Protecting Your Rights: Serving Sand Lake, Spenard, and Turnagain
January 25, 2019
Dear Friends and Neighbors,
On Tuesday, Governor Dunleavy gave his first State of the State address. The Governor focused on three main topics: the Permanent Fund Dividend, a balanced budget, and public safety.
State of the State
During his address, Governor Dunleavy made a number of promises: bigger dividends, a balanced budget with cuts estimated at $1.6 billion, and increased spending on public safety. The law allows the Governor until February 13 to present his updated FY20 budget proposal to the legislature, and he has provided few details about how he plans to accomplish these goals.
Permanent Fund Dividends
The Governor has pledged to pay a $3,000 Permanent Fund Dividend in 2019, which will cost approximately $1.9 billion spent from the earnings reserve. The current revenue forecast for the State is $5.3 billion for FY20, which is a $200 million reduction from this year, FY19. The table below, provided by the nonpartisan Legislative Finance Division, shows the forecasted FY20 expenses of approximately $5 billion. The revenue includes “POMV Revenue” of $2.9 billion as established by Senate Bill 26 (SB 26), a law enacted in 2018 with support from Democrats, Republicans, and Independents. SB 26 limits the amount the legislature can withdraw from the Earnings Reserve Account to an amount that protects the Permanent Fund for future generations. With the inclusion of $1.9 billion for the proposed dividend, we are left with a deficit of approximately $1.6 billion (shown by the graphic below).
David Teal, the Legislative Finance Director (nonpartisan) remarked recently: “I fear that many people don’t understand that deficits are now a big problem because we live in a different fiscal world. It’s a world without reserve. It’s a world in which budgets have to balance because you cannot fill them from savings anymore.” Mr. Teal further explained that the “competition between dividends and government services creates a problem for you legislators.” You can watch the recent presentation by David Teal here.
The budget above does not include the Governor’s promise of a PFD “pay-back.” Last week he introduced two bills that propose supplemental payments of $6,700 to each Alaskan. To accomplish this, the Governor is relying on the legislature to approve an additional estimated $683 million to this year’s budget (and two $800-plus million payments in the following two years). The back payments would total about $2.3 billion and the funds would be drawn from the earnings reserve account over three years.
Financial analysts and the financial markets responded positively to passage of SB 26 because it was a major step toward a responsible financial policy for Alaska. Just as protection of the Permanent Fund and its earnings reserve account is vital to a long-term financial plan, an unstructured draw out of the permanent fund earnings reserve—in excess of the 5.25% limit established in SB 26—is going to have negative effects on market returns, long-term balances, and the life of the Permanent Fund.
“Permanent Fiscal Plan” and Balanced Budget
In his address, the Governor confirmed that we wants the state to match expenditures with oil revenues and investment returns from the Permanent Fund. He described three constitutional amendments he plans to introduce as the foundation for his “permanent fiscal plan”:
We anticipate that the Governor’s updated budget, which is due to the legislature on February 13, will provide more detail on how the Governor proposes to meet these goals.
Increased Public Safety Resources
While proposing a spending gap, Governor Dunleavy also promised to “expend the necessary resources for additional State Troopers, provide more local control, and more prosecutors. We will ensure that our courts will remain open five full days a week in order to hear cases. We will provide the focus and the resources necessary to combat the scourge of opiates and other illicit drugs driving up our crime rates and ruining lives.” At a news conference the next day, the Governor further stated that he didn’t want to limit our investment in public safety if that additional spending would help protect the public.
I have many questions and concerns about Governor Dunleavy’s budget and his vision for Alaska. The state’s resources are not infinite. In the event of a $1.6 billion deficit, I’m skeptical about proposals to massively cut essential services and programs such as education, health care, and rehabilitation services, on top of the extensive cuts to state government that we made in recent years. Moving forward, I will look closely at the Governor’s actual budget proposal and the level and scope of cuts proposed.
To read the full speech or watch the address, click here.
UAA School of Education
On January 11, UAA learned that its School of Education had lost accreditation with the Council for the Accreditation of Education Preparation (CAEP). Universities are required to have a neutral third party certify that their program offerings are acceptable in order to receive accreditation. CAEP, known for having more rigorous standards than other accreditation groups UAA had used in the past, requires a school to meet five standards in order to receive accreditation: 1) program ensures students develop a deep understanding of the concepts and principles of their discipline; 2) program ensures students partake in effective partnerships and high-quality clinical practice; 3) the university works to ensure its students are high quality from recruitment through graduation; 4) the university demonstrates the effectiveness of graduates in their classrooms; and 5) the university maintains a data-based quality assurance system and supports continuous improvement to its program.
The accreditation process involves the submission of a self-study by the university, a compilation of evidence that it meets the five standards, followed by feedback from CAEP on areas for improvement. Finally, evaluators from CAEP visit the school to review evidence, and CAEP produces a final report. In the CAEP report, UAA failed to meet four out of the five standards.
Education remains Alaska’s best investment in the future, and the UAA School of Education is a critical part of growing Alaska’s future educators. UAA says it’s taking steps to address the areas of concern, but it has not provided the details of its plan nor has it provided a full explanation about why it lost its accreditation. In the meantime, 2019 graduates will be recommended for teaching licenses in the state. Specifically, UAA is working with the Alaska State Board of Education and Early Development to ensure all graduates are recommended for licenses despite their program’s lack of accreditation. The board will meet February 4 to discuss this proposal. While the University has no plans to close the School of Education, it has suspended recruitment and enrollment. UAA can re-apply for accreditation a year after the denial. The total process of re-accreditation could take up to three years.
Thank You for Attending Our Start of Session Constituent Meeting
Thank you to everyone who took the time to share your thoughts at our recent Start of the Session Constituent Meeting at the Anchorage Legislative Information Office (LIO). I always appreciate receiving feedback from my friends and neighbors, and look forward to hearing more from you as the session progresses.
Mark your calendar for these upcoming events:
The Costs of Alaska’s Economic Roller Coaster
For more information and to RSVP, visit the Facebook event page.
Jewel Lake Farmers Market Launch Meeting
Their mission is to inspire and nurture a healthy community by contributing to the success of Alaskan farmers, increasing access to fresh, local products, and serving as a neighborhood gathering place.
When: Thursday, January 31 from 5:30 – 7:30 PM
Where: Kaladi Brothers Coffee, 6861 Jewel Lake Rd.
As always, please let me know if you have any questions or concerns.