House approves reverse sweep, Senate passes operating budget bill

The third time was the charm for the Alaska House of Representatives, who on Monday gained the supermajority necessary to approve the reverse sweep and fund the capital budget. After passing the House in a 31-7 vote, the bill now goes to Governor Mike Dunleavy. While the governor can veto line items in the capital budget, he cannot easily undo the reverse sweep without collapsing the entire bill. This means that money swept into the Constitutional Budget Reserve can be returned to accounts such as the Power Cost Equalization and the Higher Education Investment Fund.
Despite the vote, the Regulatory Commission of Alaska, which administers the PCE funds to statewide utilities, notified Nome Joint Utilities that this month there won’t be a PCE coming. According NJUS manager John Handeland, the legislation has yet to be signed by the governor and until the PCE funds are swept back from the CBR into the proper account, the utilities have no access to the money. NJUS on Tuesday printed the July invoices for NJUS customers and announced via NomeAnnounce that the power cost equalization credit won’t be showing up on the bills, meaning customers have a higher bill coming. “We are hopeful with the recent action by the Legislature, that the Governor signs all the legislative bills and that perhaps there will be agreement to grant the credit retroactively,” Handeland said in an email to the Nugget. 
The capital budget itself passed through both the Senate and the House early last week. The House, which can vote up to three times, failed twice to achieve the 30 votes necessary to approve the reverse sweep. The legislators who voted no on the reverse sweep on Monday were: David Eastman (R-Wasilla), Sharon Jackson (R-Eagle River), George Rauscher (R-Wasilla), Colleen Sullivan-Leonard (R-Wasilla), Cathy Tilton (R-Wasilla), Sarah Vance (R-Homer) and Tammie Wilson (R-North Pole).
Also on Monday the Senate passed House Bill 2001, introduced by the House Finance Committee, which reverses all but $23.29 million of Dunleavy’s $444 million line item vetoes while paying a $1,600 Permanent Fund Dividend check per eligible Alaskan. The bill took a circuitous route, however, facing resistance from the House minority and other lawmakers pushing for a full PFD.  The operating budget is still not fully resolved, as the amended bill now goes to the House.
HB 2001 initially included the PFD, then the dividend was extracted, and then later added back again. Originally, HB 2001 set the PFD at about a $1,605 check per eligible Alaskan. However, Rep. Neal Foster (D-Nome) introduced an amendment to remove language of the dividend from the proposal, which passed. Lawmakers took up the dividend in a new bill, HB 2003. The size of the PFD delivered under this bill depended on the reverse sweep. With the sweep, it would pay out $1,600. Legislators would need to dip into savings to pay a PFD check over $1,336, which would require separate legislation to approve. The House passed both HB 2001 and HB 2003 on Friday.
The Senate Finance Committee took up HB 2001 and HB 2003 on Saturday. The Committee decided to reintroduce the dividend to the operating budget by combining the two bills. Senator Mike Shower (R-Wasilla) added an amendment to draw additional money from the Permanent Fund’s Earnings Reserve account in order to pay a full $3,000 PFD. The chairs of the committee, Bert Stedman (R-Sitka) and Natasha von Imhof (R-Anchorage), were both concerned that funding the PFD would require overdrawing from the reserve account, which they said is unsustainable in the long-term. Despite these objections, the Committee voted 5-4 to narrowly approve the amended bill. The Senate decided to set HB 2003 aside for the time being.
The full Senate passed HB 2001 17-1 on Monday, with Lora Reinbold (R-Eagle River) being the only no vote. Several amendments were added, including $200,000 for military and veteran’s affairs, about $50 million to cover the costs of school construction and $20 million for rural schools added by Senator Donny Olson (D-Golovin). Stedman added an amendment that would delete language appropriating a full PFD—essentially reversing Shower’s contribution from Saturday. Stedman’s amendment passed, so HB 2001 once again allocates a $1,600 PFD.
