Arguable: Is the state's rural energy subsidy fund special and protected, or part of the general fund? - Must Read Alaska
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Sunday, January 16, 2022
HomePoliticsArguable: Is the state’s rural energy subsidy fund special and protected, or part of the general fund?

Arguable: Is the state’s rural energy subsidy fund special and protected, or part of the general fund?

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It’s a simple concept: The Alaska Constitution allows no special carve-out funds besides the General Fund, the Permanent Fund, and the Constitutional Budget Reserve, a special fund created by voters in 1990, where the state deposits certain income from disputes over mineral-related income. 

But Recall Dunleavy attorney Jahna Lindemuth tried to convince a judge Friday that the Power Cost Equalization Fund is also protected by the Constitution.

It’s not. It’s an unprotected fund created by the Legislature in the 1980s to help lower power prices in rural areas that don’t benefit from state-funded power projects in urban areas.

The lawsuit brought by Lindemuth on behalf of Alaska Federation of Natives was heard in court on Friday. Lindemuth came into the courtroom with two other briefcase-toting lawyers to try to make the case that the PCE fund is protected and the governor should have not “swept” those funds at the end of the fiscal year. Normally, all unspent funds get swept, and then the Legislature reverse-sweeps the funds back into their designated homes.

Lindemuth’s argument was made more difficult by the fact that the Legislature had the option to reverse sweep the funds, but politically it chose not to. It just let those funds go back into the Constitutional Budget Reserve. So Lindemuth, who has sued the governor repeatedly for various items, found a plaintiff to help make the case that the PCE fund is special.

Lindemuth made her argument all about the governor, not the appropriators in the Legislature. Time and again, she referred to “the governor,” even after the Department of Law attorney pointed out that Lindemuth was making it personal and that it was not the governor, but the State of Alaska that was the defendant.

Lindemuth, who stuttered and stumbled through her argument that the $1.15 billion PCE fund was protected, was the former attorney general, until her boss, former Gov. Bill Walker, was shown the door by voters. Now she makes a living suing Gov. Mike Dunleavy.

The state attorney Katherine Demarest argued that the Legislature could fund the rural power subsidy with an annual appropriation if it wanted to. It just didn’t have the political will to do so.

She likened the special funds categories like PCE in the general fund as basically sticky notes, which could be moved around to create legislative intent for how to spend various buckets of money.

Superior Court Judge Josie Garton appeared noncommittal and her lines of questioning revealed little. She said she would try to provide a decision on the matter in a timely way, which likely means this coming week.

Gov. Dunleavy is attempting to persuade the Legislature to allow voters to decide whether to put the PCE fund under constitutional protection, along with a formula for how the Permanent Fund dividend will be calculated going forward. He has had little to no cooperation from the House and Senate majorities, but his question to them is the core of the Aug. 16 special session in Juneau.

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

Latest comments

  • This state is so broken.

    • Amen!

      • Amateur Hour at best. What a gong show.

  • Socialism.

  • Walker has never been good for Alaska and the people. He is just like the democrats in DC.

  • It’s not that the State is broken – it’s the people, especially the ones in the legislature. Perhaps we should throw in the bureaucratic management and the court system. You know them: The ones who have lost the sense of serving others, not themselves. The ones who cannot accept that other folks might disagree with them and it just might be okay. The ones who suffer from megalomania and are determined to preserve their power regardless of anything – like the will of the people for instance. The ones who have no understanding of respect and are clueless as to what “love your neighbor as yourself” means. The ones who are determined to use their power – whether legitimate power or usurped – to gain wealth and comfort for themselves, often at the expense of others. The ones who think beer pong is more important than the people’s business. They are “greedy and entitled”. Let’s remember we are one nation under God. Pray for us – and them – and for Alaska.

  • The pce is the only thing keeping Bryce elected.

  • Subsidies, be they food stamps, low income senior benefits, Section 8 housing certificates, or whatever should not be guarantied in the state constitution (or the US Constitution for that matter). NC Machinery benefits when these people persistently refuse to check the oil in the $3 million generators but it shouldn’t be in the constitution! God save us from politicians who actually think this is a good idea. Do politicians think we are stupid enough to believe this has something to do with the PFD?

    • Fomenting dependency does no one a favor except for the politician buying votes with public dollars. Living a dependent lifestyle is a choice, and responsible government would encourage independence and sustainability, using public dollars to encourage such. If a place is not self sustainable, perhaps, like the village of Belkofski, it is time to be abandoned.

  • It’s funny how these zealots try and make it the Governor’s fault for everything that effects their bottom line but it is the Legislature that controls the purse strings.

