statutory Budget Reserve only requires a majority vote.

There was $10.1 billion in the CBR as of April 30, according to the Revenue Department. About $3 billion of that is needed for fiscal year 2016, Walker said, and the stalemate in the Legislature over about $90 million has pulled attention away from the bigger problem, which is the entirety of the nearly $4 billion deficit.

“The irony of it is other states that have done this — they couldn’t go out and borrow money,” Walker said. “We have the money; we just cant get sufficient votes or the budget to match so they can access the funds that are there. Here we are with a Triple-A bond rating and we’re talking about this scenario of a potential shutdown.”

Walker has been criticized by some Republican legislators for proposing to increase spending beyond the budget passed primarily on Majority votes. When the impasse between legislators became clear, the governor reintroduced his budget that would increase spending about $50 million over HB 72, a negotiating “starting point,” he called it.

If it comes to a partial shutdown, Walker said all commerce — the summer fishing, oil and gas, tourism and other industries — that need state oversight would be impacted.

“Let me be perfectly clear. Our coalition does not want a government shutdown and have been working daily to prevent a shutdown,” Minority Leader Chris Tuck, D-Anchorage, said in a release. “This current impasse is due to the Majority’s refusal to consider the huge spending cuts we have put forward while simultaneously slashing education funding and turning away millions from the federal government to expand Medicaid in Alaska.”

The $47 million reduction in the Education budget came from the Senate.

House Speaker Mike Chenault, R-Nikiski, said in an interview that he would have preferred Walker pass the whole budget, but that at the same time it was not a surprise.

“The governor has to do what he believes is the right thing for the state given the fact that he has a partially funded budget because we’ve not been able to get a three-quarter CBR vote from our minority,” Chenault said.

“We’ll deal with what (Walker) kept and what he vetoed and we’ll put that together in another bill and move it forward.”

The Legislature is set to reconvene the special session May 20 in Anchorage. Walker called a 30-day special session to be held in Juneau April 28 to handle the operating budget, a sexual abuse prevention bill known as Erin’s Law and Medicaid expansion and reform.

HB 148, the Medicaid bill, has since stalled in the House Finance Committee.

Chenault said he met with Tuck, members of the Senate Majority and Walker’s staff May 15 and that all the issues are still “in play,” but the top priority is getting a complete budget.

The state Capitol building is undergoing a major renovation and numerous legislators have voiced displeasure with the governor over the Juneau special session.

“I guess if they would spend as much time on getting the business done as where they’re going to get the business done maybe it would get done,” Walker said May 18.

The governor said he would continue to call special sessions until the budget is resolved.

He expects to get a complete budget passed “pretty soon,” Chenault said.

“Whether it’s this special session or we have to extend a little bit longer I don’t know, but certainly we’re going to pass a budget.”

Elwood Brehmer can be reached at [email protected].

11/21/2016 - 9:56pm