State workers receive layoff notices as governor calls Legislature’s budget ‘defective’

Gov. Mike Dunleavy at a press conference on June 17, 2021.  (Photo by Andrew Kitchenman/KTOO)

Gov. Mike Dunleavy announced that layoff notices are being sent to state workers on Thursday. He said that’s because the budget the Legislature passed is “defective” because it won’t go into effect by July 1.

“Unfortunately by law, layoff notices have to be sent out by 4 p.m. today. And they’ve been sent out notifying folks that the potential for a layoff is real,” he said.

The governor said many functions of state government will shut down. His office said that essential public health and public safety employees will continue to work. The administration didn’t immediately announce what programs would be shut down and how many state workers would be laid off, but said it numbers in the thousands.

Dunleavy said the failure of two motions caused the problem. One would have allowed the budget to take effect on July 1 — the first day of the new state budget year — and the other would draw from the Constitutional Budget Reserve.

Dunleavy called on legislators to reach a compromise by the end of the special session on Friday. If they’re not successful, he said he would call the Legislature back into a special session starting on Wednesday, June 23.

The effective date clause fell four votes short of the necessary number, which means the law wouldn’t go into effect until September. The CBR vote failed by six votes.

Dunleavy said he hopes legislative leaders listen to all members.

“So it’s my hope and the hope of Alaskans that some of the maneuvers and brinksmanship that crafted this particular budget could be put aside and a budget be crafted that benefits all Alaskans, everyone working together because we’re running out of time,” he said.

The Department of Law advised the governor that state spending under the budget bill cannot be made until the bill goes into effect 90 days after it becomes law. It takes two-thirds of both legislative chambers to agree to have a different effective date. The Senate passed the July 1st effective date clause, but the House didn’t.

The Department of Law said there are exceptions to meet constitutional obligations like maintaining Alaskans’ health and safety, or to comply with with federal requirements.

House Speaker Louise Stutes, a Kodiak Republican, said Dunleavy ignored four decades of previous legal advice and long-standing precedent in announcing the shutdown. She said the House majority is ready to reaffirm its votes for the budget “in hopes that the minority will join us.” She said it could be fixed by Friday.

Legislative leaders were negotiating Thursday.

Lawmakers who voted against the budget have criticized how the permanent fund dividend is funded.

They also want a larger dividend. The budget included a $525 dividend without the CBR draw passing. If it had passed, the dividend would be $1,100. But some legislators support paying a dividend of roughly $3,500, the amount under the formula in a 1982 state law.

Dunleavy has proposed a change to the formula that would lead to a $2,350 dividend, half of the planned draw from the permanent fund’s earnings reserve.

But legislators who worked on the budget are concerned that drawing more than planned from the permanent fund’s earnings would start the state down a path of spending down the earnings reserve and would threaten the permanent fund’s future.

This story has been updated to include details about public health and public safety employees continuing to work and reaction from a lawmaker.

Andrew Kitchenman

State Government Reporter, Alaska Public Media & KTOO

State government plays an outsized role in the life of Alaskans. As the state continues to go through the painful process of deciding what its priorities are, I bring Alaskans to the scene of a government in transition.

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