As the political wrangling over the state budget continues in the state Capitol there is particular concern for the University of Alaska following the governor’s veto of $131 million in state funds, or 41 percent of its budget. Funding for the university is still an issue as the Legislature’s special session continues, and some of the money may be restored. However, UA officials are already concerned about loss of key faculty and diminished enrollment.

Given the timing, however, university officials must plan for steep cuts even if some of the cut is softened. UA’s Board of Regents declared a financial emergency last Monday, July 22, which allows university president Jim Johnsen authority to terminate faculty and close campuses. The regents will have to approve those actions, and Johnsen is due to have a conceptual plan ready for an emergency Regents’ meeting on Tuesday, July 30 and a more detailed plan ready for a scheduled Regents’ meeting in mid-September. The timing is terrible for the university because the institution is already locked in to a fall academic schedule with students enrolled and faculty under contract. That means the spending rate can’t be slowed substantially, and that the bulk of the staff and other reductions will come after January and on through the spring.

If the governor’s reductions do wind up happening, the University of Alaska Fairbanks budget of $126 million must be reduced by $67 million; University of Alaska Anchorage’s budget of $104 million must be reduced by $47 million, and the University of Southeast, in Juneau, would see its $21 million budget reduced by $10 million.

Separately, there would be reductions among smaller regional campuses, which now cost $36 million a year; facilities maintenance, where $45 million is spent annually, and statewide administration, where $18 million is budgeted yearly. Additionally, losses in revenue from reduced enrollment and tuition income and in federal research funds will aggravate the situation. Facilities maintenance could be a real problem because the UA system already faces a $1.1 million backlog of deferred maintenance. While some university buildings could be sold or leased there are practical limits on how this could be done in a way that would ease the financial burden.

Another budget impact: Rural residential power costs could double
Another consequence of the budget impasse is potential loss of $32 million in funding for this year’s Power Cost Equalization to support rural utilities’ residential electricity rates. If the issue isn’t resolved soon monthly PCE payments from the state won’t go out and utilities will have to bill customers for the full cost of power, doubling the consumer cost in many small villages with limited local economies. The $32 million was appropriated from earnings of the PCE fund, an endowment-type fund. As a consequence of a “sweep” of special funds into the Constitutional Budget Reserve of July 1, and failure of the Legislature to “reverse” the sweep so far, there is no fund source for the payments, essentially negating the appropriation. The governor, who classified the PCE fund as subject to the sweep, says he will fund the payments out of the general budget, but that is embroiled in the current budget impasse. The outcome is uncertain.