Dunleavy disguises his role in trying to empty Power Cost Equalization endowment

Gov. Mike Dunleavy told the Alaska Federation of Natives he is now committed to protecting the Power Cost Equalization fund, an unofficial $1 billion endowment in the state treasury, the earnings from which help reduce rural electric rates.

In announcing his newfound commitment Thursday, Dunleavy did not say was that he was the one who proposed doing away with the PCE endowment. He championed the idea for most of this year.

And he did not say that he eliminated the fund in June, an action that was overturned by a super-majority of the Legislature.

Dunleavy did not admit his leading role in any of this, or volunteer that “mistakes were made,” but told the convention in Fairbanks that “a legitimate concern was raised about the long-term protection of the PCE endowment.”

Now, he says, he no longer wants to eliminate the fund, but will work with “lawmakers to ensure the long-term protection of the PCE fund so that affordable electricity for rural Alaska is never in doubt.”

This began when former temporary budget director Donna Arduin and policy director Mike Barnhill appeared before the Senate Finance Committee in February and discussed plans to get rid of the endowments that pay for scholarships and for the Power Cost Equalization payments.

There was about $1.1 billion in the fund to help with electric rates. There was about $345 million in the fund to help pay for scholarships. Getting rid of these endowments and putting $1.4 billion elsewhere for other purposes was a key part of the Dunleavy/Arduin budget.

Doing so would allow the governor and the Legislature more flexibility to spend the money on something other than power subsidies and scholarships. Dunleavy didn’t want to go on the record opposing scholarships and rural power subsidies, but the elimination of the endowments would have made it far more likely that the payments would end or be cut after this year.

Dunleavy proposed spending $32 million on PCE subsidies for this fiscal year, while ending the designation attached to the $1 billion reserve.

“There seems to be a punitive action here for a program that’s years in the making and has been successful,” Sen. Donny Olson asked at the legislative hearing at which the end of the PCE endowment was debated. “Why would we be sweeping that money so that it can be used for other things besides what it was destined for?”

“With respect, however, Mr. Chair, this is not intended to be punitive in any way, shape, or form. We’re not attacking the program,” Barnhill said of the attack on the program.

“In each of these cases, the funding remains in place for the program. The characteristics of the Power Cost Equalization program that Sen. (Lyman) Hoffman just identified are good characteristics. They are meritorious. What we are doing, in a state of fiscal crisis, is trying to increase the Legislature’s flexibility to deal with all of the stakeholders,” Barnhill said.

“In the minutes of the constitutional convention they talked about having a level playing field. That’s what they wanted to secure. And the wisdom of that is in times like this when there’s not enough money to go around,” Barnhill said.

“We have to weigh the merits and the needs of the state. And that’s what we’re trying to do here, is return the state’s finances to the way it was intended by the framers in 1955. Not punitive. Going back to what was constitutionally intended,” Barnhill said of the punitive plan.

“However long it’s taken to save that $1.1 billion . . . you are proposing that we just put it in the general fund to spend however we want, whenever we want, until it’s gone?” Senate Finance Co-chair Natasha von Imhof asked Barnhill during the hearing.

“I am absolutely not suggesting that this money be frittered away. If anything, the Dunleavy administration is calling on the Legislature to be frugal and a very strict steward of its funds,” Barnhill said of the plan to fritter the money away.

The Legislature refused to eliminate the PCE endowment and the scholarship fund. The governor did it on his own. The Legislature overturned his decision. Now he claims to oppose the position he held from February until July.

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