Written by:  Leila R. Kimbrell

With the deadline looming for the Alaska State Legislature to pass a budget for the next fiscal year, the Governor’s office and the executive branch are taking steps to prepare for the possibility that a deal will not be reached in time.  What does this mean to the rest of us?  BHBC serves clients in all areas of both the public and private sectors, including individuals, associations, business and state and local governmental clients.  This article addresses the possible impacts of a state government shutdown.

State capitol building in Juneau. (Photo courtesy of Thom Watson on Flickr.)

The state government operates on a fiscal year that begins July 1 and ends June 30 of every year.  Pursuant to Article IX, Section 12 of the Alaska Constitution, each year the Governor is required to submit an annual budget and appropriations bill for the upcoming fiscal year which must be approved by the Alaska State Legislature.  As part of the separate of powers structured in the state constitution, Article IX, Section 13 of the Alaska Constitution gives the Legislature full control over the appropriations approval process.  To date, the Legislature has not approved any department budgets or authorized any appropriations for the new fiscal year (FY18).  The current legislative session ended earlier this spring; but with no budget in place, the Governor called a special session to continue until the Legislature adopts a budget to fund state government for FY18.

With an increasing budget deficit, due in large part to the State’s reliance on dwindling revenues from oil production, our elected representatives in Juneau are at an impasse on just how to cover that deficit and fund the Governor’s budget.  If no agreement is reached by before July 1, funding authorization for state operations will expire and the government will be forced to “shutdown” until a budget is approved.

A full shutdown would be unprecedented in Alaska’s history.  Consequently, there are a number of concerns and speculations as to how this affects the rest of us.  Will the entire state shutdown?  Will all state offices close?  The answer is a large maybe.  The most likely scenario is that many state employees will be temporarily laid off and programs and services will be suspended during that time while a skeleton crew of absolutely necessary personnel to avoid catastrophes remains in place.  While definitive guidance has yet to be issued as to the specific events that would occur in the event of a shutdown, the Governor’s office and other executive branch officials recently issued notices of what could be possible.

The Department of Law also released a fact sheet explaining the Attorney General’s opinion that certain categories of government programs and services may continue during a shutdown.  The DOL breaks this down into two categories:

  • First, “personnel and funding necessary to carry out constitutional mandates,” and
  • Second, “personnel and funding necessary to carry out federally mandated programs.”

These categories are further broken down into three tiers of priority:

  • Tier I addresses programs and services “that would lead to [an] immediate threat to public health or safety if interrupted.”
  • Tier II includes “constitutional and federal mandates that may only be delayed a short amount of time, if at all, before severe impacts would occur to the State’s people and economy.”
  • Tier III includes “constitutional and federal mandates that … could become urgent if a shutdown were to continue for too long.”

Tier I is fairly clear and addresses public safety and health concerns.  This means that no, a shutdown does not mean you get to avoid a speeding ticket.  State Troopers and State Wildlife Troopers will continue to enforce state laws and protect the public safety.  However, the Department of Public Safety has indicated that a reduction in non-law enforcement personnel that could be required in the event of a shutdown could affect their services.  Correctional facilities will remain in operation and courts will operate as needed to address public safety needs.

Tiers II and III, however, are worded broadly enough to make it less clear as to what might be approved to operate during a shutdown.  Certainly, a shutdown will cause “severe impacts” on the State’s people and economy but this will not justify keeping all state programs and offices open without the necessary authorized appropriations from the State Legislature.  Examples provided, however, are more narrowly tailored to public assistance programs, unemployment benefits and ensuring timely payments of bonded indebtedness.  Tiers II and III are more focused on federal programs and less certainty exists surrounding state programs.  Consequently, it is necessary to look at each state department, agency, or program affecting you most.

For business and corporate matters, the State Department of Commerce, Community and Economic Development has warned that services related to business and professional licensing, corporate compliance, as well as licensing and regulation of insurance, banking and services industries will likely be suspended.  Commercial fishing loans processed by the Commerce Department would also be suspended.  For our many business clients, this means there could be delays in processing license applications, potentially affecting your ability to carry on your business.

Processing of labor disputes, workers’ compensation and wage and hour claims, unemployment, as will as job training programs would likely be delayed or suspended by the Department of Labor and Workforce Development during a shutdown.  Consequently, labor and employment matters may also have to be put on hold.

Real property and commercial transactions could be significantly impacted as well.  The State Department of Natural Resources, which operates the State Recorder’s Office, could be shutdown, delayed, or significantly interrupted during a shutdown.  Planning on closing a real estate deal, record a lien or UCC filing?  You may not be able to after July 1st.

Issuance of marriage licenses and birth certificates through the Department Health and Social Services (DHSS) could be shutdown or delayed.  In addition, inspections and regulatory oversight duties of DHSS over residential and healthcare facilities could also be impacted.

The Department of Environmental Conservation (DEC) warns the processing and issuance of permits and authorizations it oversees would also be significantly impacted.  These include air and wastewater permits; water and sewer infrastructure projects, and oversight of cruise ships.  The DEC is also responsible for the retail food inspection program, which would also be suspended.

At the height of our beloved Alaska summer season, more pressing concerns affecting your summer recreation plans are valid.  A shutdown will likely mean a closure of state offices issuing hunting and fishing licenses, closure of state campgrounds and recreational areas, commercial fishing is also affected.

The Department of Natural Resources (DNR) has warned delays and interruptions will occur to issuing all DNR permits and authorizations, inspections, timber and/or land sales.  Operations of state park lands, campgrounds and visitor centers will also likely be impacted.

The State Department of Fish and Game (ADF&G) has warned a shutdown could affect the state’s fisheries, including commercial, subsistence, personal use and sport fisheries.  This has obvious impacts on the seasonal sport and commercial fisheries important to the State and local economies.  State hunting seasons may be also be impacted.  Most certainly, the ADF&G has warned the ability to process and issue state hunting and fishing licenses will be affected.

As this article illustrates, there are many uncertainties surrounding the possibility of a state government shutdown but there are real consequences to Alaskans, Alaskan businesses, and our economy should the Legislature and the Governor fail to find compromise on a budget plan.  While this article generally addresses what could happen if no budget agreement is reached before the start of the next fiscal year, it is impossible to address individual situations.  For more information regarding how the potential shutdown might affect your specific individual, business or other legal matter, please contact the author for more information.