This morning a letter was sent out to Alaska state employees. I am without words at the moment...
Subject: Governor’s Action on Budget Bill HB72
Governor Bill Walker plans to act on the unfunded operating budget bill, HB72, today. As you know, the legislature did not get the required votes to use the constitutional budget reserve, so the budget transmitted in HB72 for fiscal year 2016 provides state spending appropriations of $5 billion but only provides $2 billion in state funding. The legislature transmitted HB72 to the Governor on May 1, 2015 which set May 19, 2015 as the deadline to act. On Fri., May 15, Legislative Director Darwin Peterson, Commissioners Randy Hoffbeck and Sheldon Fisher, and I met with legislative leadership. We learned it is highly unlikely the legislature will resolve the budget issue before the Governor’s has to take action. Furthermore, it is uncertain when the legislature will resolve the budget impasse.
It is important to note that HB72 includes the necessary funding to operate through the current fiscal year end, June 30, 2015. Therefore, a veto of the entire HB72 is not an option.
The governor’s choices were:
1. Line-item veto all FY16 budget items.
2. Line-item veto FY16 state appropriations to the $2 billion funding level to focus available state funding on health, life, safety and debt service obligations.
3. Allow the unfunded budget in HB 72 to become law.
After much discussion, analysis, and legal review, the governor has determined option 2 is the least detrimental of the three options.
In the event the legislative impasse continues, option 2 assures continued operation of critical state operations, including prisons, detention centers, and work by troopers. It will also keep open facilities like Alaska Psychiatric Institute and the Pioneer Homes, and ensure distribution of health care payments. It assures full debt service payments to mitigate the negative impact an unfunded budget may have on the state’s credit rating. Option 2 will also allow every agency to allocate funds for heat, lights, emergency maintenance and services for maintaining critical operations such as network communications and payroll. Finally, this option provides the ability to maintain programs that operate fully on earned receipts, designated funds, and federal funds.
All other government functions will likely have to cease shortly after July 1. If the legislature does not take action prior to June 1, 2015 (14 days from today) termination notices for personnel not directly responsible for health, life, and safety functions must be prepared. Some employee contracts require 30-day notice periods.
Option 1 is not viable because, in the event the legislative impasse continues, it would require immediate preparation for complete government shut-down effective July 1, 2015.
Option 3 is not viable for two reasons. First, it would set an untenable precedent that an unfunded legislative budget is acceptable. Second, it would open the governor to lawsuits from every entity with a named appropriation that couldn’t be funded, i.e. oil companies, school districts, grantees, etc.
Attached is a summary showing the budget implementation of Option 2. The OMB website will have detailed reports. Unfortunately, there was not time to implement a precise veto assessment. With $10 billion available in savings for these times, it was inconceivable to imagine a legislative impasse would put the state in this position.
It is my sincere hope the legislature will provide for a fully funded budget in the next few days and all of this will be a wasted exercise, albeit a tremendously costly and disruptive one. Until then, I ask that you focus on the following principles of implementation within the budget constraints:
1. Maintain life, health, and safety operations.
2. Secure and provide emergency maintenance for state facilities and assets (because these costs are funded by agencies through service agreements to Department of Administration and/or DOTPF reserve your agency state funding allocation for this purpose).
3. Operate enterprise systems such as finance, payroll, treasury, telecommunications to assure support for life, health, and safety operations (because these costs are funded by agencies through service agreements to Department of Administration and/or DOTPF reserve your agency state funding allocation for this purpose).
4. Address to the greatest extent possible existing payments for vendors essential to the above three principles, then identify contracts to close.
5. Halt all other activities utilizing or dependent on functions funded on state UGF. Operations that function on designated general fund and/or federal revenue may continue.
Below is the timeline to consider:
Between today and May 27, 2015 or until a fully funded budget is passed by the Legislature:
· Using the shutdown provisions you provided earlier this month, the principles stated above, and the budget figures in the attached spreadsheet, develop an operation plan that distinguishes units that will be maintained and those that will be substantially reduced or closed.
· Departments will be given the ability to move funds within an appropriation to the highest need components for addressing these operational plans.
If the legislative impasse continues beyond May 27, 2015, identify by June 1, 2015
· All personnel not directly responsible for health, life, and safety functions and associated termination notice provisions.
· All vendor contracts not directly supporting health, life, and safety functions.
If the legislative impasse continues between June 1 and June 30, 2015
· Send required employees contract termination notices on the last possible date to meet contract provisions.
· Send contract termination or work stoppage notices to identified vendors on the last possible date to meet contract provisions.
Please share this information with leaders in your agency. Simultaneous to this message, Governor Walker is sending a note to all employees explaining the situation and possibility of layoff notices in early June.
I regret that we have all been forced into this untenable position where this uncertainty and extra work has been imposed upon you and your staff.
When the immoral are in charge, this is what you get. 
