Now that the Legislature adjourned after more or less authorizing CARES Act funding, people are asking, “Where is the money and how is it being distributed?” To answer this question, we first need to understand what happened and what should have happened.
Alaska’s constitution designates the Legislature the sole power to appropriate. To a limited extent, the Legislature can delegate that power, as we did in the budget we passed in late March. First, we said that additional federal funding to existing programs could be received and spent with the approval of the Legislative Budget and Audit Committee (LBAC), just like we do every year. Then, because of the Coronavirus, we also gave the governor power to receive any federal funding for Health or Labor purposes related to the virus response.
Out of the $1.5 billion in CARES Act money Alaska was getting from the federal government, almost $400 million of it was for health programs, so it was already pre-approved. The Governor introduced a package to the LBAC to spend the rest. Eleven separate programs, totaling about $200 million, were, in some way, expanding some other federally funded program in the budget. These are things like airports, school lunches, and homelessness programs, and were approved by the LBAC with just some technical cleanup.
However, it was the other $900 million that was problematic. It wasn’t the programs themselves: there was broad agreement that this money should be used to help municipalities, businesses, and fisheries. But there were no specific programs for these already in the budget, so it simply wasn’t legal for LBAC to approve them.
There was immense pressure and a lot of anger directed at the committee because of the need to get the money out as quickly as possible to Alaskans who were hurting. As chair, I was obligated to rule the packet out of order because there were severe legal and constitutional issues that left the money vulnerable to being held up even longer, but I was outvoted by the committee. Within a couple of days, the action was challenged by a lawsuit.
The right thing to do would have been to come back to Juneau when the Governor introduced the package in April and pass legislation to describe the emergency programs and appropriate the money.
In the end, the Legislature had to come to Juneau anyway to try and make the committee action legal. By then, it was three days from the end of the session, and there was no time to do it right. The “ratification” action we took was not a true appropriation, and we still don’t know if the court will find it legal. If future federal money becomes available, this may compound the problem. But for now, the funding is allowed to go forward, although there remain problems with the programs that could have been fixed in the legislative process.
The community distribution funding formula was strangely put together, and kind of arbitrary. Half of it was mostly based on the state’s existing revenue sharing program, except for how unincorporated communities were treated and that all the money goes out in a single year. The other half was based on how much tax revenue (other than property taxes) a community may lose. The problem is, the U.S. Treasury said this money could not be used to replace lost tax revenue. If the funds are misused, the feds can ask for their money back. The Dunleavy administration reacted to this by requiring individual cities to take on the risk, hoping they will be responsible for paying it back if anything goes wrong.
I’m especially concerned about the small business program. Based on input, the administration changed its proposal from a loan program to a grant program. Then they unsuccessfully tried to change the rules to expand eligibility to companies who have already received prior federal funding (like PPP and disaster loans). Not including them is unfair. Businesses would have held off for the more generous assistance had they known it would become available.
At this moment, if a business received $1 in federal relief, they would be denied the possible $100,000 they could collect under the new state program. However, the administration wrote the exemption into the program, which the LBAC couldn’t amend, nor could the Legislature during the ratification process. That’s why the program didn’t begin accepting applications until Monday. If they still want to make this change, the administration will likely have to go back to the Legislature.
Honestly, it would have been easier to just do it right the first time.
Please be safe,