Senators grilled officials from the administration of Gov. Mike Dunleavy Monday, February 18, regarding what are likely to be his least popular budget cuts- cuts to K-12 education.
“Education, I think, is one of the key components in the State’s budget that everyone says they support,” Sen. Lyman Hoffman (D-Bethel) noted in a Senate Finance hearing Monday.
Indeed, an unscientific online poll conducted by the Senate Majority, of which Hoffman is a member, shows 51 percent of respondents feel education funding is too low. An additional 12 percent say it is “about right.”
Yet Dunleavy proposed a $269 million cut to the K-12 foundation formula in the FY 2020 budget he released last week.
“Is this normal? Abnormal?” Senate Finance Co-chair Bert Stedman (R-Sitka) asked for the benefit of the public.
“I certainly couldn’t call reductions of this magnitude ‘normal,’” responded Department of Education and Early Development (DEED) Commissioner Michael Johnson. “Our state’s in a tough spot.”
Other education cuts include all pre-K funding and the $30 million in grants approved by the legislature last year.
“In a way, the charade’s over,” Senate Minority Leader Tom Begich (D-Anchorage) said in a press conference. “We can see what the governor had intended to do. We can see the vision that he hinted at but did not give details to when he was running for office.”
Cuts to DEED total $309 million in unrestricted general funds (UGF). That is more than 23 percent of DEED’s budget.
“From my viewpoint, I find that completely unacceptable,” Hoffman reacted. “How does this administration justify just about a 25 percent reduction in education? What are we trying to accomplish, other than it’s a budget issue, and we need to balance our checkbook?”
“The State is out of money and we need to balance our budget,” responded Office of Management and Budget (OMB) Director Donna Arduin. “We’re proposing this so that we can get our budget balanced and our fiscal house in order.”
“It’s all about the checkbook,” Hoffman concluded. “It can’t be only about the checkbook; it has to be about our obligations to educate students.”
“How is the magnitude of this cut to education going to improve outcomes in Alaska for students?” asked Sen. Click Bishop (R-Fairbanks).
When Arduin responded by only mentioning the impact on the budget, Bishop told her, “With all due respect, ma’am, that’s the wrong answer.”
Sen. von Imhof: Budget “Seems to Be Cuts and Nothing More”
Senate Finance Co-chair Natasha von Imhof (R-Anchorage) noted that school districts’ health care costs grew nearly 100 percent in a decade, despite student counts remaining flat.
“Rather than just making a big across-the-board cut and saying, ‘All 53 districts, you’re on your own. Good luck,’ maybe a better approach might have been, ‘Let us help you with your highest cost driver and see if we can, as a state, come up with a solution that makes sense that helps everybody.’ I’m not really hearing that, and I think that’s a problem,” von Imhof said.
“We don’t control school districts, and we don’t control how they spend their money,” Arduin responded.
“There just seems to be cuts and nothing more,” von Imhof said of the budget. “Was there any evaluation of the impact of these cuts [and] any attempt to mitigate them?”
Arduin told her that OMB and DEED are still at the beginning of the process.
“I would say that the proposed budget that we are looking at here today is being received with less than enthusiasm by this committee,” said Hoffman. “I don’t see the thought going into this budget of what are our alternatives.”
Using an analogy, Bishop told Arduin, “You’re a client coming in to the banker. We’re the bankers, and you haven’t made a very good case why I should loan you some money.”
Sen. Peter Micciche (R-Soldotna) said there used to be plenty of teachers interested in working in Alaska.
“Now at the job fairs for teachers, they have more people at tables trying to hire teachers than the teachers that show up for jobs. There are crickets,” Micciche told Johnson. “You can’t fill the positions that you have open today. Most of it’s due to uncertainty. When we support policies such as an oil and gas [tax] to provide certainty so that we increase investment in our state, yet we make our education funding so uncertain, is this going to make it easier to fill the jobs that are available or more difficult?”
“I have no easy answers. Budget cuts are going to be difficult,” replied a visibly uncomfortable Johnson. “I can’t sit here and tell you that any of this will be easy. It will be tough.”
Bishop said he’s receiving concerned phone calls about the budget from businesses.
“How does this budget proposal grow Alaska’s economy?” he asked.
Arduin repeated a claim that the State’s spending has held back the private economy.
There is no evidence to support that claim. In fact, research has shown that this budget would cost over 10,000 public and private sector jobs, only about half of which would be offset with the $3,000 Permanent Fund dividend (PFD).
“You can’t govern a state by throwing out types of economic theories and not understand the real world implications of those theories to people,” Begich told reporters later.
During the hearing, von Imhof noted the $3,000 PFD would cost the State an amount equivalent to 15 of its 18 departments.
“The governor ran on a campaign to pay a full dividend this year. Without an income tax, really the only way to do it is to cut the budget,” she told those in the audience. “The public has a choice. This is what a budget looks like to pay a full dividend. How does it sit with you?”
Sen. Wielechowski: Budget Coming Close to Violating Constitution
Dunleavy’s proposed cuts would the reduce the Base Student Allocation (BSA) from $5,930 per Alaska student to $4,880, according to testimony from Heidi Teshner, OMB’s administrative service director for DEED.
