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Budget Vetoes Will Increase Poverty, Hardship for Low-Income Alaskans

Alaska’s legislature is convening this week to debate whether to override Governor Mike Dunleavy’s vetoes of more than $400 million (about 10 percent of state spending) from the budget — 85 percent of which comes from education, public safety, and programs that serve low-income Alaskans. These cuts would pull Alaska’s economy into a recession, the state’s economists warned, and inflict great hardship on low-income Alaskans at a time when the state already has the nation’s highest unemployment rate.

Dunleavy’s veto of $130 million in state university funding (about 40 percent of what the system gets from the state) has received the lion’s share of attention. It would force the system to close some campuses that serve parts of the state with smaller populations, cut personnel, and lower enrollment, according to university officials.

But the governor’s vetoes would also make large, harmful cuts to health care, housing, and other basic assistance programs.

  • Medicaid cuts would make it harder for low-income Alaskans to access needed care. The governor vetoed $50 million in state Medicaid spending, which comes on top of more than $70 million in cuts that the legislature approved. Together, these cuts would total nearly a fifth of state Medicaid spending. The legislature’s cuts would come mainly by cutting provider reimbursement rates, which could cause some doctors to stop seeing Medicaid patients and make it harder for doctors in rural areas with lower patient volumes to stay in business. The governor has not said how the state will make an additional $50 million in Medicaid cuts, although he has hired a consultant to develop recommendations for a federal Medicaid waiver that would enable the state to make further cuts, such as by pursuing a block grant that would cap funding each year. The governor also eliminated Medicaid’s coverage of dental benefit for adults — a critical preventative care tool because poor oral health elevates elevatesthe risks of chronic (and costly) health conditions like diabetes and heart disease.
  • Housing-related cuts will increase hardship for Alaskans experiencing homelessness. The governor eliminated funding for two programs that fund housing services and homeless shelters, and he reduced funding for two others. As a result, some homeless shelters will have to close, while others won’t be able to serve as many people. The governor also vetoed two-thirds of state funding for a homeless shelter in Bethel, rural Alaska’s largest town.
  • Eliminating the Senior Benefits Program will make it harder for low-income seniors to afford necessities like groceries and rent. Dunleavy vetoed all funding for the state’s Senior Benefits Program, which pays about 11,000 low-income seniors between $75 and $250 a month, based on income.
  • Eliminating Head Start could force early education programs for low-income children to close. Head Start provides preschool programs to low-income children and health and nutrition services to their families. With the governor vetoing all state funding, Alaska Head Start programs won’t have the local match needed to draw down federal matching dollars (which account for about three-quarters of Alaska’s Head Start funding). Head Start programs around the state will likely begin to close in the coming months, according to local Head Start administrators.
  • Cuts to legal aid will make it harder for low-income Alaskans to navigate the legal system. Dunleavy eliminated all state funding for the Alaska Legal Services Corporation (ALSC), which provides free legal aid to low-income Alaskans. The cut will force ALSC to turn away about 1,300 people (about 16 percent of its caseload) and reduce staff, and it could force it to close offices and reduce its presence in rural Alaska, ALSC estimates. The governor also vetoed half of the travel budget for the state’s public defenders, which will make it harder for them to represent clients in rural Alaska.

Dunleavy says the budget vetoes are necessary to help close a budget deficit. But the state has far better ways to address its fiscal challenge and build for its future. The state has no income tax and 80 percent of its revenue comes from oil taxes. Oil production in the state is at historic lows (and is expected to remain flat in the coming years) and world oil prices are low as well. That means the state will find it increasingly hard to fund government services without additional sources of revenue.

Alaska policymakers should restore the funds the governor vetoed and look for ways to raise the necessary revenues to invest in schools, health care, and infrastructure to promote long-term and broad-based prosperity and economic growth.