  • Jahna was one of the Walkerites who supported – AND WON – the notion that the PFD was just another line item in the budget. For the AFN, she is arguing their rice bowl is not. As a lawyer, she is being paid to tell the court what her clients want her to tell them. As State Attorney General, she was paid to tell the courts what Bill Walker wanted her to tell them, which she did. One wonders what she really believes, though I would suggest she agrees with both, and a line item in a budget is, like Louis Carroll’s Red Queen, nothing more or less than what she has been told to believe at the time. Cheers –

  • Can we build roads and bridges into Rural communities. I think that sounds more cost effective than a Power Cost Equalization constitutional amendment.

    If Alaska didn’t have so much corruption throughout, it probably have more access to lands closed.

    If Alaska’s lands were open for building roads and bridges as well as exploring and developing, what kind of good difference would it make since Alaska’s executive, legislative, judicial, private and public entities are corrupt throughout and a select group can just pocket everything and not help the people. What good had Alaska done with its last two booms during the Gold Rush and Oil periods?

    • That would be too expensive. There’s been cost surveys done and nobody can foot the bill. It’s like saying let’s build highways all over Europe when there are none initially.

  • Lindemuth is so inept in her arguments and delivery to the court. She sounds like a first-year law student stumbling her way through a Socratic grilling by her professor. No wonder Bill Walker chose Lindemuth and Kendall by his side. Those are the only two lawyers that truly believe Walker’s BS. Losers………ALL.

  • Can we the people sue her for wasting tax payers money?

    • We don’t pay taxes in Alaska. Dunleavy has lost every lawsuit and he will lose this one too.

  • The PCE is just one more example of politicians spending money with emotion, rather than logic. Worn out generators and villages having to fly fuel in to meet demand is the result. Are we wrong to ask that our money be spent more wisely?

    • Wait are you saying that government money shouldn’t be spent to help the needy? That seems kind of self-serving doesn’t it. Try this, next time there’s a major earthquake and an on-ramp falls in or even if there’s just a pothole that’s about 5 ft deep, get your shovel and go out there and fix it fill in the hole of yourself. Tell the repair crews that show up that you got this and send them on their way and don’t cash your PFD check either. And all that government money that the airlines get for hauling fresh produce up for you to snack on needs to be cut out too. Get a truck and drive down the al can when Canada will let you through, and make a grocery run down to the lower 48. Do all this on your own because none of that government money should be spent for anything that you need. Because you’re not selfish are you?

      • Creating a permanently dependent underclass is not helping them, only the politicians buying votes with public money. A day of reckoning will come as it always has, and it will be painful.

  • Wait. You mean I can get the state to help pay for my generator and fuel if I decide to go live in a cabin in the Bush? Maybe they can pay to send my kids to private school too.

    Or … I can pay for my own choices without burdening others.

    • You evidently don’t get it Dan. Many communities were granted state money to get hydro power and because of that other communities without such access get involved in this program to even things out.
      Since you aren’t in a community, you won’t get a subsidy. Tough noogies.

  • We need way less lawyers. They think they are untouchable but they are the bottom feeders of the working class.

    • No. Just smarter than the average bear.

  • I don’t know anything about this judge, but I always advised my principals that if a major Democrat interest group was the adversary, any Republican Governor should expect to lose at the Superior Ct. level. The Democrats have an uncanny ability to find friendly judges.

    I’ve long held that the whole notion of sub-funds of the General Fund and Designated General Funds is merely a legal fiction contrived by the ‘crats to preserve slush funds for themselves. When this gets to the AKSC, they’ll have to side with the State that the PCE Fund is just general funds subject to lapse or undo their whole line of cases going back at least to Hammond days holding that the only Constitutionally permissible dedicated funds were a handful of small ones that pre-date Statehood, the Constitutionally established Permanent Fund, and I’ll take Suzanne’s word for it that the CBR is Constitutionally sound, but I haven’t researched it myself.

    • So people who live on the road system want what they want but when somebody else wants something or actually needs it then they don’t want those people to have it. That seems kind of selfish and self-serving. People in the bush can’t afford to pay a huge market for fuel transportation. Most villages I’ve lived in people were just scrapping around enough to get by. By a Honda every 10 years after they bailing wired their current one together multiple times or was able to buy an outboard motor so they can go get something to eat. In my opinion is very selfish. If you want to be part of this state and you’re going to have to put something in the kitty, instead of just belch n moan but somebody’s getting something that you ain’t.

      • The best things the governments of the United States and the State of Georgia ever did for me were building ‘farm to market” roads so you could get out of rural Georgia, they established the National Defense Education Act so I could get a decent education and NDEA loans so if I could get in, I could go to college, and, finally, they did absolutely nothing to try to keep me in the obsolete and failing socio-economic system of the rural South.

