State Government

Gov. Mike Dunleavy vetoed a bill Monday that would substantially boost long-term education funding. House Bill 57 would have increased the base of Alaska’s public school funding formula, the base student allocation, by $700, increased student transportation funding and made several policy reforms.

“There is no evidence that a permanent increase in the Base Student Allocation will improve educational outcomes,” Dunleavy wrote in his veto message to legislative leaders. “Therefore, this bill in its current form does not serve the best interest of Alaskans.”

Parents, school leaders, local elected officials and business leaders have long said that the state’s public school system is in crisis after years of flat long-term funding in the face of inflation.

Some legislators said Monday that they’re hopeful they can override Dunleavy’s veto. A vote is scheduled for Tuesday morning.

“Our schools need relief. They need it soon. Many of them are right on the cusp of, basically, insolvency,” House Speaker Bryce Edgmon, I-Dillingham, said.

In recent years, lawmakers have provided one-time funding boosts for schools but have failed to come to terms with Dunleavy on a long-term increase.

In an effort to find compromise, lawmakers included several reforms in the bill — a ban on student cellphone use, targets for the maximum number of students in each classroom, and a variety of reforms aimed at making it easier to create and maintain charter schools, a key priority for the governor.

“It’s really a shame, because I think, in many ways, we gave the governor many wins on education,” Senate President Gary Stevens, R-Kodiak, said. “A lot of the things that he wanted are in there.”

But in the end, Dunleavy said it was not enough.

“We all agree that our schools need some funding. It did not contain the other half, as we say, of the coin,” Dunleavy said in a video posted to social media. “We worked hard on trying to get policies in there that we believe would help kids, would help families, and would help teachers.”

The veto was not unexpected. Earlier this month, Dunleavy told school superintendents he planned to veto the bill unless lawmakers passed additional bills with more of his priorities.

In the video, Dunleavy objected to a few omissions. He said he wanted lawmakers to implement a statewide open enrollment system, which would allow students living in one district to enroll in another.

Lawmakers said the system the governor envisioned would make it difficult for some families, especially military families who move to Alaska midyear, to enroll in the school closest to their home. The bill would have required a legislative task force to study the issue.

Dunleavy also said the bill didn’t do enough to improve student reading performance.

The bill lawmakers sent to Dunleavy sought to create a reading proficiency incentive grant program for school districts — for each student in grades K-6 who read at grade level or demonstrated improvement, districts would get $450.

But, with the state facing a budget crunch because of low oil prices, lawmakers sought to fund the grant program with an expansion of corporate income taxes aimed at capturing more revenue from out-of-state companies who do business in Alaska over the internet. Additional revenue from the tax bill was planned to bolster career and technical education.

But Dunleavy said he opposes new taxes without a comprehensive fiscal plan, which has eluded lawmakers for years. Dunleavy said lawmakers’ decision to tie the reading and tax proposals together was a sign legislators didn’t see the reading program as a priority.

“There was a game played with the tax, is what’s happening here,” he said at a news conference.

Dunleavy also sought additional changes to charter school policies in an effort to improve student achievement, though lawmakers said Dunleavy’s proposals could intrude on the authority of local school boards.

“We couldn’t get agreement on those policies. So in essence, in the end, this became a spending bill that we believe we could have done a lot better with,” Dunleavy said.

But underfunding schools has its own consequences, said Rep. Chuck Kopp, R-Anchorage and the House majority leader.

“Starving our schools also will not produce increased educational outcomes,” he said.

It’s the second year in a row Dunleavy has vetoed a compromise package aimed at boosting funding for public schools. Last year, lawmakers fell one vote short of overriding his veto.

Dunleavy also vetoed a larger standalone funding boost earlier this year that did not include policy reforms. Lawmakers failed to override him by a wide margin.

An override vote on the newly vetoed bill is scheduled for 9 a.m. Tuesday, and lawmakers have said they’re optimistic it could garner the two-thirds majority necessary. Thirteen minority Republicans joined the bipartisan majority caucuses to approve the bill by a combined vote of 48-11, and five would need to favor an override for it to succeed.

It’s unclear whether lawmakers have the votes. But Rep. Justin Ruffridge, R-Soldotna, said he planned to vote to override Dunleavy.

“I think people have been hearing from their constituents over and over and over again that education funding and outcomes are important to them. It’s their No. 1 priority. It’s why many of us are here,” he said.

But in a reversal, Rep. Sarah Vance, R-Homer, said she would vote to sustain the veto. Shortly after the bill passed, Vance said she was willing to override the governor, but she said Monday she had reconsidered.

“I changed my mind,” she said, because “the majority was absolutely unwilling to give him a couple of more of his policy asks.”

