Legislature must act to restore Power Cost Equalization funds

The late U.S. Sen. Patrick Moynahan famously said, “Everyone is entitled to his own opinion, but not to his own facts.” This is true in the case of two unique aspects of Alaska’s budget: the Constitutional Budget Reserve (CBR) reverse sweep and the Power Cost Equalization (PCE) endowment.

Our state constitution has a strict dedicated funds prohibition clause. For the non-lawyers, that means Alaska makes it really hard to set up separate pots of money when budgeting from year to year. The majority of state funds are available to the Legislature to appropriate for whatever purpose it deems necessary. This ensures flexibility in budgeting when an economic downturn occurs or a disaster hits. Despite the general prohibition, there are a few exceptions, including the Constitutional Budget Reserve, known as the CBR.

The CBR was set up by a constitutional amendment in 1990 as an emergency savings account. To access money from the CBR, lawmakers generally need a supermajority vote, unless the amount available for appropriation is less than the previous year’s budget. Additionally, any money taken from the CBR is more of a loan because it has to be repaid to the fund.

So how does that repayment happen? The constitutional language is clear: At the end of every fiscal year, any money “in the general fund available for appropriation” must be put back into the CBR. That action is called a “sweep” of funds into the CBR to repay the money that was taken out.

This means that many pots of money in our general fund that support worthwhile projects are subject every single year to the sweep. Funds like the Alaska Higher Education Fund, set up to provide scholarships for our students to go to college or eligible apprenticeships, are great programs. But they remain available for appropriation in the general fund, which means those monies must be swept into the CBR if the loan has not yet been repaid in full.

There is a way to prevent this from happening every year. Lawmakers can vote on something called a reverse sweep. Like its name suggests, voting to reverse the sweep keeps these funds in their respective pots for another year. Because reversing the sweep is essentially taking money away from the CBR that it was constitutionally owed, it requires the same supermajority as it takes to pull funds out.

So, why does all of this legal history and explanation matter? This year, neither the House nor the Senate voted to reverse the sweep. Effective July 1, the money that funds scholarships, and the PCE program that reduces the cost burden shouldered by rural Alaskans as they heat and energize their homes, is not available because it must — at least based on what appears to be the plain language of the Alaska Constitution — be placed in the CBR and thus cannot be spent for these worthwhile causes. A lawsuit has now been filed on this issue, which may provide some clarity, but it won’t solve the entire problem. Millions of dollars will still be taken away from necessary programs because the constitution demands it.

Gov. Mike Dunleavy proposed reversing the sweep in the budget he sent to the Legislature. He also proposed a constitutional amendment to protect the Permanent Fund dividend and PCE payments so they would no longer be subject to political wrangling and potential depletion.

Now is the right time for the Legislature to vote to reverse the sweep of funds. Let’s get this done in the next special session and keep our commitment to rural Alaska.

Julie Anderson is the Commissioner of the Alaska Department of Commerce, Community, and Economic Development. Curtis W. Thayer is the Executive Director of the Alaska Energy Authority, a public corporation of the State of Alaska governed by a board of directors with the mission to “reduce the cost of energy in Alaska.”

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