State workers receive layoff notices as governor calls Legislature’s budget ‘defective’

A white person in a suit speaks from a podium
Gov. Mike Dunleavy at a press conference on June 17, 2021. (Andrew Kitchenman/KTOO)

On Thursday, Gov. Mike Dunleavy announced layoff notices would be sent to state workers. He called the budget passed by the Legislature “defective” since it will not go into effect by July 1.

“Unfortunately by law, layoff notices have to be sent out by 4 p.m. today. And they’ve been sent out notifying folks that the potential for a layoff is real,” he said.

The governor said many functions of state government will shut down. His office said essential public health and public safety employees will continue to work. The administration didn’t immediately announce what programs would be shut down or how many state workers would be laid off, but said it numbers in the thousands.

Dunleavy said the failure of two legislative motions caused the problem. One would have allowed the budget to take effect July 1 — the first day of the new state budget year — and the other would draw funding for budget items from the Constitutional Budget Reserve.

Dunleavy called on legislators to reach a compromise by the end of the special session Friday. If they’re not successful, he said he would call them back into a special session starting Wednesday, June 23.

The effective date clause fell four votes short of the necessary number, which means the law wouldn’t go into effect until September. The CBR vote failed by six votes.

Dunleavy said he hopes legislative leaders listen to all members.

“So it’s my hope and the hope of Alaskans that some of the maneuvers and brinksmanship that crafted this particular budget could be put aside and a budget be crafted that benefits all Alaskans, everyone working together, because we’re running out of time,” he said.

The Department of Law advised the governor state spending under the budget bill cannot be made until the bill goes into effect 90 days after it becomes law. It takes two-thirds of both legislative chambers to agree on an alternative effective date. The Senate passed the July 1 effective date clause, but the motion failed in the House.

The Department of Law said there are exceptions to meet constitutional obligations including maintaining Alaskans’ health and safety, or complying with with federal requirements.

House Speaker Louise Stutes, a Kodiak Republican, said Dunleavy ignored four decades of previous legal advice and long-standing precedent in announcing the shutdown. She said the House majority is ready to reaffirm its votes for the budget “in hopes that the minority will join us.”

She said it could be fixed by Friday. Legislative leaders continued negotiations Thursday after the Governor’s announcement.

Lawmakers who voted against the budget have criticized how the permanent fund dividend is funded. They also want a larger dividend: The budget included a $525 dividend without the CBR draw passing. If it had passed, the dividend would be $1,100. But some legislators support paying a dividend of roughly $3,500, the amount under the formula in a 1982 state law.

Dunleavy has proposed a change to the formula that would lead to a $2,350 dividend, with half of the planned draw coming from the permanent fund’s earnings reserve.

But legislators who worked on the budget are concerned drawing more than planned from the permanent fund’s earnings would start the state down a path of spending down the earnings reserve and would threaten the permanent fund’s future.

This story has been updated to include details about public health and public safety employees continuing to work and reaction from a lawmaker.