But even if an override succeeds, Dunleavy could still veto education funding from the state budget, which would require a three-quarters majority to reverse.

Lawmakers must adjourn their regular session by midnight Wednesday, though legislators say they’re optimistic they may finish their work Tuesday night.

This year’s Permanent Fund dividend will be $1,000, according to a final draft state budget approved Sunday afternoon by six House and Senate negotiators.

The dividend was among the biggest items in a $5.9 billion document that will fund state services from July 1 this year through June 30 next year.

The draft approved Sunday is scheduled for a final vote as soon as Tuesday in the House and Senate and will advance after that to Gov. Mike Dunleavy, who may reduce or eliminate individual line items. He may not increase a line item.

The Legislature’s regular session reaches its constitutional limit on Wednesday.

The latest forecast from the Alaska Department of Revenue expects significantly lower oil and gas revenue over the next year, and lawmakers significantly cut services and programs during the budget drafting process.

Unlike in previous years, the amount of the Permanent Fund dividend was not a contentious issue for budget negotiators at the end of the legislative session.

Rep. DeLena Johnson, R-Palmer, said on Sunday that lawmakers had already argued the issue earlier in the session, and even though she unsuccessfully voted for a $1,400 dividend on Sunday, she knew the $1,000 figure would be final.

“From my perspective, I already knew what this number was going to be,” she said.

Compressing the dividend is the state’s precarious budget situation.

In December, Dunleavy handed lawmakers a budget draft with a $2.1 billion deficit and a $3,900 dividend; the budget will leave the Capitol with a surplus of about $55 million. Legislators expect that surplus will evaporate in the coming months — oil prices are running below the Department of Revenue forecast, and Republican members of Congress are planning to reduce the amount the federal government pays for major programs, including food stamps and disaster relief.

The Senate approved a budget draft with deeper cuts than the final document, but during the compromise process, lawmakers added individual line items preferred by the House, which proposed higher levels of spending and a draw from the Constitutional Budget Reserve, the state’s main savings account, to pay for that spending.

The final version of the budget eliminates that draw from savings, except as needed to cover a deficit remaining in the current fiscal year.

That will put pressure on members of the House’s 19-person Republican minority caucus, who previously voted against drawing from the CBR. Thirty votes are needed in the 40-person House to spend from the CBR.

The final version of the budget includes an additional $13.7 million for child care programs, $5.7 million more for infant early learning programs and 15 new full-time positions to help process public assistance applications.

The conference committee, in charge of negotiating the compromise budget, also approved a House proposal to increase funding for behavioral health services used by mentally ill homeless people by $13.75 million.

“The Alaska Behavioral Health Association made a strong case that they need that,” said Rep. Andy Josephson, D-Anchorage and chair of the conference committee.

In future years, the state will try to obtain behavioral health funding through federal Medicaid grants.

A $1 million grant to food banks — proposed by the House — was rejected in the final version of the budget, as was funding for public radio.

There will be no new troopers for the Matanuska-Susitna Borough; the committee voted 4-2 to eliminate a section of the House budget that would have re-established the trooper post in Talkeetna. Sen. James Kaufman, R-Anchorage, and Johnson voted in favor of the addition.

Sen. Lyman Hoffman, D-Bethel and a vote against the addition, said that the reopened trooper post was suggested by Gov. Mike Dunleavy who withdrew that proposal — and all of his other proposed budget increases — before the conference committee met.

Johnson said the failure to include the troopers, who could be used to curtail the Railbelt drug trade, was “probably one of the bigger disappointments for me in there.”

The final version of the budget also eliminates a paragraph that sought to restrict gender dysphoria treatment, the kind used by transgender Alaskans. That paragraph was inserted by the House in its budget draft, but the Senate didn’t include it.

Conversely, a paragraph limiting abortion care, adopted by the Senate but rejected by the House, was included in the final budget draft.

That paragraph has been repeatedly challenged in court, and the effect of including it in the budget is a small cut to Medicaid funding.

Josephson said the result of the two decisions is a return to the status quo — the Legislature has included the anti-abortion language in its budget for years, and the anti-transgender language was new this year.

The Alaska Department of Education and Early Development failed a test that allows it to include millions of federal dollars toward its contribution to education funding. 

Alaska receives millions of dollars in education funding each year called federal impact aid. That money makes up lost revenue for regions with land that can’t be taxed like federal and Alaska Native owned land. The state can put that money toward its own obligation to school districts in those regions – as long as there isn’t too big of a gap, or disparity, in funding between the most and least funded school districts.

In a Friday letter to state Education Commissioner Deena Bishop, the U.S. Department of Education said the state failed the disparity test. That means what’s usually tens of millions of dollars in federal aid won’t count toward the state’s education contribution for the next fiscal year. 

