Alaska Supreme Court takes another look at security of university investment fund

The Legislature passed a law earlier this year to protect it, but a rehearing could allow future challenges

By: - November 1, 2022 5:00 am
The University of Alaska Southeast campus in Juneau as seen on May 25, 2022

The University of Alaska Southeast campus in Juneau as seen on May 25, 2022. (Photo by Lisa Phu/Alaska Beacon)

The Alaska Supreme Court is taking a second look at a September decision on a new state law intended to protect the state Higher Education Investment Fund from being automatically drained under a provision of the Alaska Constitution.

On Oct. 7, the Alaska Department of Law asked the court for a rehearing, effectively a do-over, on a single footnoted sentence: “The legislature has since amended the HEIF statute, removing the HEIF from the general fund and thus making it ineligible for the sweep.”

The investment fund is used to pay for college scholarships and the state’s equivalent of medical school. 

If the court agrees to the rehearing and subsequently reverses itself on that sentence, it could reopen questions about the fund’s legal status, potentially causing the $400 million account to be permanently drained.

The Legislature and plaintiffs who originally brought the case oppose the rehearing request.

It’s the latest twist in a three-year-old issue that began when the administration of Gov. Mike Dunleavy re-examined a list of state funds eligible to be swept into the state’s Constitutional Budget Reserve at the end of the fiscal year.

That sweep is required under a constitutional amendment passed by voters in 1990, but until 2019, the Legislature had annually and uncontroversially reversed the sweep with a supermajority vote.

Before 2019, it was believed that the higher education fund and the Power Cost Equalization endowment (used to subsidize rural home electricity prices) were immune from the sweep if the Legislature ever failed to reverse it.

But that year, Dunleavy proposed a budget that called for the sweep to take place, and the Office of Management and Budget concluded that prior analyses were incorrect and both the education and PCE funds were eligible for the sweep.

In 2021, the Legislature failed to reverse the sweep, causing both funds — as well as many other, smaller accounts — to be transferred to the budget reserve.

Supporters of the PCE sued, and a Superior Court judge ruled that the PCE fund should not have been swept.

That act preserved a reliable source of funding for the rural-power program, and several university students also filed suit, hoping to preserve the higher education fund.

That case went the other direction, with a Superior Court judge ruling that because of the way the Legislature wrote the law establishing the higher education fund, it was eligible to be swept. The students appealed, but the Alaska Supreme Court confirmed the ruling earlier this year in a brief order.

Soon after that order, state lawmakers passed a new law, changing the structure of the higher-education fund into one that resembles the PCE fund.

In September, the high court released a longer explanation of its decision, which included a detailed analysis of when a fund is sweepable and when it is not. 

In their footnote, they noted that the Legislature’s new law would make the higher education fund unsweepable.

Attorneys for the Alaska Department of Law objected, saying that the Legislature’s new law wasn’t part of the case.

“That sentence is dicta that purports to resolve a question of Alaska constitutional law not before the court,” they wrote in a request for a rehearing. 

Dicta is a legal term for a comment in a judicial opinion that isn’t necessary to resolve a case but could be mentioned in future lawsuits.

Requests for a rehearing are rarely granted by the court, but in October, justices asked for more information before making their final decision.

Attorneys representing the Alaska Legislature and the students who brought the original lawsuit have since submitted written arguments against the rehearing.

“Appellees’ requested rehearing would introduce unnecessary uncertainty where there was none,” wrote Kevin Cuddy, an attorney representing the Legislative Council, a House-Senate committee that acts on behalf of the Legislature.

Attorney Scott Kendall, a frequent Dunleavy critic who represents the students, said it appears to him that the state is attempting to keep the higher education fund available for sweeping.

Patty Sullivan, a spokeswoman for the Department of Law, said that isn’t the case.

“We are not making any assertions about any particular funds. We are merely requesting that the Alaska Supreme Court remove a footnote in its opinion that addresses an issue that was not before the Court,” she said by email.

“Courts generally prefer to avoid unnecessarily deciding questions, especially questions not presented by the case and without full briefing. Our petition simply points out that the footnote could be read as deciding this question and may therefore lead to uncertainty and confusion,” she said.

With both sides having offered written arguments, the issue is now in the hands of the court’s justices. There is no timeline for a decision.

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James Brooks
James Brooks

James Brooks is a longtime Alaska reporter, having previously worked at the Anchorage Daily News, Juneau Empire, Kodiak Mirror and Fairbanks Daily News-Miner. A graduate of Virginia Tech, he is married to Caitlyn Ellis, owns a house in Juneau and has a small sled dog named Barley. He can be contacted at [email protected]

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