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Alaska lawmakers ask if federal COVID-19 aid can cover governor’s big budget vetoes

 Gov. Mike Dunleavy announcing his vetoes to the FY21 budget. (04/07/20)
Gov. Mike Dunleavy announcing his vetoes to the FY21 budget. (04/07/20) (KTUU)
Published: Apr. 15, 2020 at 1:10 PM AKDT
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Is the governor right that funding from a federal coronavirus relief package can be used to compensate for vetoes he made to the budget for the upcoming fiscal year? That’s a question some state lawmakers are asking and a House Finance Committee hearing held Wednesday tried to investigate.

Pat Pitney, the head of the Legislative Finance Division, said the State of Alaska is set to receive $1.25 billion from

before April 24.

How exactly that $1.25 billion can be spent remains unclear. If the federal funding is spent incorrectly, the State of Alaska could be on the hook to pay the feds back.

On April 7, the governor announced that he was vetoing

for the upcoming fiscal year. He said “the majority of larger items” he vetoed would be then covered by funding from the CARES Act.

Some of the vetoed funding items the governor hoped to compensate include $30 million for schools and $30 million in direct community assistance.

Using an example of paying municipal governments for school construction costs, the governor said that $100 million would help cover a shrinking local tax base due to COVID-19. “Once again, that’s our interpretation when we look at the bill that has passed that we can do that,” the governor said referring to the CARES Act.

According to Gov. Dunleavy, his office has received advice from the Alaska attorney general and federal officials that CARES Act funding can be used in that way. The Alaska Department of Law will not share that guidance, saying it’s protected by attorney client privilege. The governor’s office also refused to share the advice, also saying it’s protected.

The governor's did release a statement on Wednesday regarding the CARES Act funding:

"Governor Dunleavy fully intends to use CARES Act funds to meet the needs of all Alaskans. The intention would be to utilize these funds to address the needs of municipalities, individuals, businesses, non-profits, health care systems and any unanticipated impacts stemming from the COVID-19 pandemic. Governors from all 50 states anticipate guidance from the U.S. Department of the Treasury in the days ahead on how the funds can be used to assist the residents of their states."

Senate Democrats sent a letter to the governor on April 14 asking to see the guidance from Alaska Attorney General Kevin Clarkson provided to the Dunleavy administration.

“If your interpretation of the CARES Act is misguided, items critical to the necessary, healthy functioning of our state and of our local communities may be left without funding during FY21,” the letter from Senate Democrats reads. “Or, if the state unlawfully uses the funds, Alaska will have to pay back the federal government.”

Attorneys for the Legislature have questioned the governor’s actions. Megan Wallace, the director of legal services, said there are doubts that federal coronavirus funding can be used to pay for costs unrelated to COVID-19.

Wallace says under her interpretation of the Alaska Constitution that lawmakers need to be part of the process in how CARES Act funding is spent. “Before the CARES Act funds can be expended they must be appropriated,” she told the House Finance Committee.

The three options to move forward legally, according to Wallace, include lawmakers reconvening to appropriate the funds, the Dunleavy administration seeking legislative approval before the funds are spent, or the administration finding areas where they can spend the money on specific projects within existing bills.

Members of the Senate majority are seeking further clarification from the feds.

On April 9, Sen. Cathy Giessel, R-Anchorage, and Sen. Natasha von Imhof, R-Anchorage, sent a letter to the U.S. Treasury Department, seeking to learn more.

“Governors nationwide are getting substantial amounts of money across the country,” the letter from the two state senators reads. “We, the below signatories, are looking for Department of Treasury legal guidance as to what the money cannot be used for. What are the restrictions?”

Federal lawmakers are also seeking guidance from the U.S. Treasury Department.

On April 7, Alaska Republican Sens. Lisa Murkowski and Dan Sullivan sent a letter with 12 other senators to Treasury Secretary Steve Mnuchin, asking for clarification on how spending can be used by governors and local governments. “While the attention is often on Washington, they are the ones on the front line,” the letter reads.

Things may soon be clearer for everyone. Pitney said state officials expect to receive additional guidance from the feds “any day.”

Under the CARES Act, it could ultimately be the Inspector General of the Treasury Department who decides whether the governor is right to rely on federal funds to fill state budget gaps. Any misuse of funding may need to be paid back by the State of Alaska, according to the federal legislation.

The Legislature’s attorneys say a trip to the courts may also be necessary.

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