        My generational cohort, b. 1949, got the best education that anyone but the wealthiest in The South ever got, before or since. By my 30th HS Graduation Reunion when all of us were in our peak earning years, only a mere handful were still in my home town or county and most weren’t even in the state; two of us were in Alaska. A few have held on to old family property and have returned now that they’re retired, but most of us will never return except for weddings and funerals.

        We should take the lessons of the New Dealers. In the Thirties, they recognized the need for a portable industrial workforce and many younger Americans were being held on the family farm both to keep it going economically even as it had become obsolete economically, and to take care of aging parents. Social Security was created to support aging parents and allow the kids to go to the city and get an industrial job. Most of rural Alaska exists only to provide a zip code to send the government check to.

        • Art are you saying that the bush only exists to cash checks? They’ve been around a little bit longer than social security. Don’t blame native people for learning the system all too well. They’ve been placed at the front of the line for generations. Handouts and welfare have become part of the culture. But don’t blame them, if you give a kitten a saucer of milk, he’s going to come back for more.

          • I’m saying that most of the villages, nearly all, are just as irrelevant today as the 17th and 18th Century “Twelve Mile Towns” in the Eastern states. You might note that to the extent they exist at all, there is nobody left but the dead and dying in those little town.

          • Art, then if that is the case, which it isn’t, why is enrollment steady? The villages aren’t dead and dying. Fresh from 20 years in the bush myself. People are having babies, culture is alive and well.

    • ” I’ll take Suzanne’s word for it that the CBR is Constitutionally sound, but I haven’t researched it myself.”
      Yes Art the Budget Reserve Fund (CBR) Article 9, Section 17 is constitutionally sound except it is complicated and difficult to understand and subject to misinterpretation.
      The sweep began in 1990 due to Art.9.17 enactment. I don’t think it really requires a sweep of every account as people seem to assume without questioning. It would be good if Suzanne would research the legislative history and intent. How did we ever get by without the sweep before 1990?

      • OK, I went and read it, something I hate to do when I’m not being paid. I was a relative neophyte on budget issues in ’90 but I do remember some of the discussion of the CBR. The State had a huge backlog of pending tax and royalty litigation and there was pressure to get the money since we were still pretty broke in ’90, but also lots of concern how fair settlements might be and what would be done with the money from those settlements. The requirement for a three quarter vote is reflective of the lack of trust between the parties in the Legislature and between the Legislature and the Executive Branch.

        Before 1990 the “sweep” wasn’t an issue because it was ironclad dogma that at 12:01 AM on July 1st, all appropriated but unexpended funds in the Operating Budget lapsed to the General Fund and became available for appropriation in the succeeding budget. Operating Budget appropriations are only for that budget year, Capital Budget appropriations have specified expiration date with two years being common. In any event, whether Operating or Capital, when the appropriation expired, the money lapsed.

        Somewhere in there the notion of “Sub-funds of the General Fund” began to creep into the vocabulary. This was an invention of the bureaucrats because “Sub-fund of the General Fund” is just a nice way to say Dedicated Fund, and those are unconstitutional with rare exceptions.

        By the Hickel Administration, I’d been around long enough and successfully enough to sit at the adult table. At that time, “sweep” meant a sweep of the “Sub-funds of the General Fund,” the Legislature’s nuclear weapon against an Administration because it took the slush funds away. Everybody in a position of authority in both branches knew the sub-funds were likely unconstitutional, but they were convenient tools.

        Gov. Hickel made some settlements with the producers and was roundly criticized by the ADN and other Democrat shills for selling out to the oil companies. I was too busy doing other things to pay much attention to the Legislature in those days, but there couldn’t have been too much money in the CBR that early so I don’t know how much of a Legislative tooi it was.

        Under Knowles, Law made a “grasp for cash” to settle with the oil companies anything they would settle. If Gov. Hickel had made the deals with the producers that Gov. Knowles made, Hickel’s corpse would have rotting hanging from the flagpole at the ADN.

        I’d had all I could stand of the Knowles Administration and quit in Nov. ’96. I went to work for the Legislature for the ’97 Session. The distrust between the Republican Majority in the Leg and the Knowles Administration was such that if somebody in the Administration had remarked that the Sun was shining every Republican would have gone to the window to check. In those days the CBR became the nuclear weapon that gave the Democrats power all out of proportion to their numbers. If you needed money from the CBR you had to buy that three quarter vote and the price was dear.

        In the Murkowski Administration we threatened sub-fund sweeps and may have done it early on; we were really broke at the beginning. I don’t think we ever went to the CBR because we understood the cost.

