Final Piece of FY20 Budget Announced; One Third of State Deficit Eliminated, State Spending Reduced by $650 Million
Governor Will Not Veto Legislature’s Incomplete Dividend, Pledges Continued Fight for Full Statutory Formula Distribution in Next Special Session
Posted & Edited By MARY KAUFFMAN
August 20, 2019
The enactment of HB 2001, which includes approximately $156 million in budget restorations, brings to close a months-long discussion on the state budget, a billion-dollar-plus deficit, and the need to better align state revenues with state expenditures. As a result of the FY 20 budget, approximately one third of the state’s deficit has been eliminated through the reduction of $650 million in total state spending.
Dunleavy said, “Alaskans need to understand that we can no longer afford to spend at our current rates. We can no longer afford to deplete our savings and hope for higher revenues. We must begin making the long-term changes to put ourselves on a path to a more sustainable future, and we can no longer pretend the problem will fix itself. It will take difficult decisions to get us to a sustainable budget, and I am prepared to make those difficult decisions.”
"Previous legislators and governors tried to address the fiscal imbalance by proposing taxes and cutting the PFD. My approach was going to be different – one that would try to balance spending with existing revenues," said Dunleavy.
The governor said after months of discussion and deliberation with Alaskans and the legislature, the legislature instituted a 2.9%, or $270 million, reduction to the state's overall budget. A good start at reductions, but still leaving a gap of well over $1 billon. Based upon the size of the deficit and our revenue picture, it became clear that more needed to be done through the use of a veto, reductions that are reflected in yesterday's budget.
Important steps are being made to address our deficit, to right size our government and to put Alaska on a more sustainable path. Governor Dunleavy said hrough the enactment of HB 2001, we have eliminated over 1/3 of the state's deficit through reduction of approximately $650 million in state spending. Reforms have been initiated to make services and programs, such as Medicaid, University of Alaska, and the Alaska Marine Highway System more efficient and more sustainable said the governor.
"The driver for these reductions continues to be Alaska's current fiscal outlook, requiring all of us to rethink the way we provide services, the way we prioritize limited state resources and the way we spend state dollars moving forward. While state savings will continue to be exhausted as we move into a multi-year step down, reducing our rate of spending must be a priority for all Alaskans. More must be done in the coming months, but we as Alaskans are resilient, and I honestly believe our future remains bright," said Governor Dunleavy.
Dunleavy said, "In the weeks since receiving the state's operating budget from the legislature, we have taken a serious look at restoring a number of programs and services Alaskans deem too important not to fund. As a result, you will see those restorations reflected in this budget."
Certain programs, programs valued got caught in a budget discussion that went on way too long said the governor. "The seriousness of the deficit, the need to begin making reforms and the length of our legislative session all contributed to the level of uncertainty we experienced the past several months. We have listened and we have learned from this past year's budget process."
Moving forward the governor said, starting this fall, the administration will be working diligently with Alaskans, state agencies, service providers, legislators and stakeholders on a budget for the coming year that attempts to meet the needs of Alaskans within the prescribed 90-day session so all Alaska will know what the budget is well in advance of the start of the new fiscal year. My hope is to unveil a budget in December that reflects the values of Alaskans, and that the legislature acts upon this budget within the 90-day legislative session outlined in statute, not the drawn out process that we experienced this year.
Overall, this year's budget limited 1/3 of the deficit, reduced state spending by 8% and began the difficult process of changing the way limited state resources are deployed." The discussion that occurred ultimately helped Alaskans understand the seriousness of our challenges, forced the conversation about priorities and, in the end, helped shape this year's budget."
Lastly, in his address yesterday he spoke on the very serious issue of the Permanent Fund distribution, something that he said has weighed on him and Alaskans greatly. Dunleavy said, "Unfortunately, this process was thrown into chaos the past several years when oil prices fell. Too many in the legislature now treat the PFD as a political football, arbitrarily setting its amount rather than following the statutory formula Alaskans know and trust. For 35-plus years, Alaskans could rely on the system we had in place, a process outlined in law and immune from politicians who wanted more for government spending."
"Now some politicians in Juneau are attempting a complete takeover of the PFD, converting it into revenue for government and denying Alaskans their full statutory PFD. While there are some in the legislature that support the full statutory formula, unfortunately, majorities in both houses do not," said Governor Dunleavy.
"In this year's budget, the legislature sent me a $1,600 appropriation for the PFD. Again, not following existing statutes that calculated the dividend for Alaskans of approximately $3,000. If I had the authority to add more money to the budget for a full PFD, I would. However, only the legislature, by Constitution, can appropriate these funds. The legislature has once again denied the people of Alaska the full statutory PFD," said Dunleavy.
