Unapologetic, Dunleavy stands behind budget vetoes and $3,000 dividend

JUNEAU — In a question-and-answer session with Alaska news media, Gov. Mike Dunleavy said Thursday afternoon that he has not changed his opinion on a $3,000 Permanent Fund dividend and is unlikely to accept reversals of his decision to veto $444 million from the state operating budget.

The Alaska Legislature is deeply divided over the issue of the Permanent Fund dividend and state spending, and under the Alaska Constitution, 45 of the Legislature’s 60 members must agree in order to override a governor’s veto.

As long as the Legislature remains divided and unable to muster a veto-proof majority, that means Dunleavy’s point of view has paramount weight.

Here’s what he had to say Thursday about various issues:

Budget vetoes

This week, the Alaska House of Representatives passed legislation that would reverse about 80% of Dunleavy’s $444 million in vetoes. The bill is headed to the Senate.

On Thursday, Dunleavy didn’t say whether he’d sign the bill if it made it to his desk. He did say he doesn’t think his vetoes were too aggressive.

“No, I don’t. I don’t. Every action that I’ve taken, I fully understood there would be a reaction,” he said.

That reaction has included widespread protests, calls for reversals, a downgraded credit-rating outlook from Moody’s Investors Service and the possibility of a recall campaign against the governor himself.

“I’m glad that people are engaged,” Dunleavy said, “and I’m not being flippant.”

Asked whether he has changed his mind about the vetoes after seeing how some Alaskans have reacted, Dunleavy said he’s also heard from people who want further reductions.

“Keep in mind these vetoes represent about 6% of our overall budget in the state of Alaska. And there’s no doubt that these vetoes impact programs and systems," Dunleavy said.

“There is little choice in that because of the dependency that a lot of Alaska has on direct aid from the state,” he said. “But nonetheless we do listen. We are hearing Alaskans on both sides of this issue. There are those that believe we should reduce even further. There are those that believe we should not reduce at all. And then there are Alaskans that are somewhere in the middle, so we are listening to Alaskans.”

Dunleavy said he believes the vetoes have sparked a discussion that “needs to happen because Alaska needs to decide what road it’s going to go down."

“Are we going to reduce the budget to close the gap or are we going to take the PFD and tax ourselves, or possibly a combination of? We won’t get there if I continue to try and kick the can down the road by using our savings and acting as if everything is OK,” he said. "We’ve got to fix this now. We’ve got to fix this on my watch. I’m willing to do it.”

He said he’ll wait to see what the Senate does with the bill reversing many of his budget vetoes.

“If it moves us further away from reducing this budget, that’s going to be a big factor in the calculus as to how we react to what comes out of both the House and the Senate,” he said. “So we are willing to have discussions but, again, whatever comes out has got to move us closer to closing this gap. And that’s really the issue that I think we all need to stay focused on.”

[As Alaska’s budget uproar rolls on, a top Dunleavy adviser has seen it before]

On the Permanent Fund dividend

Dunleavy referred to the issue of this year’s dividend as “the gorilla in the room.”

In an attempt to find a way past their deadlock, some lawmakers have floated the idea of a $1,600 dividend payment immediately and another $1,400 payment if legislators agree to change the traditional distribution formula moving forward.

One of the basic problems with that approach is that in a special session called by the governor, the governor sets the agenda, formally known as the “call.” So far, a formula change is not on the call, and Dunleavy said he isn’t open to changing the call until lawmakers agree to pay a $3,000 PFD.

“I think once we get through the process of the full statutory PFD, I am open to amending the call,” Dunleavy said.

He also said that while he “would not be adverse to having a discussion with the Legislature on them wanting to review the Permanent Fund dividend,” any change should be subject to a statewide vote.

Following the laws

In the meantime, he said, “I think the people of Alaska want our elected officials again to follow all laws, and I know I sound like a broken record on that.”

Dunleavy was asked why he is advocating the violation of a new law that limits spending from the Alaska Permanent Fund. (At present levels of state spending, a $3,000 dividend would require exceeding that limit.)

