Governor’s budget vetoes impact rural, low income Alaskans
Rural and low-income Alaskans will feel the sting of Governor Mike Dunleavy’s budget vetoes most severely. Dunleavy’s Fiscal Year 2020 budget disproportionately eliminated funding from services intended to benefit residents in rural areas as well as children, elderly and low-income residents.
The Rural Alaska Community Action Program, or RurAL CAP, faces a $5.5 million loss in funding due to the budget reductions. RurAL CAP, a private non-profit organization that provides services to low-income Alaskans, operates Head Start programs in 24 communities throughout Alaska. According to a press release, cuts will shut down more than a third of RurAL CAP Head Starts, meaning that over 220 children will lose access to early education services.
RurAL CAP also provides housing for individuals and families dealing with homelessness, mental illnesses and physical disabilities. They provide services such as therapy and behavioral health assessments as well as skill development and case management. Due to the vetoes, Safe Harbor and Sitka Place in Anchorage will be forced to close their doors. More than 500 people will be without housing services provided by RurAL CAP. “The decision to defund critical community services will undercut our community’s efforts to protect vulnerable populations and particularly impacts vulnerable populations and rural Alaskans,” RurAL CAP Chief Executive Officer Patrick Anderson said in a press release.
This is apparent in Nome, where budget cuts have completely eliminated state funding for the Nome Emergency Shelter Team. NEST, run by the Nome Community Center, is the only cold-weather shelter in the region and was created as a response to several deaths due to freezing. Despite the lack of state support, Nome Community Center Executive Director Rhonda Schneider said she remains hopeful that there will be a way to keep NEST open. She framed the cut as a “challenge,” which will require thinking creatively to find alternate funding sources. This could include minimizing expenses, such as cutting down on meal services and the number of days and hours NEST is open. “It will impact Nome’s homeless population, that’s safe to say,” Schneider said. Without NEST, over 200 people in the region could be without a place to stay this winter.
Nome Community Center also receives funding from the Department of Health and Social Services, but Schneider said these cuts have not been as severe. Other than NEST, the two main NCC services, which have been impacted are the Food Bank and the homeless prevention program, which provides support for families who have fallen behind on payments such as rent and heating. According to Schneider, the Food Bank is not a huge expense to keep open because it relies mostly on volunteers.
Health care services in the region will also be impacted by Dunleavy’s cuts. Norton Sound Health Corporation released a statement on July 8 “strongly urging” the Legislature to overturn the governor’s vetoes. The Legislature scheduled a vote to override the vetoes for Wednesday, July 10. NSHC relies on third-party payer revenue to provide health care services because less than half of its funding comes from Indian Health Services. Medicaid, which took an $83 million cut, is its largest payer. “Ongoing cuts to reimbursement of this magnitude will force NSHC to curtail services,” reads the release.
Another concern for NSHC is that the region will be unable to respond to the high rates of substance use disorders. The vetoes eliminated $12.2 million in behavior health grants, which provide services for people with substance misuse and mental health illnesses. Without this funding, NSHC will need to refer patients out of the region, placing additional pressure on providers who are already overburdened. Furthermore, the press release said, decreasing availability of treatment corresponds to increased crime, thereby creating a vicious cycle. To compound the issue, Dunleavy vetoed $3 million from the Village Public Safety Officer budget. The VPSO program was created to train residents of rural communities without a local police force to be first responders and in many villages VPSOs play a crucial role in keeping people safe in situations when it could take days for the Alaska State Troopers to arrive. The lack of access to mental health services and the absence of trained people to respond to the situation could have deadly consequences.
The potential increase in crime may be especially problematic because Dunleavy’s cuts will eliminate the Nome Youth Facility. NYF is slated to close its doors on July 14. This will mean that youth will be sent out of the region and separated from their support systems, which could result in additional crime and homelessness problems. “By cutting the grants, the State of Alaska will only see more crime, more homelessness, and more children removed from their homes,” according to the NSHC statement.
Rural Alaskans may also be threatened by the potential elimination of state savings accounts. One such account funds the Power Cost Equalization program, which is run by the Alaska Energy Authority. Since the cost of power can be three to five times more expensive in remote areas than it is in cities, the PCE program appropriates earnings from the PCE Endowment Fund to reimburse rural residents and communities for the high cost of power. As its name suggests, the program equalizes power costs off the road system to the average cost of power in cities such as Anchorage, Fairbanks and Juneau. In Fiscal Year 2018, the fund distributed about $26.2 million in reimbursements. And, as of April 2019, 194 communities and 83,510 Alaskans benefitted from the program.
