Dunleavy hides opposition to power subsidies, scholarships in legalese

The Dunleavy administration has stopped payments of scholarships to thousands of young Alaskans and has halted the financial assistance that helps thousands of rural Alaskans deal with the highest electric rates in the nation.

Gov. Mike Dunleavy has emptied the endowments for education and electric payments, which contained a total of $1.4 billion, and moved that money into the Constitutional Budget Reserve.

Now that the endowments are gone, the payments to students and rural residents should continue at least this year, the governor says, but paid for with money withdrawn from the general fund.

In the future, those programs will have to compete with every other state program for funding, which means they are more likely to be cast aside as the pressure to spend elsewhere would be much greater.

What is behind all this?

While watching a Senate Finance Committee hearing Thursday, I began to better understand this episode of the Dunleavy disaster.

Temporary budget director Donna Arduin is trying to provide political cover for Dunleavy in telling legislators, “The governor was not involved in this process; no political influence took place when making these determinations.”

That’s not true. The governor was involved from the start.

This began in February when Arduin and policy director Mike Barnhill appeared before the Senate Finance Committee and announced plans to get rid of the endowments that pay for scholarships and for the Power Cost Equalization payments.

There was about $1.1 billion in the fund to help with electric rates. There was about $345 million in the fund to help pay for scholarships. Getting rid of these endowments and putting $1.4 billion elsewhere for other purposes was a key part of the Dunleavy/Arduin budget.

Doing so would allow the governor and the Legislature more flexibility to spend the money on something other than power subsidies and scholarships. Dunleavy doesn’t want to go on the record opposing scholarships and rural power subsidies, but the elimination of the endowments makes it far more likely that the payments would end or be cut after this year.

Dunleavy introduced a bill in April to get rid of these endowments and others. The Legislature took no action, but the Dunleavy administration found another way, dressing it up in legalese, and claiming that every other governor has misinterpreted the law on these funds.

The Republican minority in the House, led by Rep. Lance Pruitt, whose wife makes more than the governor as a contract employee for Dunleavy, refused to approve the technical step needed to preserve the endowments.

The Republican action meant the administration was clear to create a new interpretation of the so-called “reverse sweep” and wipe out the endowments on its own without legislative approval or public hearings.

On Thursday the Dunleavy administration said it would like the Legislature to approve funding for scholarships and electric payments for this year, while leaving the endowments empty.

This decision carries out the goals that Arduin and policy director Mike Barnhill described to the Senate Finance Committee in February.

It received little press attention at the time. The Alaska Ledger had the best coverage.

“There seems to be a punitive action here for a program that’s years in the making and has been successful,” Sen. Donny Olson said five months ago of the plan to end the PCE endowment. “Why would we be sweeping that money so that it can be used for other things besides what it was destined for?”

“With respect, however, Mr. Chair, this is not intended to be punitive in any way, shape, or form. We’re not attacking the program,” Barnhill said of the attack on the program.

“In each of these cases, the funding remains in place for the program. The characteristics of the Power Cost Equalization program that Sen. (Lyman) Hoffman just identified are good characteristics. They are meritorious. What we are doing, in a state of fiscal crisis, is trying to increase the Legislature’s flexibility to deal with all of the stakeholders.”

“In the minutes of the constitutional convention they talked about having a level playing field. That’s what they wanted to secure. And the wisdom of that is in times like this when there’s not enough money to go around,” Barnhill said.

“We have to weigh the merits and the needs of the state. And that’s what we’re trying to do here, is return the state’s finances to the way it was intended by the framers in 1955. Not punitive. Going back to what was constitutionally intended,” Barnhill said.

“However long it’s taken to save that $1.1 billion . . . you are proposing that we just put it in the general fund to spend however we want, whenever we want, until it’s gone?” Senate Finance Co-chair Natasha von Imhof asked Barnhill during the hearing.

“I am absolutely not suggesting that this money be frittered away. If anything, the Dunleavy administration is calling on the Legislature to be frugal and a very strict steward of its funds,” Barnhill said.

The Legislature refused to eliminate the endowments. The governor did it on his own.

The best way for the Legislature to respond is to approve the so-called “reverse sweep” so that the endowments are not emptied by administrative action without public discussion.

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