With federal aid expected, lawmakers question whether Dunleavy borrowing plan is needed

JUNEAU — An Alaska Senate committee has approved a plan by Gov. Mike Dunleavy to borrow more than $300 million for construction projects across the state, but several members of the committee said they doubt the proposal has the support needed to pass the full Senate.

“I’m very skeptical that it will make it out of the Senate,” said Sen. Robert Myers, R-North Pole and chairman of the committee that advanced the plan.

Alaska is expecting more than $1 billion in federal aid from a COVID stimulus bill passed this month, and billions more could come to Alaska if Congress passes an infrastructure-funding bill later this year.

The federal money wasn’t foreseen in December when Dunleavy proposed to borrow up to $350 million for job-creating construction projects. With interest rates low and unemployment high, the governor says it makes sense to borrow money to create jobs.

Approving a bond package requires a statewide vote, and the governor’s proposal would call a special election after the Legislature adjourns.

“The...bond proposal is for shovel-ready projects, and that money could hit the street ASAP once a vote of the people takes place. Governor Dunleavy looks forward to working with the Legislature taking this proposal to a vote of the people following the 2021 legislative session,” Dunleavy spokesman Corey Allen Young said.

Alaska is in its ninth consecutive year of deficit spending, and a 10th is expected next year. Borrowing $354 million would cost about $93 million in net interest, according to an actuarial analysis performed for the Alaska Department of Revenue.

“I think it’s problematic to be borrowing money when we’re already so far in the hole,” Myers said. “Working some of these projects through the federal stimulus gives us an out.”

The long-term cost of the borrowing plan has fueled skepticism, including from Senate President Peter Micciche, R-Soldotna, and Sen. Mike Shower, R-Wasilla.

Under the newest draft of the plan, the state would borrow only $303 million, and the list of projects has changed to exclude airports, which have already received a large amount of federal aid.

“We’re at a very different position financially than when this package was assembled,” Micciche said.

Shower, who represents the state Senate district formerly represented by the governor, used a hockey analogy and said the proposal should be sent to the penalty box.

“Send it off to where penalties go to die,” he said.

Senate Minority Leader Tom Begich, D-Anchorage, said his caucus supports the governor’s proposal but acknowledged that the Senate’s Republican-led majority is “in the driver’s seat” when it comes to advancing or blocking it.

He worries that by emphasizing the federal government’s short-term infusion of cash, the Alaska Legislature will fail to make progress on the state’s ongoing fiscal problems.

He also said it’s not clear whether incoming federal aid can be used for things like school roof repairs, which are listed in the borrowing plan. The U.S. Department of the Treasury has yet to publish rules detailing what the most recent aid package can be used for.

That’s also on the mind of the administration.

“Federal relief is welcomed, but the guidance on what is appropriate for using federal relief funds for capital projects is not firm. Alaskans know what Alaska needs best to fix its roads, ports, and airstrips,” Young said.

For that reason, said Sen. Click Bishop, R-Fairbanks, it’s too early to throw out the governor’s idea.

“You don’t want to shoot it in the head today,” he said.

The governor’s proposal has not yet been considered by the House Finance Committee, but Rep. Bryce Edgmon, I-Dillingham, said he believes support for the idea is “tapering off. I don’t think it’s dead yet. Nothing is on or off the table completely at this point.”

Rep. Steve Thompson, R-Fairbanks and the ranking minority member on the committee, said the 18 Republicans in the House minority do not have a defined position on the proposal, but he believes the idea has some good points. Whether it has enough good points to get through the Legislature is unknown.

“Will it get through? That’s a big question mark right now,” he said.