A group of four Alaska college students has appealed a state court ruling that upheld a decision by Gov. Mike Dunleavy to drain the state’s $410 million higher-education investment fund. The decision made scholarship programs subject to annual legislative appropriation of state general fund dollars.
The students last Friday filed their appeal of the ruling handed down a day earlier by Superior Court Judge Adolf Zeman.
Unless reversed on appeal to the Alaska Supreme Court, the Alaska Performance Scholarship program and WWAMI, which helps pay the costs for Alaska students who attend medical schools out of state, do not have a dedicated funding source and must compete with other programs in the state’s annual budget process.
More than 5,000 students a year receive scholarships under the programs.
Lawmakers and the governor last year agreed to use general funds dollars to cover the scholarship programs through the end of the current fiscal year on June 30, and Dunleavy has requested that the programs remain funded in next year’s budget.
In his order, Zeman said the administration correctly classified the higher-education fund as part of the state’s general fund in 2019. That made it subject to a clause in the Alaska Constitution that requires leftover general fund money to be automatically swept into the Constitutional Budget Reserve, a special savings account that requires a three-quarters legislative majority for withdrawals.
The Alaska Legislature regularly votes to reverse that sweep into the savings, reinstating the scholarship fund each year, but it failed to do so in 2021 because of opposition by Republican legislators in the state House. That failure, combined with the administration’s 2019 decision to remove protection from the scholarship fund, drained the account into the harder-to-reach savings, prompting the switch to using general fund dollars since then.
Attorney Scott Kendall, who is representing the students, said Friday he expected the Alaska Supreme Court to move in an expedited fashion in the case and he hopes for a better result with the higher court.
The suit stems from a decision by former Attorney General Kevin Clarkson and former Office of Management and Budget Director Donna Arduin to subject the scholarship fund to the sweep, a position never taken by previous governors.
A similar lawsuit rejected the Dunleavy administration’s decision to sweep the Power Cost Equalization Fund into savings. The fund provides about $32 million a year in subsidies to high electricity costs for more than 82,000 rural residents.
The judge noted that the scholarship fund case differs from the 2021 lawsuit in which the Alaska Federation of Natives challenged the draining of the Power Cost Equalization account.
AFN won that case, in part because the law creating the power subsidy fund said it was created outside the general fund. The law creating the higher-education fund specifically says that it is part of the general fund, Zeman said, and therefore subject to the annual sweep into savings.
“If the Legislature believes these programs should be funded, it possesses the power to establish the (higher education fund) as a separate fund outside the general fund or to appropriate money from other sources ... to fund the programs in the future. However, this is not within the court’s power. The power of appropriation belongs solely to the legislative branch,” he said.
Reporting by the Juneau Empire and Wrangell Sentinel contributed to this story.
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