State judge backs Dunleavy administration decision that drained special fund for Alaska college scholarships

An Anchorage Superior Court judge on Thursday ruled against a handful of Alaska college students who sued the administration of Gov. Mike Dunleavy, challenging a decision that drained Alaska’s $410 million higher-education investment fund.

The decision from Judge Adolf Zeman, unless reversed on appeal to the Alaska Supreme Court, means the Alaska Performance Scholarship program and WWAMI, the state’s equivalent of medical school, do not have a dedicated funding source and must compete with other programs in the state’s annual budget process.

The scholarship programs remain funded through at least June 30, and state legislators are in charge of setting funding after that date. Dunleavy has requested that the programs stay funded.

“The judge’s decision today cites the plain language of the Alaska Constitution and judicial precedent, and we appreciate the clarity provided by this expedited decision,” said Attorney General Treg Taylor, whose office defended against the lawsuit.

In his order, Zeman said the administration correctly classified the higher-education fund as part of the state’s general fund in 2019. That made it subject to a clause in the Alaska Constitution that requires leftover general fund money to be automatically swept into the Constitutional Budget Reserve, a special savings account.

The Alaska Legislature regularly votes to reverse that sweep, but it failed to do so in 2021 because of opposition by Republican legislators in the state House. That failure, combined with the administration’s classification, drained the fund.

Attorney Scott Kendall, representing the plaintiffs, said they intend to appeal to the Supreme Court.

Zeman noted that this case differs from a 2021 lawsuit in which the Alaska Federation of Natives challenged the draining of the Power Cost Equalization fund, which pays for the state subsidy of rural electrical power.

AFN won that case, in part because the law creating the PCE fund said that it was created outside the general fund. The law creating the higher-education fund specifically says that it is part of the general fund, Zeman said.

He said his decision doesn’t mean that the scholarship programs “become obsolete” with his decision.

“If the Legislature believes these programs should be funded, it possesses the power to establish the (higher education fund) as a separate fund outside the general fund or to appropriate money from other sources ... to fund the programs in the future. However, this is not within the court’s power. The power of appropriation belongs solely to the legislative branch,” he said.