THE STATE GOVERNOR MICHAEL DUN LEAVY Department of Law Of OFFICE or THE ATTORNEY GENERAL l031 West Fourth Avenue, Suite 200 Anchorage. Alaska 99501 Main: 269-5100 Fox: {907) 269-51l0 April 9, 2019 Delivered Via Email The Honorable Cathy Giessel Senate President Alaska State Senate State Capitol Room 111 Juneau, AK 99801 Email: The Honorable Bryce Edgmon Speaker of the House Alaska State House of Representatives State Capitol Room 208 Juneau, AK 99801 Email: Re: Fiscal Year 2020 Operating Budget Legislation Dear Senate President Giessel and Speaker Edgmon: The Department of Law believes that recent legislative action regarding education spending for ?scal years 2020 and 2021 presents a constitutional problem. Although proposed spending for K-12 education was included in each of the budget proposals presented by the executive branch (November 30, December 15, and February 13), the operating budget bill being debated by the House does not include a K-12 apprOpriation for FY20. It appears that the intent of the House of Representative is to rely solely on an appropriation included in the education funding bill enacted in 2018 (HB 287). It appears that the House is also proposing a similar approach to ?nding education for FY21. In the Department of Law?s Opinion, the 2018 appropriation that ?forward funded? education by committing a future legislature and governor to spend future revenues on education, is unconstitutional. This forward ?inding violates the Alaska Constitution?s: (1) prohibition against dedicating revenues, (2) general framework providing for an annual budget where the legislature and the governor can consider funding priorities in comparison to revenues and make decisions accordingly, and (3) provision granting the Sen. Cathy Giessel and Rep. Bryce Edgmon April 9, 2019 Re: Fiscal Year 2020 Operating Budget Legislation Page 2 of 4 Governor line item veto authority. Unless the Legislature appropriates education ?mding for FY20, there will be no lawful appropriation for education funding for that year. Repeating the same practice would risk education funding for FY21. Unlike past forward funding appropriations that committed current year revenues to be spent in future years, both the appropriation in HE 287 for FY20 education spending and the apprOpriation included in the current committee substitute for HB 39 for FY21 education spending would require the expenditure of ?xture year revenues. This action unconstitutionally dedicates revenues and sidesteps the constitutionally required annual budgeting process including the govemor?s line-item veto. Article IX, section 7 of the Alaska Constitution provides that ?the proceeds of any state tax or license shall not be dedicated to any special purpose.?I In considering this constitutional prohibition against dedicating state revenues, the Alaska Supreme Court has emphasized the importance the constitutional convention delegates placed on ?preserv[ing] control of and responsibility for state spending in the legislature and the governor,?2 and that the purpose of the dedicated ?lnds prohibition was to ensure ?that the legislature would be required to decide funding priorities annually on the merits of the various proposals presented.?3 The Alaska Constitution includes a speci?c provision setting forth a budget process in which all state spending needs are considered on an annual basis. Article IX, section 12 mandates that the governor submit a budget ?for the next ?scal year? that sets forth ?all proposed expenditures and anticipated income of all departments, of?ces, and agencies of the State.?4 The legislature, in turn, has the responsibility to determine how much to spend and on what and to pass appropriation bills authorizing annual spending which are then subject to the governor?s line item veto power and the legislature?s authority to override a veto.5 In light of these provisions, the Alaska Supreme Court has described Alaska?s budget process as requiring that legislators consider the competing Art. IX, sec. 7. 2 Sonneman v. Hickel, 836 P.2d 936, 938 (Alaska 1992). 3 Id. at 938?39. 4 Art. IX, sec. 12. The budget must be submitted ?at a time ?xed by law? which the legislature has established as December 15 in the Executive Budget Act. AS 37.07.020. 5 Art. IX, sec. 13 (?No money shall be withdrawn from the treasury except in accordance with appropriations made by law. No obligation for the payment of money shall be incurred except as authorized by law. Unobligated appr0priations at the end of the period of time speci?ed by law shall be void?); Art. II, sees. 15 and 16 (Governor?s authority to strike or reduce items in an appropriation bill and the legislature?s authority to oven'ide a veto). Sen. Cathy Giessel and Rep. Bryce Edgmon April 9, 2019 Re: Fiscal Year 2020 Operating Budget Legislation Page 3 of 4 demands for state funding each year. For example, the Court ruled that the legislature and the governor have a ?joint responsibility to determine the State?s spending priorities on an annual basis.?5 And the Court in its recent permanent ?ind dividend decision pointed out that ?[a]bsent another constitutional amendment, the Permanent Fund dividend program must compete for annual legislative ?mding just as other state programs?? As you are aware, the operating budget proposals provided on November 30, December 15, and February 13 all included pr0posed appropriations for FY20 K-12 spending. But as of the date of this letter, the operating budget bill being debated by the House does not include a K-12 appropriation.8 The Department of Law believes that the Alaska Supreme Court would find that the 2018 forward ?inded appropriation was (1) an unconstitutional dedication of state revenues, (2) a violation of the Alaska Constitution?s annual budget process, and (3) an unconstitutional attempt to circumvent the govemor?s line item veto power. Under this analysis removing K- 12 education appropriations from the FY20 operating budget and relying solely on an action of the legislature in 2018 that committed future revenues would leave education unfunded in Y20. The legal analysis does not change simply because of the importance of education ?nding. The Supreme Court pointed out in Southeast Alaska Conservation Council:9 dedicating funds for a deserving purpose or a worthy institution is an attractive idea. Our constitutional founders were aware of the power of the dedication impulse. They decided that the good that might come from the dedication of hands for a particular purpose was outweighed by the long-term harm to state ?nances that would result from a broad application of the practice.10 We are aware that in a context other than education ?inding Legislative Legal Services has expressed a similar concern that an appropriation that seeks to commit future revenues rather than current year revenues is an unconstitutional dedication of revenues. 6 State v. Ketchikan Gateway Borough, 366 P.3d 86, 93 (Alaska 2016) (emphasis added). 7 Wtelechowskt v. State, 403 P.3d 1141, 1152 (Alaska 2017) (emphasis added). 8 Moreover, additional forward ?inding appropriations based on future revenues have been included in the pr0posed budget bill for FY21: FY21 education funding that would not go into effect until July 1, 2020 and (2) a ?iture appropriation from the Constitutional Budget Reserve Fund for a reverse sweep. 9 202 P.3d 1162 (Alaska 2009). '0 Id. at 1176-77. Sen. Cathy Giessel and Rep. Bryce Edgmon April 9, 2019 Re: Fiscal Year 2020 Operating Budget Legislation Page 4 of 4 I am in the process of fully vetting this issue and plan on issuing a formal attorney general opinion on the subject in the near ?Jture. But I thought it was important to raise this concern with you now so you can consider this information as you continue your deliberations on the FY20 budget. Attorney General