Alaska state employees receive layoff notices as Gov. Mike Dunleavy says new state budget is ‘defective’

JUNEAU — About 15,000 Alaska state employees received contractually mandated layoff notices Thursday as Gov. Mike Dunleavy said a budget that passed the House and Senate is “defective” and lacks a key clause. Some members of the state Legislature disagree with the governor’s assessment and say he is holding the budget hostage for a larger permanent Fund dividend.

Thursday’s notices warn of a “potential partial shutdown” of state government on July 1.

The impacts of any shutdown are likely to be significant. State employees will be temporarily laid off, and many services will end, at least temporarily.

“There’s still hope that we can get some things fixed. Unfortunately, by law, layoff notices have to be sent out by 4 p.m. today, and they’ve been sent out notifying folks that have the potential for layoff is real,” Dunleavy said.

According to a list compiled during a 2017 shutdown scare, state ferries will not run and fisheries managers will be unable to supervise Alaska’s multibillion-dollar salmon fishery. Last month, the managers of the $81 billion Alaska Permanent Fund said they will need to put it under passive management because they won’t be able to work.

Jeff Turner, a spokesman for the governor’s office, said the 2017 list is obsolete and that a new list of effects is under development.

Jake Metcalfe, executive director of the state’s largest public-employee union, said he doesn’t know whether critical workers such as police, firefighters or medical personnel will be affected by a shutdown.

“I’ll cross my fingers that we don’t have a shutdown, but I’m not very confident,” he said.

Alaska’s state House and Senate have approved a budget, but members of the House failed to approve what’s known as the “effective date clause.”

Under the Alaska Constitution, bills take effect 90 days after enactment unless two-thirds of the House and two-thirds of the Senate agree on an earlier date. The Senate agreed to start the budget July 1, but in the House, Republican opposition meant the effective date clause failed.

In the 40-member House, 18 seats are held by Republicans who sit in a minority bloc. Two voted for the effective date in a prior vote. At least some of the 16 must change their votes in order to fix the problem.

House Minority Leader Cathy Tilton, R-Wasilla, said Thursday evening that negotiations are still ongoing.

Dunleavy said he hopes lawmakers will resolve the issue before an ongoing special session ends at 11:59 p.m. Friday night, but if they cannot, he will call them into another special session starting Wednesday. Many lawmakers have already left the Capitol, and the start time would allow them to return to Juneau.

Tilton said the governor hasn’t asked the House’s Republican minority to vote for the clause.

“The governor has not asked the minority to vote for the effective date clause. He’s asked for the entire Legislature to bring him an effective date, but he has not asked the minority or told the minority to do anything,” she said.

Rep. Zack Fields, D-Anchorage, said Dunleavy should act.

“There are enough people in Juneau to vote for the effective date clause tomorrow. All the governor has to do is tell his people to vote,” he said.

Sen. Jesse Kiehl, D-Juneau, and the AFL-CIO of Alaska accused Dunleavy of manufacturing a crisis.

This year’s budget includes a smaller Permanent Fund dividend than Dunleavy proposed earlier this year. Minority Republicans have supported that amount. Fields said the governor is attempting to force the state into a government shutdown to get what he wants.

“It’s about holding things hostage for a larger dividend. They’ve already told us that’s what they want,” he said.

Tilton said it’s not that simple. Members of the minority have differing opinions, and they don’t always act as a bloc. Some members want additional action on a proposed long-term change to the dividend formula, while others want to see progress on a tighter state spending cap.

“The dividend is an important piece, but it is not the only piece of the conversation,” she said.

Shortly before the vote in the House, an advocacy group managed by the governor’s office sent an email asking Alaskans to tell their legislators to vote no on the budget. Rep. Kevin McCabe, R-Big Lake, said in a speech before the vote that he had received “hundreds of emails” about the topic.

Anchorage attorney Scott Kendall, former chief of staff to Gov. Bill Walker and a leader of the recall campaign against Dunleavy, said on social media that the advocacy group’s statement — given the failed vote that followed — makes the governor “the arsonist, not the fireman.”

Soon after the email was sent, and before the vote took place, the governor’s office told the Juneau Empire that it had been sent by mistake and did not reflect the governor’s view. Jeff Turner, a spokesman for the governor, reiterated that position on Thursday.

“The governor can’t sign a budget, or any other piece of legislation, that is unconstitutional. His expectation is that the Legislature will pass the effective date clause before July 1 and prevent layoffs and a shutdown,” he said.

Members of the coalition majority that runs the state House say the budget has been written in such a way that it can become effective July 1, even without the effective date clause.

“It’s clear this budget is enough to avoid a shutdown, and it’s hard to comprehend the governor’s decision to ignore more than four decades of legal advice and longstanding precedent,” said Speaker of the House Louise Stutes, R-Kodiak, in a written statement.

The budget includes a section making it retroactive to July 1. Under the legal interpretation offered by the coalition majority, the state can proceed as normal because it will know that when the budget takes effect in September, actions it took before then will be OK.

That approach was used in 1989, when the Legislature failed to approve the effective date clause for a budget bill that contained money needed to deal with the Exxon Valdez oil spill.

The coalition majority offered copies of a Department of Law memo backing the 1989 move as evidence that their approach is legal, but one sentence in that memo says, “Other appropriations that are clearly not supplemental in nature should be implemented with caution before the constitutional effective date arrives.”

Asked about that sentence, Stutes said, “Even if (Dunleavy) were in a gray area, shouldn’t he err on the side of the people of Alaska?”

But the Department of Law has advised Dunleavy that as currently written, the budget isn’t constitutional.

Deputy Attorney General Cori Mills said Thursday that “a retroactivity clause has no effect until the bill becomes law,” which presents a problem for government services between July 1 and September.

Dunleavy is following that interpretation, rather than the one offered by the House.

“We’re hoping that the Legislature can fix some of the problems with the budget. But constitutionally, we cannot ignore ... the effective date,” he said.

Clarification: This article has been updated to add additional context about the 1989 Department of Law memo about the effective date clause.