Anchorage judge reverses Dunleavy decision to end rural electric subsidies

An Anchorage judge soundly rejected the political justification created by Gov. Mike Dunleavy to stop Power Cost Equalization payments to more than 84,000 rural Alaskans faced with the most expensive electric rates in the country.

Under a policy created in 2019 by former temporary budget director Donna Arduin, Dunleavy stopped the funding for PCE subsidies July 1, claiming the Legislature needed a super majority vote to approve the funding for 194 villages, not the simple majority that signed off on the program.

Requiring a super majority is tantamount to giving veto power to Dunleavy’s allies in the Republican minority in the House. The best thing about this court decision is that it removes the PCE political power game from the negotiations that will take place during the special legislative session next week.

Dunleavy and Arduin, who enjoyed saying “all money is green,” wanted to get rid of the $1 billion PCE endowment and use it for other purposes, while giving the Republicans a bargaining chip to use against rural lawmakers who support the PCE.

“We began on Day 1 of the administration. We started with eliminating budget silos, tearing down those silos,” Arduin told legislators on Jan. 23, 2019.

Anchorage Superior Court Judge Josie Garton ruled that the PCE budget silo was not eliminated by the failure to get a three-quarter vote in the Legislature.

The judge said the program was funded by the Legislature this year and she stopped the administration from emptying the endowment and placing it in the Constitutional Budget Reserve.

In a clear analysis of the case, Garton said the endowment is separate from the general fund and therefore not subject to the sweep—the procedural move under which money left in the general fund at the end of each fiscal year is transferred to the CBR to make up for money borrowed from that fund in previous years.

Why did she say the fund is separate from the general fund?

Because the law says, “the power cost equalization endowment fund is established as a separate fund” of the Alaska Energy Authority.

If the Dunleavy administration appeals the case, it has to be prepared for the risks of taking this to the Supreme Court.

As the Legislative Finance Division said two years ago, if the law regarding the PCE that places the endowment in the Alaska Energy Authority, outside the general fund, is insufficient to avoid the sweep, the earnings reserve of the Permanent Fund should be given the same treatment.

Dunleavy would have to prepare for the possibility that “winning" on the PCE argument would mean that $10 billion or more would have to be removed from the Permanent Fund earnings reserve and transferred to the CBR.

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