Tuesday, December 17th, 2019
FY21 Budget Update
Governor Dunleavy released his FY21 budget last Wednesday flat-funding essential state services including public education and Medicaid, and restored several programs the administration sought to eliminate last year including senior benefits for low income elders.
There are still cuts - one of the largest being to the University at $25 million, but this budget is vastly different from the one we saw last year.
Importantly, it shows that your emails, phone calls, public testimony and letters mattered and made a difference. Thank you!
However, the bad news is this budget is not fiscally sustainable or responsible. It has a $1.5 billion deficit that the Governor proposes to fund by spending the last of our state's savings in the Constitutional Budget Reserve (CBR). Draining the CBR leaves our state vulnerable to future shortfalls due to emergencies or natural disasters, like last summer's raging wildfires, that may occur in the future.
It's essential that we pass a balanced budget that balances revenue and expenses, just like we all do in our households, so that our economy can be strong and stable.
Alaskans crowd the Anchorage Legislative Building February of last year to comment on the governors FY20 budget.
Good news first!
Restored programs and funded essential state services:
The governor's proposed budget restores and funds the following programs:
In addition to restoring some services vulnerable Alaskans rely on, the governor also:
  • Added 15 new state trooper positions to improve public safety;
  • made no further cuts to education, and;
  • made no further cuts to Medicaid.
This is a huge victory, however it was not an easy win. Not only did it require the involvement of tens of thousands of Alaskans, but also several filed and threatened lawsuits.
For example, forward-funded education was only achieved this year after we, the legislature, took the administration to court for refusing to honor forward-funding of education.
After attempting to cut Medicaid through vetoes, the governor restored all $120 million in funding via this year's supplemental budget. Why? Because in order to cut state spending on Medicaid, changes to coverage or services must be reduced through a state plan approved by the federal government. The governor never put forth an actual plan to reduce the costs. In the absence of an approved plan to reform Medicaid, providers must to be paid for their work. If funding hadn't been restored this year, there would be another lawsuit on this administration's hands.
The bad news:
steep reductions, poor spending priorities, and a lack of a fiscal plan
Here are some of the governor's proposed reductions this year:
  • cuts another $25 million from the University;
  • cuts funding in half for the Alaska Legal Services Corporation, ($450,000);
  • cuts school bond debt funding in half ($18m);
  • eliminates state dairy monitoring and inspection which prevents Alaskan dairy farmers from selling their locally produced milk;
Continues $3 million in reductions to the Village Public Safety Officer program (VPSOs).
Fails to restore funding for:
  • the civil air patrol for the second time;
  • the Ocean Ranger Program for the second time, and;
The governor's proposed FY21 budget also includes some irresponsible spending for the privatization of state mental health and public safety services, which will lead to poor management and outcomes in both areas.
The budget allocates:

  • $6 million to API for a contract with no clear deliverables to Wellpath, a company with a dubious health and safety track record, and;
  • $25 million for sending prisoners out of state to privately owned and operated prisons.
Alaskans gather outside the capitol steps to rally for education funding and a strong university last February.
An unbalanced budget:
The governor's budget proposal blows through our remaining state savings accounts. Far from being fiscally conservative. it actually drains the Constitutional Budget Reserve (CBR), by two thirds, leaving the state with only minimal savings.
Further, the governor's budget jeopardizes the long-term health of the Permanent Fund. The governor proposes paying back four years of reduced dividends, which could cost about $5.5-$6 billion from the Permanent Fund and essentially be like taking money from your children's college savings account to pay for the mortgage. It can be done in an absolute emergency but should never be done if you can find any other solution.
Such a transfer would risk our state's fiscal stability by spending far more than the 5% allowed by the Percent of Market Value formula set in law. We need to continue to responsibly manage this fund that now provides two-thirds of the state's revenue as well as annual dividends to Alaskans.
The time for avoiding discussion of potential new revenues for the state is over.
We are nearly out of savings, the Permanent Fund cannot bridge the gap without risking its sustainability, and oil production is forecast to plateau and then decline about 4% per year despite new projects coming online.
While I am disappointed that the governor did not propose a solution himself, I am grateful that he heard Alaskans and did not propose a budget like last year's. Now it's time for Alaskan's to step up and do what we have always done in tough times--roll up our sleeves and get to work. I look forward to doing the hard work of working out potential solutions to our state's fiscal problem this upcoming session.
Pre-session Constituent Meeting
Have a happy holiday season with friends and family, and as always, keep in touch!
Phone Number: (907) 269-0123