Dunleavy vetoes millions in programs, but says federal stimulus funds will make up for most cuts

Gov. Mike Dunleavy speaks at a news conference on Wednesday, March 25, 2020. (Office of the Governor)

Gov. Mike Dunleavy announced on Tuesday that he signed the state budget bill, and vetoed specific line items.

And he called on the Legislature to pass additional economic stimulus, saying it’s important to infuse cash into the state’s economy.

“If we don’t do that, because we’ve stopped the economic machine to safeguard our public, we run the risk of really collapsing our economy,” he said.

Dunleavy noted state revenue has been declining, leading to the state drawing down savings. And he talked about the immediate economic consequences from the coronavirus.

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The vetoes include $12.5 million less for the University of Alaska, bringing it to the funding level Dunleavy and university regents announced last year. He also vetoed all of the state support for municipal school bond debt reimbursement, but he said he expects to replace the money with federal support. He said the vast majority of the money he vetoed will be replaced with funding under the federal CARES Act.

“It’s a direct result of this virus and this shutdown,” Dunleavy said of municipalities’ revenue problems from residents losing their jobs.

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The vetoes not covered by the CARES Act funding include a $31 million reduction to Medicaid; $15.5 million to the Alaska Marine Highway System; $4.3 million to pre-kindergarten grants; $1.1 million to state employee travel; and $2.7 million for public broadcasting. The governor also vetoed a $1 billion transfer from the Alaska Permanent Fund’s earnings reserve account to the constitutionally protected principal of the fund.

The budget the Legislature passed was for $5.4 billion, including $680 million for permanent fund dividends of $1,000. That total was slightly less than the amount in 2019’s budget, which included PFDs of roughly $1,600.

RELATED: Alaska Legislature passes budget with $1,000 PFD, no stimulus

Dunleavy repeated his position that Permanent Fund dividends should only be changed with the support of Alaskans.

The signing comes at a difficult time for state finances. On Monday, the Department of Revenue forecast that the state would raise $1.3 billion less this year and next than it expected in December. This is primarily due to the drop in global oil prices, but the COVID-19 pandemic also is also affecting state revenue.

The Legislature sent the budget to Dunleavy earlier than usual this year, as it wrapped up its work early due to the coronavirus. It recessed, rather than adjourned, leaving the door open to it reconvening by May 20, the last day of the session under the state constitution.

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