He responded: “I know that with SB 26 and what’s occurred in the courts has complicated that issue. But again, we believe that those statutes that still exist should be honored until the Legislature and the people agree that there should be a change.”

Referring to other laws broken by his vetoes — such as those requiring a senior benefits program and an Ocean Rangers cruise ship pollution inspection program — Dunleavy said many of those are “subject to appropriation.”

Asked about the 2017 Alaska Supreme Court decision that declared the dividend subject to appropriation, Dunleavy talked about other matters and his press secretary ended the call.

University of Alaska

Dunleavy said his administration is working with the University of Alaska system on a “step-down approach” on state funding cuts. It’s unclear what exactly that means. He didn’t provide specifics Thursday, and a UA spokeswoman said the administration’s proposed reductions are still deep.

“We are working with the University of Alaska, as I mentioned, to come up with a plan, a step-down approach, that would not be done in one year, but over multiple years,” Dunleavy said. “We’re making some attempts to soften the blow of these reductions for Alaskans.”

UA is facing an unprecedented 41% cut to its state funding this year. The $135 million cut is just over 15% of its total operating budget for the last fiscal year: $855.4 million.

The UA Board of Regents is scheduled to meet Tuesday to discuss restructuring options, after declaring “financial exigency” this week. Dunleavy said representatives from the state Office of Management and Budget will attend “and lay out the discussions that have been occurring and the possibilities for plans going forward.”

“So it’s unfortunate we find ourselves in July,” Dunleavy said. “We were hoping that we would be done in April and we could have prepared the people of Alaska for these reductions.”

In a statement Thursday, UA spokeswoman Robbie Graham said: “While OMB has put forward a spreadsheet of suggested reductions for the university over the next two years, those suggestions still call for deep cuts to the university, and it’s clear that we are a long way from securing a reasonable budget from the state.”

Graham didn’t answer a question Thursday about the amount of funding included in the spreadsheet. She referred a reporter requesting the spreadsheet to OMB, and wrote in a text message that budget decisions are under the purview of the regents.

Matt Shuckerow, Dunleavy’s press secretary, said the administration will present the details Tuesday.

He said the administration is working with UA “on a transition plan” for the university, a “timeline for inevitable changes and consolidations” and “the possible inclusion of transition funds that may be needed to implement system-wide reforms.”

Ferry system strike

Asked about the statewide ferry system strike by members of the Inlandboatmen’s Union of the Pacific, Dunleavy said it is “unfortunate” that the union “has resorted to a strike.”

“You know, I have faith that my commissioners and our negotiating team that we're going to work through to agreement,” he said.

He added that the people involved are “our workers, our friends.”

“None of us want this situation to happen so we've been working with the union to try to come to an agreement. We'll continue to do that and we hope that this side of this issue gets resolved sooner than later,” he said.

[With statewide strike underway, legislators fear for Alaska ferries’ long-term existence]

Oil taxes

Members of the Alaska Senate’s Democratic minority requested the governor add changes to the state’s oil tax system to the agenda of the ongoing special session. A spokesman for the governor’s office later said the governor would not do so.

According to figures provided by Sen. Bill Wielechowski, D-Anchorage and a member of the minority, eliminating an oil tax rate reduction at low prices would generate an extra $1.2 billion for the state each year, enough to eliminate the need for budget vetoes while paying a traditional dividend.

When asked about the idea, Dunleavy said he’s just starting to hear about the issue “through the grapevine.”

“I think that needs to have a serious discussion,” he said. “I’ve not been a proponent of taxation. I think the more money that can stay in the private sector, the private part of the economy bodes well for investment and for the state of Alaska in the mid-term and long term for Alaskans.”

Another special session?

The Alaska Legislature’s current special session reaches its 30-day limit in the first week of August, and Dunleavy said that he will call legislators into another session if they don’t finish by the deadline.

“We have to,” he said. “If the work is not completed, we have to.”