“Have we ever lowered the Base Student Allocation before?” Stedman asked.
Teshner said there is no record of the BSA previously being lowered.
Article VII, Section 1 of the Alaska Constitution requires the State to “establish and maintain a system of public schools open to all children of the State[.]”
The State has been sued multiple times by plaintiffs claiming the State failed to provide an adequate education.
In Moore v State, the Alaska Superior Court established a four-part test of adequacy: rational education standards; an adequate method of assessing whether children are meeting those standards; adequate oversight of school districts; and adequate funding.
“We’re coming, I think, perilously close to violating our constitutional obligation to adequately provide for a public education system in the state of Alaska if this budget passes,” Sen. Bill Wielechowski (D-Anchorage) told reporters.
During the hearing, Wielechowski asked Johnson if anyone at the Department of Law had expressed concern over the constitutionality of the budget, to which Johnson replied he had not been contacted.
“Is it your position that schools across Alaska will be adequately funded if we pass this budget, or do you believe that local communities will be required to add additional funds to adequately fund education?” Wielechowski pressed.
“We have answered the question from the senator about adequate education funding. He’s asking us for a legal term,” Arduin protested to Stedman, who was chairing the meeting.
Wielechowski cited AS 14.07.150, which makes the DEED commissioner responsible “for the preparation and execution of a budget[.]”
“It’s your statutory obligation to prepare a budget that meets our constitutional obligation, so I’m a little surprised that you’re unable to sit here and say that you have met that obligation, that this adequately funds education,” he told Johnson.
Wielechowski noted the $16.8 million cut to pre-K, which eliminates all funding for pre-K grants, Parents as Teachers, and Head Start.
“Study after study has shown that pre-K programs have worked to get especially students in rural Alaska that are somewhat lagging behind into a position where they can go ahead and keep up with people throughout the state,” Sen. Donny Olson (D-Golovin) observed.
“Pre-K was one of the required items as part of the Moore v State settlement agreement a number of years ago to improve outcomes in the poorest-performing districts in the state. It has improved outcomes in those districts. By completely eliminating pre-K, you are very likely putting the State in jeopardy of violating the constitution, our constitutional obligation to provide for an adequate public school system,” Wielechowski said during the press conference.
“Do you believe that cutting pre-K funding will improve or decrease outcomes in the poorest-performing districts in the state of Alaska?” Wielechowski asked Johnson.
“This is an OMB budget presentation,” Arduin interjected after Johnson hedged. “Those things are for another committee another day.”
AS 14.07.150 also requires the State Board of Education to approve the DEED budget. However, last week, the Board tabled a motion to approve the budget pending action by the legislature, Johnson reported.
“They can’t just duck the hard decisions,” Wielechowski told reporters. “That’s not how the statute works.”
Wielechowski noted that the BSA is also set in statute, yet Dunleavy has proposed to underfund it.
“We should follow the statutes that we have on the books,” Wielechowski declared.
Sen. Stedman Appeals to Johnson’s Experience as Superintendent
During the hearing, Hoffman drew a comparison between the PFD, which Dunleavy has said is a statutory obligation, and a variety of other laws he proposes to change. The result would be a $420 million shift in tax revenue from local governments to the State.
“The problem is this administration is proposing somewhere around 20 pieces of legislation to change the law,” Hoffman said of Dunleavy. “I’m finding it hard to fathom that he plans to pick and choose which laws are on the books and which ones he will enforce and which ones won’t he. To me, that’s a very large inconsistency.”
Arduin told Hoffman that the appropriations in the budget are subject to legislative approval. Dunleavy is trying to submit bills that would permanently match the moves in the budget, she said.
“I understand the political process and how laws are made and not made. I’ve been at this table for 20 years, Ms. Arduin, so I don’t need schooling on that subject,” Hoffman snapped.
Hoffman was one of several senators who sought clarity on Dunleavy’s intentions should the legislature not approve his budget moves. They emphasized the impact on local communities.
“We’re seeing kind of a theme of shifting costs to local governments, which means local property taxes, local sales taxes will be going up to meet this difference. Ms. Arduin… I don’t know if you understand that there’s a connection here when you remove $300 million, because of federal law, the fund to the cap locally is lowered, as well, so it exacerbates the problem. The locals can’t respond with higher funding,” Micciche explained of the education formula. “You’re actually talking about thousands of local positions that the local districts can’t match because if they fund to the cap, they’re still put at the same cap because of the trickle-down from the funding formula.”
Micciche estimated that the cuts would result in 40-44 kids per classroom.
“Can we adequately deliver an adequate educational product with 44 kids per classroom?” he asked.
Johnson replied that student/teacher ratios would vary.
“Any reduction in funding is going to be difficult for everyone,” Johnson said. “I can’t anticipate how each district, how each classroom would respond if these reductions are passed.”
Teshner testified that the Anchorage School District would see an $85.7 million cut if the budget passed.