The state failed the test because the gap between the most and least funded school districts it compared was too wide.

The state failed the test before in 2021, but successfully appealed the decision. It received an exemption to leave out state funding for student transportation — a change that allowed it to pass the disparity test.

The letter also says the state can request a hearing with the federal department if it will be negatively impacted by the test result.

Bishop said in a Friday email to KTOO the state is considering its options moving forward.

This comes as the state’s education department is pursuing a regulation change intended to keep it from failing the disparity test. The regulation would further limit how much funding local governments can contribute to school districts. But it’s unclear if local contributions were a factor in the education department’s most recent failure.

The state has 60 days to request a hearing.

The money local governments spend on their school districts falls in an interesting spot in the maelstrom of Alaska education funding. Under state law, municipalities are limited in how much money they can give school districts annually. It’s called a local contribution.

In Juneau, the local contribution makes up close to half of the school district’s operating budget. Municipalities can also fund specific, non-instructional services outside of the operating budget – and that doesn’t count towards the limit, or “cap.”

“We’re talking about things like extracurricular sports and activities, community schools programs, after school programs, student nutrition, student transportation and pre-K and early education programs,” Juneau School District Superintendent Frank Hauser said at a recent House Education Committee meeting.

He said districts like his stand to lose millions of dollars in local funding if a proposed regulation change from the Department of Education and Early Development, or DEED, goes through. It would further limit the money local governments can give to school districts. 

Last month, Rep. Andi Story, D-Juneau, introduced House Bill 212. It would allow local funding for those non-instructional services to continue as it has – outside of the local contribution limit.

A letter from DEED says the state needs to crack down on local spending because it doesn’t want to lose access to millions of federal dollars called federal impact aid.

The state gets to put that money towards its obligation to schools. The money counts toward its contribution as long as the state can prove that it’s funding education equitably between districts. State officials are worried that the federal government may start looking more closely at the local money that goes beyond the limit when it’s deciding if things are equitable. 

The federal government hasn’t done that yet, but the state’s gone after the Juneau School District over local contributions in the past.

DEED Commissioner Deena Bishop said her agency is trying to make the change before anything happens.

“The initiative to pursue regulatory clarification is solely on DEED driven by our obligation to ensure compliance with federal law and Alaska law, which includes impact aid as a critical component of the state’s school funding framework,” Bishop said.

Using federal money to reduce state spending

Alaska receives the federal aid to make up for money lost from land that can’t be taxed, like Alaska Native-owned land or military land. That’s the money the state can use toward funding districts if it’s fair by federal standards. 

There’s more than $80.8 million at stake this year.

That money is what the state contributes to districts that qualify for the aid, but that’s only if it passes the disparity test. 

Alaska is the only remaining state in the country that uses the disparity test. It looks at how much school districts spend per student and takes out the top and bottom 5% of districts, and then sees how big a difference in spending there is between districts. The state passes if there is less than a 25% difference in spending between the remaining districts.

Federal regulation says the disparity test uses current expenditures in the calculations. That’s money that goes toward providing free public education.

This includes “administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities.”

Right now, the limited local contributions are counted in the calculations, but not the additional non-instructional spending. Still, Hauser said during his testimony that analysis from the Alaska Council of School Administrators showed that the regulation wouldn’t make a significant difference — including those non-instructional funds is unlikely to influence the results of the disparity test.

Alaska doesn’t need to include state transportation funding in the disparity test after initially failing and then receiving an exemption in fiscal year 2022.

Creating “clear definitions” with House Bill 212

The bill that Story proposed would make it state law that local funding for non-instructional services doesn’t count when the state calculates local contributions to school districts.

Time is running out for the bill to become law this year, but lawmakers could take it up again next year. In addition to passing out of two committees and the House, it still needs to make its way through the Alaska Senate.

But Story said districts have a lot to lose if DEED approves the regulation change between sessions.

“My hope with this bill is again drawing awareness to the issues, trying to make sure we have clear definitions, obviously, hoping it moves along the process,” she said. “And I think it will be a – very much a loss to services and educational opportunities to children across the state if the regulation goes into effect.”

Hauser said in an April interview with KTOO that school districts will have difficult decisions to make if DEED’s regulation change goes through.

“Are we going to provide extracurricular activities, or are we going to have another two or three teachers in the classroom to reduce the class sizes?” Hauser said. “So those are the decisions that boards have to make. How to make up for those funds that really are for non-instructional purposes.”

An administrative order from Gov. Mike Dunleavy froze any new state regulations coming forward. But Bishop said during a Senate Education Committee meeting Wednesday the department will request an exemption with an aim to put the regulation up for public comment at the July state Board of Education meeting.