Dunleavy responded to the Legislature’s work in a statement. Dunleavy has the power to veto all three of the bills, and it seems likely he will veto HB 2001. The governor, who remains committed to using the traditional formula to calculate the PFD, criticized the bill, claiming that it “robs” Alaskans out of their dividend. “Unfortunately, with this action the PFD is no longer a dividend, but a primary source for government spending and growth.” Dunleavy was also unhappy with the add-backs to state spending, which he referred to as “yet another attempt to blow up the size of the government. According to the statement, Dunleavy said he will consider a “limited number” of additions to the operating budget, but for the most part plans to stand behind his line-item vetoes.
Of SB 2002, Dunleavy said the legislation represents an important step forward for the state. In particular, Dunleavy mentioned items such as the Alaska Performance Scholarship and the Power Cost Equalization funds, which are “critical for keeping our economy going and our communities moving.” These accounts were in jeopardy for about a month, after members of the House minority—all of whom typically side with the governor—refused to vote on a reverse sweep in an effort to pressure the House majority into agreeing to a $3,000 PFD. The governor intends to sign the bill, but will use his power to veto line items at his discretion.
The Legislature has the power to override Dunleavy’s vetoes, but they would need 45 votes to do so. If the Legislature is unable to come to agreement about the budget, they will need to go into a third special session.
Despite mounting feelings of stress and uncertainty about the future of the state and concerns for essential services, former Anchorage Democratic Representative Les Gara is optimistic that Alaskans will be able to turn things around. Gara visited Nome last week for a fishing trip and provided insight from his years serving at the Legislature. “It’ll get better,” he said of what he referred to as one of the most critical moments in state history. But change will require more work from residents. “We can’t give up, because if we give up we lose,” said Gara. His advice for Alaskans is to stay loud about the budget.
Gara emphasized the importance of getting through to the governor and “his allies,” reminding them that they are supposed to be representing the 700,000 or so Alaskans and that this includes residents of rural areas who have different needs than those on the road system. An effective way to do so, according to Gara, is to email Dunleavy, his Chief of Staff Tuckerman Babcock and the State Office of Budget and Management Director Donna Arduin. However, because these emails and letters can simply be ignored, Gara also suggests writing letters to the editor, since these reach a much greater number of people. “Keeping your voice up is what democracy is all about,” said Gara. He added that he believes the reason the Legislature is still meeting about the budget is because of the overwhelmingly dissatisfied response they received from constituents. “I’m proud of Alaskans. Democrats, Republicans and Independents, everyone is following politics more closely.”
One angle for those who disagree with the Dunleavy’s budget to take is to let the governor know how unpopular he is, Gara said. “No politician wants to be unpopular, and he’s very unpopular,” he said.
 A poll by Patinkin Research Strategies released the week after Dunleavy’s operating budget vetoes revealed that his approval ratings have been falling; they plunged by 10 points in the days following the vetoes. Dunleavy currently sits at about a 30 percent approval rating, with very little support from rural areas. Gara’s point is that if Dunleavy continues to stand behind his vetoes and a full PFD, as he did in a press conference last Thursday, his chances at reelection or a further political career could be slim.
Although the operating budget is not completely set in stone, Dunleavy’s budget cuts are already taking their toll on the state. Anchorage Mayor Ethan Berkowitz last week declared a civil emergency due to Dunleavy’s extensive operating budget cuts. Dunleavy’s vetoes disproportionately impacted services for low-income, elderly and otherwise vulnerable Alaskans. In particular, Anchorage’s homeless population is expected to increase by 800 people, according to the declaration. Declaring an emergency will allow Anchorage to use both municipality and (ironically) potentially state disaster funds to respond to the crisis.
Alaska’s financial situation has not gone unnoticed on a national level. Moody’s Investors Services lowered Alaska’s credit outlook from stable to negative, citing “political paralysis.” “A new focus on distributing increased shares of Permanent Fund earnings to residents, combined with political paralysis or other factors that prevent a return to budget balance, may make the current fiscal approach unsustainable over time,” reads a Moody’s release.