Dunleavy backs ‘incomplete’ $1,600 dividend and stands by most of his June budget vetoes

Alaska Gov. Mike Dunleavy on Monday sustained the majority of his operating budget vetoes from June and set this year’s Permanent Fund dividend at $1,600, saying he will continue to push for a larger amount.

Announcing his decision in a prerecorded video, the governor said, “Alaskans need to understand that we can no longer afford to spend at current rates.”

Dunleavy, who campaigned on a promise of back payments and a $3,000 dividend paid using the traditional formula in state law, said he will accept a $1,600 dividend proposed by the Legislature for the time being.

“While this decision was not easy — it’s not easy at all — I decided I will not veto this incomplete dividend,” he said in the video, explaining a veto would result in no dividend this year because of legislative resistance.

“I anticipate a special session this fall to complete this process,” Dunleavy said.

Dunleavy’s action Monday also confirmed a long list of budget vetoes, including cuts to Medicaid funding, all state support for public broadcasting and cuts to public assistance.

[Here’s what’s cut and what’s not in Alaska’s state operating budget]

The governor reversed himself on some vetoes, siding with a majority of the Legislature. The Alaska State Council on the Arts has had its $3.9 million budget restored after being entirely eliminated in June. There will be a prosecutor and assistant in Utqiagvik, something sought by the Legislature but vetoed by the governor previously. Agricultural programs have been restored, as have $2.2 million in grants for substance abuse treatment, mental health services, and shelter for the homeless.

The governor’s office did not make Dunleavy immediately available for questions about his decisions, the dividend amount, or whether the vetoes will change his earlier strategy for balancing the state budget in two years. A press conference has been scheduled for Tuesday afternoon.

The Legislature has repeatedly declined to approve a $3,000 dividend because doing so at present levels of state services would require violating a spending limit approved last year.

According to Adam Bryan, chief budget analyst for the Alaska Office of Management and Budget, the governor vetoed $423.7 million from the state’s operating and mental health budgets in June. According to OMB documents released Monday, the governor sustained $222 million of those cuts.

Figures from the nonpartisan Legislative Finance division differ from those compiled by OMB, and some figures released Monday by OMB do not match totals released by the agency itself earlier this year.

[Governor repeats $335,000 veto from Alaska judiciary budget over court’s abortion rulings]

The governor’s vetoes, coupled with reductions to the state’s capital budget, and $76 million cut by the Alaska Legislature before the governor’s vetoes, appear to be one of the largest year-over-year reductions in the state budget in Alaska’s state history, according to calculations by the Legislative Finance Division.

In June, the governor said the intent of his vetoes was to balance the state budget in two years without reducing the Permanent Fund dividend, raising taxes or spending from savings.

While the governor’s plan had its supporters, opponents reacted vocally, flooding public forums held by members of the Legislature, conducting rallies urging a veto override, and beginning a recall campaign that has already amassed enough signatures to be considered by the Alaska Division of Elections.

The Alaska Legislature failed to muster enough votes to override the governor’s vetoes directly. Alaska’s constitution requires three-quarters of the Legislature’s 60 members to approve an override, and more than a third of the Legislature was absent at the time of the vote.

Lacking support for a direct override, lawmakers instead approved House Bill 2001, which sought to add funding to vetoed programs and pay a $1,600 Permanent Fund dividend. Lawmakers subsequently referred to it as the “are you serious?” bill, referring to the way the bill gave the governor an opportunity to recant his vetoes from June.

As late as July 25, the governor said he didn’t think those vetoes were too aggressive.

But in the week before Monday’s announcement, the governor announced his willingness to reverse himself on least some of them. The governor’s cut to the university budget is $20 million instead of $130 million; he agreed to not veto $20.8 million needed to fund senior benefits and $9.6 million for Head Start and other early education programs.

The state’s fiscal year began July 1, meaning the governor’s June vetoes have already taken effect. For some programs and agencies, this means the Monday action is the equivalent to adding gasoline to a car already stalled at the side of the road for lack of fuel. They have already laid off staff and ended programs, and now may restart them.

Benjamin Brown, chairman of the board of trustees for the Alaska State Council of the Arts, hopes to hire back the four employees laid off in mid-July when the council closed.

He’ll also be sending out letters to dozens of artists and grantees, letting them know their canceled project funding will be restored.

“I’m elated, it’s not even bittersweet,” he said. “I hope the bitter part is gone. I’m happy the administration chose to listen to the voices of thousands of Alaskans.”

House Speaker Bryce Edgmon, I-Dillingham, said he had a mixed reaction to the governor’s announcement.

“Overall, I was pleased a lot of the items were restored after the legislature sent them to him a second time for his reconsideration,” Edgmon said, but he was concerned by the governor’s insistence upon what he calls an unsustainable Permanent Fund dividend.

“In order to accommodate (a $3,000 dividend) you’ve got to overdraw the Permanent Fund or make massive budget cuts,” Edgmon said.

He added that he would prefer the governor begin talking about adjustments to the state’s tax system.

Edgmon said it’s too early to say whether the Legislature will consider overriding any of the vetoes the governor sustained Monday.

Rep. Colleen Sullivan-Leonard, R-Wasilla, said she doesn’t know whether the support exists for either addressing the governor’s vetoes or the increased Permanent Fund dividend. Sullivan-Leonard, like the governor, has supported a $3,000 payout.

“I guess it’s going to take more discussion,” Sullivan-Leonard said.

Sen. Natasha von Imhof, R-Anchorage and co-chair of the Senate Finance Committee, also said it’s too early to know whether the Legislature would support such an override.

Rep. Jennifer Johnston, R-Anchorage and co-chair of the House Finance Committee said that when it comes to overriding vetoes or increasing the dividend, “I don’t think the votes are there for either side.”

Dunleavy spokesman Matt Shuckerow said earlier Monday that the governor chose to deliver the budget news by video, without taking questions immediately afterward, because the governor wanted to speak directly to Alaskans.

“Given the attention of this issue, the significance of this issue, the governor has chosen to treat it in a more significant way,” Shuckerow said.

The video was recorded Sunday, he said, with its content “finalized” Monday.

Reporters Tegan Hanlon and Alex DeMarban contributed to this article from Anchorage. James Brooks wrote from Juneau.