Dunleavy will announce final vetoes Monday as this year’s budget process continues winding down

Gov. Mike Dunleavy will declare his final decision on cuts to the state’s operating budget and the amount of this year’s Alaska Permanent Fund dividend on Monday, his office announced via email and social media Friday morning.

The governor’s line-item veto decisions on House Bill 2001 likely will end the state’s lengthy budget process this year, as legislators said Friday that there does not appear to be support for a third special session to override or alter decisions made by the governor.

HB 2001 reverses most of the line-item operating budget vetoes that Dunleavy announced in June, and also sets a PFD amount of $1,600 for this year’s check. The state’s fiscal year began July 1, meaning most veto-driven cuts are already in effect, and HB 2001 offers one final chance to reconsider.

When it comes to state services, Rep. Andy Josephson, D-Anchorage, calls HB 2001 the “ ‘Are you serious?’ bill.”

The governor had previously said he would sign HB 2001 on Friday and release a list of sustained line-item vetoes, but press secretary Matt Shuckerow said by phone that additional time was needed.

“There was a desire to have some additional time over the weekend," Shuckerow said.

The governor’s action leaves members of the Legislature waiting in suspense.

“I have no idea,” said Senate President Cathy Giessel, R-Anchorage, when asked what the governor will do Monday.

[Recall Dunleavy group says it passed a 28,000-signature threshold in two weeks]

Among the biggest decisions the governor faces is that of the dividend. Since before he began his candidacy for office, Dunleavy has supported a $3,000 Permanent Fund dividend paid using the traditional formula that has been in place since 1982. (Dunleavy also supports a series of back payments for dividends cut in previous years, but that legislation has not advanced.)

A majority of the Legislature disagrees with the governor’s stance on the dividend and instead approved a $1,600 payout boosted with money from the state’s Statutory Budget Reserve as well as the traditional transfer from the Alaska Permanent Fund Corp.

For Dunleavy, accepting the lower amount would mean breaking a major campaign promise. Vetoing it likely means no dividend this year, or at least no dividend paid in a timely manner: According to the Permanent Fund Dividend Division of the Alaska Department of Revenue, the amount of the dividend must be set by the end of the month to ensure on-time payments in October.

“He’s got two options: Door 1, an angry lion, and Door 2, an angry bear,” said Sen. Shelley Hughes, R-Palmer.

The governor’s press secretary was unable to say which option the governor will choose.

Hughes, like Dunleavy, supports a traditional dividend this year and, like the governor, supports a constitutional amendment guaranteeing the dividend.

“I’d go for a third option: Take the $1,600 and go into special session and fight for the rest,” Hughes said.

Giessel said that isn’t likely to happen.

“There is — logistically — minimal to no likelihood that the Legislature would convene again to appropriate funds for yet another dividend,” she said.

Enough senators have scheduled leaves of absence or other work through the remainder of the year that there would not be enough lawmakers.

“People have multiple commitments, and the excusal requests are extensive,” Giessel said.

If the Senate is unable to convene a special session on the dividend, it also would be unable to convene a special session on overriding any further vetoes to state services, Giessel said, adding that nothing precludes the Legislature from attempting an override at the start of next year’s regular session.

The governor in June announced more than $400 million in vetoes from the state’s operating budget. Lawmakers failed to garner enough votes to directly override those vetoes, but they did have enough support to pass HB 2001, which adds funding to the state budget. The add-backs cover all but $23.29 million of the governor’s vetoes.

In a series of announcements throughout the week, the governor announced that he will accept several of those add-backs, including those to the University of Alaska, early education and senior benefits.

Shuckerow said those add-backs should not be misunderstood: The governor will reconfirm the majority of his budget vetoes on Monday.

“There only remains a few unannounced budget restorations,” he said.

Legislators had mixed thoughts about whether the governor’s actions are being driven by the ongoing recall campaign against him. Tilton says she doesn’t think the recall is affecting the governor.

“I think that the governor is more influenced by the supportive base around him as far as making decisions,” she said, explaining that the things the governor is allowing to be added back are things that the Republican House minority generally supports as well. She pointed to senior benefits in particular.

Giessel feels differently about the rollback and the recall’s influence, saying the governor has cited the public’s voice as a reason for his changed course.

“The recall effort is certainly the voice of citizens," she said.

The governor has said that his goal is to balance the state’s budget without reducing the Permanent Fund dividend, raising taxes or spending from savings. In February, Dunleavy introduced a plan to do so in one year. Lawmakers subsequently found that plan was impossible to achieve in a single year. Changes to Medicaid (one of the biggest expenses in the state budget) require multiple years. In addition, legislators were unwilling to accept other components of the governor’s plan.

They did cut the operating budget by more than $130 million, according to the Legislative Finance Division, but new legislation — including a tough-on-criminals law endorsed by the governor — reduced those cuts. Subsequently, the governor announced his budget vetoes, and his budget director said the one-year plan had changed to his two-year plan.

Given that the governor has reversed himself on more than $120 million of those vetoes ($110 million from the university alone), many lawmakers now believe the governor’s two-year plan has changed to a three-year approach or longer.

“There’s many of us who feel there can be some pretty large efficiencies going forward, but it takes time,” said Rep. Jennifer Johnston, R-Anchorage, who said she believes the governor is now on a three-year track.

Sen. Tom Begich, D-Anchorage and the Senate’s minority leader, said he doesn’t believe a three-year track is possible.

“You can’t cut your way to full funding of this budget and full funding of the dividend under today’s statute. It’s impossible to do that,” he said.

He believes the governor must begin to consider tax changes, including those to the state’s oil and gas taxes. Without doing so, Begich believes the governor will be unable to relieve “the community anger” that has resulted from his budget vetoes.

“I think it’s time for him to take a realistic look at what the people of the state are demanding,” Begich said.