“How are they going to be able to wrap their heads around this? It’s an impossible question,” said an exasperated Hoffman. “This is an impossible task.”
Stedman appealed to Johnson’s history as the superintendent for the Copper River School District, which is facing a $1.3 million cut to its $6.8 million budget. How will this impact the district, Stedman asked.
“Clearly, Commissioner Johnson, you’ve got the history as a principal,” he said. “Educate us.”
As superintendent, “There was never a cut that I found that everybody supported,” Johnson replied simply.
Johnson added that to secure the best teachers, districts prefer to have their budgets done sooner, rather than later.
Stedman estimates the State budget won’t be completed until mid-May, after many school districts have typically finished their budgeting.
Searching for laxity in school district budgets, Sen. David Wilson (R-Wasilla) asked Johnson about “fleets of planes” that school districts own and districts that offer full-time benefits to part-time volunteers.
Johnson replied that he’s not aware of the latter, and there is only one school district that owns aircraft. It is a single plane.
Sen. Micciche: Administration’s Claim That Budget Doesn’t Raise Taxes “Not a Fact”
Dunleavy has proposed a repeal of local petroleum property tax credits. In FY 2018, local governments brought in $440 million in those taxes. The North Slope Borough’s share was $372 million.
If SB 57 passes, all that revenue accrues to the State.
“I’d like to say I’m happy to be here today to present to you, but it wouldn’t exactly be true,” OMB Policy Director Mike Barnhill said while introducing the proposal.
“It is a significant part of the governor’s budget,” Barnhill said of the petroleum property taxes.
“A cut of that magnitude is something that would be so debilitating to essentially the breadbasket of the state of Alaska that it would be crippling for years to come,” Olson told reporters.
“How did you notify the business leaders and North Slope Borough? Did they read about it in the paper? Did you give them a courtesy call a day ahead of time? Did you discuss it a week to two weeks prior?” von Imhof asked Arduin.
Arduin said the North Slope Borough saw the budget the same time everyone else did, when it was released last Wednesday.
Dunleavy has also introduced a bill repealing the fisheries business tax and the fisheries resource landing tax, which Stedman explained are designed to support local fishing infrastructure. SB 63 would cost communities $28 million, hitting Unalaska hardest.
“With a deficit of the size that we have, there’s literally no plan that we can put before this committee some element of which somebody won’t hate,” explained Barnhill. “If there’s some element of this budget you hate, then, unfortunately, it has be replaced by something else.”
But the budget bill (SSSB 20) includes $254 million for oil tax credits, $84 million of which would be paid for the current fiscal year.
Wielechowski noted that is a discretionary payment in statute.
“The oil companies don’t see anything in here to go ahead and hate,” Olson told Barnhill. “They, in fact, probably embrace this budget because they are left harmless. Because of that, I find it somewhat disingenuous that the administration would go ahead and try and present this before us without looking at… another avenue, and that’s revenues.”
“The governor’s been very clear that he is not contemplating raising taxes to fix our budget problems,” Arduin jumped in.
“That’s debatable,” responded Bishop.
“We continue to talk about this approach that was not going to be raising taxes on Alaskans, which is not a fact. It’s an approach that doesn’t change the State tax rate, but dramatically changes the local tax rate,” Micciche argued.
Micciche serves as vice-chair of the Kenai Peninsula Borough (KPB) Local Emergency Planning Committee and president of the Cook Inlet Harbor Safety Committee Managing Board.
Micciche noted that the Coast Guard has requirements of coastal communities that deal with oil export. He asked Arduin if Dunleavy is proposing that KPB raise local taxes to meet those federal requirements that support State oil revenue, or whether KPB should bill the State for its efforts.
After a pause, Arduin said she would come back with a response.
“In the testimony in the Finance Committee, I’ve been shocked by the OMB Director’s responses to legitimate questions from members who have sat at that table for up to 20 years… where she has indicated she did not even consider the implications to local communities, the passing on these taxes, essentially,” Begich said later. “For a governor who says he doesn’t support taxes, his goal seems to be to push those taxes down to the local level and to charge people those taxes anyway. At the same time… he is raising the amount that we pay to the oil industry in this process. How is that even remotely fair in the minds of the average Alaskan?”
“Most people don’t take it seriously down here,” Begich said of the budget. “If you love this budget, you can’t possibly like Alaska.”
The school bond debt reimbursement program is under a moratorium for new projects until FY 2021, but has not been fully repealed.
Dunleavy is proposing to share a portion of the State’s alcohol tax revenue with communities as part of their community assistance payments. SB 62 would cost the State roughly $20 million.
Senate Finance will continue looking at department budgets throughout the week. Next up, after finishing Dunleavy’s other administrative proposals, are the University of Alaska, the Department of Military and Veterans’ Affairs, the Judiciary, and the Department of Transportation & Public Facilities (DOT).
Stedman expects the University and DOT presentations to be lengthy.
UA is facing a $134 million cut, while a $98 million cut to the Alaska Marine Highway System (AMHS) would all but end State-run ferries.
This article brought to you by Jimmy Cliff’s “Sufferin’ in the Land.”