"Many have asked me to veto this incomplete $1,600 dividend passed by the legislature this year. Others have asked me to accept this partial dividend and to continue our fight for a full PFD. And while this decision was not easy, it's not easy at all, I decided that I will not veto this incomplete dividend. I and many others view this as a partial payment, not a full PFD, and we will continue to fight for a complete statutory dividend going into this fall," said Dunleavy.
In his announcement, Governor Dunleavy made clear he would not veto the Legislature’s incomplete dividend, calling it a difficult decision based on three parts:
First, a veto today would have resulted in a zero dividend in October, leaving approximately 660,000 eligible Alaskans who expect the PFD with absolutely nothing, zero, not a dime. Over $900 million would have been taken out of the economy if I veto the PFD, hurting Alaskans businesses and exacerbating our recession.
A veto would have been a win for those wanting to eliminate the PFD in its entirety. The governor said he is not about to give them that win. "Quite the contrary, I'll continue to fight and I will not let up for Alaskans until they receive what they are due."
Second, by funding an incomplete dividend, the legislature understands that their job is not finished. Many in the legislature know that this incomplete dividend must be fixed as soon as possible. The governor said he has begun the conversations with legislators to map out a path to appropriate the funds remaining for the full PFD.
Governor Dunleavy said, "I anticipate a special session this fall to complete this process. I'll introduce legislation to provide for a full statutory PFD through a payment from the Earnings Reserve Account."
Finally, now that the budget has been addressed, the full PFD will be the focus in this next special session, the sole focus. Governor Dunleavy said he will not let up until the remaining funds are appropriated for the full statutory PFD.
Key programs and services restored in HB 2001:
Line-item vetoes in this bill include:
Alaska Senate Democratic Leader Tom (D-Anchorage) addressed the governor's second round of vetoes noting dozens of essential state services that legislators restored in HB 2001 by a bipartisan vote of 40 to 16. Included among the 71 vetoes are behavioral health treatment and recovery grants, public broadcasting, forward funding for K-12 education, the Ocean Ranger program, Adult Dental Medicaid, and Community Assistance for municipalities.
In a prepared statement Begich said, “Over the past month and a half, tens of thousands of Alaskans came out and voiced their opposition to Governor Dunleavy’s draconian budget cuts. Their collective voice was heard loud and clear by the legislature and through that pressure, Governor Dunleavy was forced to reverse course on 42 programs and services. But the Governor’s vetoes continue to display a lack of vision for this state that manufactures instability in our economy, weakens our University system, undermines our skilled workforce, and installs fear in our most vulnerable citizens. This budget will assuredly force major increases to local property and sales taxes."
“These vetoes should never have happened just to ‘start a conversation,’ as Governor Dunleavy suggests. Many Alaskans are already preparing to leave the state or are unable to plan for their future due to a lack of certainty. Alaskans deserve a system of government that works for them from the start, not one that causes us to live our lives through fear and despair," said Begich.
Begich concluded saying, “The state budget should be a blueprint for opportunities for Alaskans to succeed. That is what the Legislature provided, but the Governor has now significantly rejected. We are a people that offers a helping hand to one another in the moment of need because that is the Alaskan way.”
Alaska House Speaker Bryce Edgmon (I-Dillingham) said in a prepared statement, “In a way, the signing of HB2001 represents good news for Alaskans. We will officially receive a $1,600 dividend, more than we have received in many years since the program’s inception. The governor also decided to follow the Legislature’s leadership and restore programs and services that are essential to elders and children across our state. At the same time, the governor made many cuts without analysis to determine impacts on people and our economy, and he continues to perpetuate the myth that we can afford the largest PFD in history without significant negative consequences.”
Alaska House Republicans expressed a variety of responses to the governor’s announcements.
“The governor has been very amenable to our caucus’ requests and considerations through the negotiating process this last month,” said Rep. Lance Pruitt (R-Anchorage), House Minority Leader. “Because of this open dialogue with the governor, the House Republicans were able to be that check and balance that is so vital to our system of government. Through our dialogue, we were able to preserve the Senior Benefits Program, Council for the Arts, and also transition the university’s reductions to a timeline that will not damage the integrity of the institution.”
“This year, the House Republicans organized around the principle that major budget reductions were necessary to protect us from the uncertainty of a fluctuating economy,” said Rep. Colleen Sullivan-Leonard (R-Wasilla), member of the House Finance Committee. “We are pleased to see that so many of those necessary reductions we fought for remain in place, and I remain vigilant in fighting for a full, statutory Permanent Fund Dividend.”
“I’m very saddened that our statutes and constitution are held in such low regard by so many in the legislature. Too many legislators made the decision that protecting government spending was more important than following the law and paying the full PFD,” said Rep. Tammie Wilson (R-North Pole), former Co-Chair of the House Finance Committee. “This year’s budget process was extremely difficult because it was the first time that our government was forced to take an objective look at our dangerous spending situation. But rather than deal with it, they chose to keep on the same path.”
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