Anchorage judge sides with the state in college scholarship fund dispute

ANCHORAGE, Alaska (KTUU) - An Anchorage Superior Court judge has sided with the state in a lawsuit brought by four college students who argued it was unconstitutional to drain the state’s scholarship fund.

The Higher Education Investment Fund is over $400 million, and is used to pay scholarships to thousands of Alaska college students each year. It was emptied into the Constitutional Budget Reserve when in 2021 the Alaska Legislature failed to make an annual three-quarter vote, known as a “reverse sweep.”

Superior Court Judge Adolf Zeman upheld the legality of Gov. Mike Dunleavy’s administration draining that fund in a 16-page order issued Thursday, saying that “the HEIF is subject to the CBR sweep.”

The students had argued that the education investment fund should never have been emptied, and that the money in that fund should be considered already designated for a specific use and therefore not available for appropriation. While the case was ongoing, the Legislature filed a brief supporting the college students and arguing that the fund had been established to provide a “durable and reliable” higher education investment.

Prior to the fund’s establishment in 2012, there were concerns about how reliable scholarship funding could be as an annual appropriation, according to the Legislature’s brief.

The state argued, however, that the scholarship fund is like other funds in that the money inside it is available for appropriation. The state’s attorneys argued that it is trumped by the Constitutional Budget Reserve. Alaska has a constitutional provision that any money taken from the reserve has to be paid back unless the Legislature makes a three-quarter vote to stop that from happening before the end of the fiscal year — the reverse sweep vote.

“A fund is susceptible to the sweep and is to be deposited into the CBR if the fund is both: (I) in the general fund; and (2) available for appropriation at the end of each succeeding fiscal year,” Zeman’s ruling reads.

The state argued, and Zeman agreed in his ruling, that the scholarship fund is indeed available for appropriation. Zeman noted in his order that the Legislature has the ability to establish the scholarship fund as a separate fund, outside of the general fund, or to “appropriate money from other sources — for example, a reverse sweep of the CBR — to fund the programs in the future.”

“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,” Attorney General Treg Taylor said in the press release. “This decision provides policymakers with the information they need as they determine budget priorities and make appropriations decisions for the next fiscal year.”

Zeman’s decision can be appealed to the Alaska Supreme Court.

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