June 30, 2019:
As many expected, Gov. Mike Dunleavy took an axe to the state budget with his line-item vetoes announced Friday, June 28.
The governor slashed $370.5 million in state general fund expenditures, which when added to $280 million in cuts made by the Legislature this spring, brings a total reduction for the Fiscal 2020 budget to approximately $678 million.
Within that, the biggest cut was $130.2 million for the University of Alaska, which UAA president Jim Johnsen said would be a devasting 41 percent of state funds for the state university if it were not overridden by the Legislature.
The second largest cut was $50 million for the state-federal Medicaid program, which pays health care costs for lower-income Alaskans, most of them children. Health providers said it is not clear how the reduction will be implemented, and that this would be on top of a $100 million reduction in Medicaid already made for Fiscal 2020 by the Legislature.
However, the $100 million is linked to specific Medicaid program changes proposed by the Department of Health and Social Services. The $50 million is not, and is effectively an unallocated reduction that passes the buck to department administrators to find places to cut.
Dunleavy said he stopped short of pressing the $1.3 billion reduction he sought earlier this year because the Legislature had stepped up to make cuts.
“While we hoped to balance the budget in a single year, many legislators and Alaskans made a case for a step-down approach and advocated time to pivot to a new fiscal reality,” of lower oil income, Dunleavy said in a budget.
“We will finish the job next year,” with more reductions, he said.
If the budget stands, and there is no veto override, the state budget deficit will be halved to $500 million, Dunleavy said. If an equal amount is reduced next year the budget will be in balance, he said.
Among the funding vetoes were 50 percent of state funding forfor school debt reimbursement for local school bonds. Larger municipalities say they can absorb this, although there will be property tax increases in some cities.
For smaller communities the reduction will be very difficult, however.
Other cuts were made to public broadcasting; the Alaska Council on the Arts; grants to behavioral health treatment nonprofits; the Nome youth juvenile justice facility; adult public assistance; senior benefits; adult dental treatment under Medicaid; village public safety officers; and community assistance grants.
Dunleavy made clear his priority in ensuring a $3,000 Permanent Fund Dividend for citizens, and said the cuts to social service and low-income programs could be offset by the higher PFD.
University president Johnsen said is no way a 41 percent reduction in one year can occur without drastic effects on programs, students and campuses.
University supporters are already lobbying the Legislature for a veto override, which requires 45 votes in the 60-member Legislature, a margin difficult to achieve.
However, the veto were overridden it would leave UA with the budget approved by the Legislature with a $6 million reduction. That could be absorbed, Johnsen said.
But if not overridden, UA’s Board of Regents will have no choice but to implement an emergency reduction, Johnsen said.
To accomplish this, the university will have to ask the Regents to invoke emergency reductions in mid-July and to have a plan for major staff, program and campus reductions by the end of July.
Personnel procedures that now require a year’s notice for non-retention of tenured faculty will be tightened to 60 days.
The university will not have time for detailed analysis, or for public review, because all of this must be accomplished within a year, he said.
The state’s economy will feel these effects. A study earlier this year estimated that a budget cut of the magnitude called for by Dunleavy would result in the loss of 1,300 full and part-time jobs from UA’s current statewide workforce of about 3,000.
The loss of instructional programs will have economic effects as well. “The university now provides 90 percent of the workforce training done in the state,” Johnsen said, a service that benefits the state’s natural resource industries like petroleum, minerals and fisheries which find it difficult and expense to recruit trained workers from out-of-state.