If approved, it would go into effect for fiscal year 2027 beginning next July.

Lawmakers rejected two of Gov. Mike Dunleavy’s nominees for state boards and commissions in a joint session of the state House and Senate on Wednesday.

One of Dunleavy’s nominees for the State Medical Board, physician assistant Sam Smith, was rejected in a remarkable unanimous vote. Several lawmakers said they’d never seen a nominee rejected on a 0-60 vote.

The State Medical Board writes regulations for medical providers in the state, handles licensing and serves as a disciplinary body for providers who violate licensing laws.

Rep. Genevieve Mina, D-Anchorage, and chair of the House Health and Social Services Committee, said lawmakers across the political spectrum were unimpressed during Smith’s confirmation hearings earlier this year.

“I think as a body, we all collectively agreed that we want someone who knows the state’s issues, and even if they don’t have the breadth of experience, show a willingness to learn,” Mina said shortly after the vote. “Unfortunately, that open-mindedness was not reflected in the hearings of her appointment in the Senate and in the House.”

Smith said by text message she was unavailable to discuss the rejection Wednesday afternoon, saying she was busy working with patients.

At a confirmation hearing this spring, Smith said she had heard the state’s medical care was “subpar,” which led her to move to the state after graduating from school in 2019 and later apply to join the medical board.

“Seeing the malpractice that occurs, and seeing the misjustice of patients, and them simply not knowing what their medical rights are, I couldn’t sit by in the wings anymore and just kind of treat quietly,” she told the House Health and Social Services Committee during a March 25 hearing.

Dunleavy appointed Smith in early March. His office did not respond to a request for comment.

The board of the Alaska Academy of Physician Assistants, a professional organization for PAs, unanimously urged state lawmakers to reject Smith’s nomination. The group sent lawmakers a letter with a number of objections to Smith’s appointment to the one seat on the medical board reserved for physician assistants.

“While we recognize PA Smith’s enthusiasm and dedication, we believe she does not possess the breadth of experience nor the objectivity required for this critical role,” the letter said.

The group cited Smith’s limited experience with rural Alaska, her niche specialty of regenerative medicine and what they described as “unwillingness to collaborate” with other Alaska physician assistants. The group also said it was concerned about Smith’s “lack of discretion and professional judgment.”

Palmer Republican Sen. Shelley Hughes said Smith’s experience working alongside chiropractors rather than in primary or emergency care made her a poor fit for the board.

“Right now, she’s not representing the kind of medicine that physicians assistants are practicing,” Hughes said. “She is not doing the typical physical exam, she is not doing the diagnosis, she’s not doing the treatment, which often includes prescribing.”

Lawmakers also rejected the reappointment of correspondence school program manager Kim Bergey to the Professional Teaching Practices Commission. That vote was much closer, 26-33. Opponents said state law required commissioners to be selected from a list submitted by a professional organization, and that Bergey was not on that list. Lawmakers did not object to Dunleavy’s appointment of Bergey to the state Board of Education and Early Development.

The Legislature confirmed dozens of other Dunleavy appointees, almost all by unanimous consent.

Lawmakers also unanimously confirmed the state’s acting ombudsman, Jacob Carbaugh, for a five-year term. He succeeds the prior ombudsman, Kate Burkhart, who resigned in April. The ombudsman’s office investigates complaints against state agencies and provides recommendations for improvement.

Lawmakers are setting aside until next year a bill that would kick off a pilot program for tribally-run public schools. 

Rep. Andi Story, a Juneau Democrat, is a co-chair of the House Education committee. She said there isn’t enough time to move the House Bill 59 through the legislature this year. But she’s supportive of what tribally compacted schools can accomplish.

“Our education system was responsible for removing the language and culture, and so I think we have a responsibility to bring it back and have education opportunities through this tribal compacting,” Story said. “I think the details are just really important.”

The bill would fund and open five tribally-run schools through a state and tribal education compact, or STEC. 

Superintendents in affected areas testified in support of the bill at the most recent hearing for the bill. However, Nome Public Schools Superintendent Jamie Burgess said she wants to see case studies that show how opening a compacted school affects local school districts. 

“We are happy to support the development of a STEC school if that does move forward,” Burgess said. “However, I believe that there are still a great deal of questions for some schools. How it impacts each community is going to be unique.”

Story said stakeholders and tribal representatives will spend the time in the interim before next legislative session to get more feedback on the bill.

The Central Council of the Tlingit and Haida Indian Tribes of Alaska is one of the tribes that is involved in the program. Tribal representatives told KTOO earlier this month they plan to continue developing a new education campus if the bill doesn’t pass this year.

The current session ends May 21 and will reconvene next January.