        The “reverse sweep” is a term that came into the vocabulary after my time but it refers to sweeping all the appropriated but unexpended funds to the CBR to repay withdrawals from the CBR. That appears to be exactly what the Constitution requires. I think the plain language says that you sweep everything so long as their is an unpaid balance owed the CBR. If we ever get to where there is more appropriated but unexpended than balance owing, I presume the Legislature has some discretion which funds it uses, but the reality there is those funds not paid to the CBR simply lapse to the GF and become once again available for appropriation.

        • Brilliant. Should be its own column Art. I would just say the phrase “available for appropriation” is the key phrase – not “un-expended” funds.

          I sent a piece to Suzanne which explains my position further.

  • Nuclear power is affordable and safe.

    • Yeah, especially next to earthquakes. Omg, you can’t make this stuff up.

  • Bill Yankee espouses here the common but largely incorrect justification for PCE. The mistaken history goes that the bush (not only Native villages but Tok, Haines, Gustavus, etc. etc.) gets its diesel fuel subsidized because the developed areas got subsidized hydro and natural gas. Well most of the communities with hydro paid the full fare, paying debt service that paid off the hydro. (Sitka got subsidies but only because of who has long been on Senate Finance.) That is true of most hydro projects around the state. And the mistaken history also includes that gas tax credits for Cook Inlet subsidized the heating and electricity for not only Anchorage but also Fairbanks through the Interior Gas Utility. However, for the most part the gas companies got stiffed because the tax credits were not paid. The only solid subsidy was PCE for rural diesel. Putting that in the constitution would be silly and wrong.

    • And as I understand it the gas credits were to provide an incentive to drill in a high cost, high risk, and politically unstable market. Moving to Henry Hub pricing helped to stabilize the gas supply, if at considerable cost, but let’s face it, Alaska is an unstable political environment, and you need look no further than our welching on the tax credits.

  • The Power Equalization Fund is just one of the many welfare programs enacted in the last 40 years that are causing the budget to be so bloated as to be unsustainable. Without some action on eliminating some of this idiocy, then the working public will be taxed to death to support places with no economy in the state.

    • So you’re saying places where people live and have lived for thousands of years have no value? Are you saying they should just go back to squatting by the scalding pot and eventually die off? Is that what being an Alaskan is all about in your mind?

    • As I understand the PCE was created because Urban areas got cheap power by state funded Hydro power and many Rural areas did not, I benefit from the subsidy the state funded projects for Urban areas, it would be selfish of me not to help my neighbors. Remember, the state monies belong to all of us, not a one of you with the exception of Corporations pay taxes.

      • Learn some history! The only hydro Anchorage has is the century old Eklutna plant which is more relic than power plant. Most of the other hydro plants while initially financed by the State had the construction debt retired by the consuming utilities and their rate payers.

  • We need development! A highway to Nome and Bethel! The road in King Cove! The bridge across the inlet! A railway intertie to Canada! The gasline from the slope to Anchorage and opening ANWR with the Nikiski refinery reopened, locking this state up as a huge nature preserve will be the death of it.

  • @Greg Forkner: You said: “Art, then if that is the case, which it isn’t, why is enrollment steady? The villages aren’t dead and dying. Fresh from 20 years in the bush myself. People are having babies, culture is alive and well. ” No room to reply above.

    I spent twenty years in the Bush one afternoon waiting for the mail plane to get in. When I worked for BIA there were 196 federally recognized villages; I’ve been in 147 of them and slept on some of the best floors in Alaska.

    Enrollment is steady because people are satisfied to live as dependents and don’t have the motivation to find another way to live. “People are having babies” only proves that the most complicated thing on the planet requires the least skilled labor to produce. A male, a female, proximity, and a little alcohol will produce a baby; now what does that prove? The “culture” you extoll only exists because the checks keep coming.

    • Art, there used to be pride, especially among elders, of their resourcefulness and independence to live in such a harsh environment and thrive with little external input. Then along came the government to ‘rescue’ them (I actually recall the use of that word by a social worker). Lamps went to subsidized electricity; subsidence went to food stamps; wood stoves went to heavily subsidized oil (wood=smoke-BAD-Clinton admin); community health aides, typically a well experienced elder, went to fancy medicaid funded clinics; and reading and evening teaching of traditions went to subsidized mindless drivel television (I loved sitting in steam bath listening to elder narratives). And independence and pride largely disappeared with the elders to be replaced by slogans and posters, apathy, drugs and alcohol. Not for all, but for too many.
      I would like to think it was done with the best of intentions but, like LBJs Great Society, which he bragged would destroy Black culture for votes, I cannot help but believe that politicians buying votes intentionally destroyed this way of life out of both ignorance and paternalism to the ‘poor people’ living like that. Anyone can ‘make a baby’ but it takes parenting to raise a child to a productive adult who is not just another lifelong attachment on the teat of society, existing only to vote the way the master says.

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