Dunleavy did not veto this money, but, according to Rep. Neal Foster, he could defund the endowment fund. And this involves the following mechanism: The Constitutional Budget Reserve, or CBR, can be used when there is a budget deficit, but according to the constitution, the reserve must be paid back with any leftover money. Essentially, at 11:59 p.m. on June 30 — the end of the state’s fiscal year —money goes from the state’s savings accounts into the CBR. At 12:01 on July 1, the beginning of the next fiscal year, the money typically is transferred back to the accounts as if nothing happened. However, three-quarters of the House and Senate must vote to pass the capital budget in order for the money to return. This vote traditionally occurs on June 30, but this year has been delayed until August.
Without this vote, called a ‘reverse sweep,’ the money will remain in the CBR and therefore will not be available to be distributed. In the past, according to Foster, the PCE fund was not considered sweepable, meaning the money returned to it to the fund. However, the governor’s administration decides which funds are sweepable, so this is subject to change. And, although the Dunleavy administration has not yet released the list of funds they are considering sweeping, Foster is concerned that the PCE fund may be on that list. Should this be the case, the money would remain in the CBR and the only way to access it would be with a three quarter vote of the Legislature. This is unlikely because the House majority voted against the reverse sweep, refusing to finalize the capital budget unless the Legislature approves a Permanent Fund Dividend check of about $3,000. If defunded, the PCE account could still be supported through the general fund, but it would need to compete with other programs.
In addition to immediate effects, the drastic budget cuts will likely have detrimental impacts on Alaska for years to come says Mouchine Guettabi with the University of Alaska Anchorage’s Institute of Social and Economic Research. He discussed the possible long-term impacts of Dunleavy’s reduction to the University of Alaska’s budget. Guettabi explains that the cuts to the university system alone have the potential to put the state into a recession. The quality of the university suffers when programs are cut and the number of faculty is reduced. In turn, more young Alaskans are more likely to leave Alaska to continue their education. Since there will be fewer job opportunities—Guettabi predicts a loss of at least 4,500 in the short-term—many students will not return to the state. This loss of skilled workers would lower the quality of life in Alaska. “It’s not just a one-time shock, it’s an effect that can potentially last for decades,” Guettabi said in an ISER article.
Dunleavy’s vetoes have proven to be both metaphorically and literally divisive for Alaskan lawmakers. For the first time in the state’s history, the Legislature is convening in two separate places for its second special session, which began on July 8. Dunleavy called for the session to be held in Wasilla, but many lawmakers chose to meet in Juneau. This caused a split—about 20 members (all Republican) met in Wasilla, but without a quorum broke up within about 15 minutes. Nearly 40 members of the House and Senate convened in Juneau. As of press time on Tuesday, the House and Senate planned to hold a joint session in Juneau on July 10 to discuss the veto overrides. The Legislature has until the end of the day on July 12 to override the vetoes. To overturn the governor’s budget vetoes, three-quarters, or 45 of the Legislature’s 60 members, must vote to do so.
On July 8, the first day of the Legislature’s second special session, the Fairbanks Daily News-Miner devoted the entirety of its front page to an editorial titled “Override: Legislature must save Alaska.” The editorial urged the Legislature to exercise their power for the sake of the state by overturning the governor’s vetoes. What Alaska needs, according to the editorial, is “reasonable and responsible action,” rather than over $400 million in budget cuts which go “too far, too fast.” Dunleavy’s vetoes hit especially close to home for Fairbanks because the $130 million cut could mark the demise of Alaska’s university system. The loss of the university alone could be devastating for both the Fairbanks economy and for the future of the state as a whole.
Managing Editor Rod Boyce said the decision made by the editorial board to run a front-page editorial was “unusual but not unheard of.” The News-Miner put a half-page opinion piece on the front page about 15 years ago, but in Boyce’s 25 years with the paper this is the first time they have dedicated the entire front page to an editorial. The board chose to do so on Monday because “This was the right moment because it feels like a big potential turning point” for the state, said Boyce. Decisions made this week the potential to reshape the Alaska, continued Boyce, and the News-Miner wanted to make sure that readers who think the budget cuts won’t impact them are aware of what their ramifications will be.