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.
Birch Horton Bittner & Cherot is proud to announce that Kathryn Black has been named to the 2017 “Alaska Super Lawyers” by Thomson Reuters and Super Lawyers magazine. This is Ms. Black’s 11th year to be listed. Each year, no more than five percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor. Ms. Black has been listed in “Best Lawyers” since 2006 in the practice areas of corporate law and mergers and acquisitions.
Ms. Black’s practice consists of representation of financial institutions in all aspects of loan documentation and collections, including in-depth knowledge of bankruptcy, debtor/creditor rights, secured transactions, real estate financing, commercial loan documentation, foreclosures, repossessions, and the law of banking.
Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates, and peer reviews by practice area. The result Is a credible, comprehensive, and diverse listing of exceptional attorneys.
The Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country. Super Lawyers Magazines also feature editorial profiles of attorneys who embody excellence in the practice of law. For more information about Super Lawyers, visit Superlawyers.com.
2017-05-23T01:33:38+00:00 May 23rd, 2017|
The Alaska Bar Association has finally announced the results of its February 2017 examination and BHBC is proud to announce that two of its Alaska-born lawyers are among the 22 newly admitted to practice in the 49th State.
Shane Coffey is a graduate of West Anchorage High School, where he was a part of three 4A State basketball championships (which required multiple wins over a Bartlett High squad led by future NBA champion Mario Chalmers). Shane earned his undergraduate degree in finance from the University of Alaska in Anchorage before attending law school at the University of Oregon. In law school, he was a member of the Law Review and the Moot Court Board, and he worked as a judicial extern at the local state trial court in Eugene, Oregon. He helped the court with a bustling docket of cases covering divorces, domestic violence, medical malpractice, murder, and more. Shane joined BHBC’s Anchorage office not long after taking the bar exam. His practice will likely draw on his background in finance to focus on business transactions and corporate law, and he hopes to also draw on his love for the outdoors to practice natural resource law.
Zach Olson has practiced in our Washington, D.C. office for nearly three years. He is from Nome, where he also played basketball (though his team washed out in the first round of the 3A State championship). He attended college at the University of Idaho and then worked for several years with U.S. Sen. Lisa Murkowski (R-AK), before attending law school at George Mason University. He worked on transportation, wildlife, environmental, and land use policy on Capitol Hill, at the U.S. Department of Interior, and then at the U.S. Court of Federal Claims before joining a large lobbying firm. His practice for BHBC has focused on wildlife law, including using regulatory and litigation tactics to protect hunting and trapping rights. He has also done a lot of work for energy and utility companies before the Regulatory Commission of Alaska. He is hoping that being licensed in Alaska will give him greater flexibility when representing his many Alaska-based clients and is looking forward to spending some time in BHBC’s Anchorage office this summer.
2017-05-02T02:48:50+00:00 May 2nd, 2017|
Ember Jade Garrett in a quiet moment.
On March 15th at 9:19pm, Kristy Garrett, a senior associate in the Anchorage office, welcomed her daughter Ember Jade Garrett into this world. Ember was born weighing 7 pounds, 7 ounces and measuring 19.5 inches. Ember was born at the exact same time as her older brother, Coal Jax. In addition to mom, her dad Paul, her brother Coal, and her dog Murphy are very excited to welcome this sweet girl into their family. Her extended family in Michigan, including her grandparents have plans to meet her in June and July. At 7 weeks old, Ember already visited her Birch Horton friends and is thrilled to be a part of this welcoming community.
There has been a critical development in the legal saga involving the challenge to the constitutionality of the Small Business Administration’s 8(a) Program that has the potential for broad-reaching implications for small disadvantaged businesses participating in this key sector of federal government contracting. Rothe Development Inc. has filed an appeal with the U.S. Supreme Court, asking it to review the U.S. Court of Appeals for the D.C. Circuit’s ruling that Section 8(a) of the Small Business Act is constitutional on its face. An amicus brief filed on behalf of the government in the D.C. Circuit case made a special argument about how Native American companies as a group are subject to a different legal review standard, but the Court never reached the merits of that argument. However, the issue would likely arise again should the case come before the Supreme Court. If the high court elects to consider the appeal, Alaska Native Corporations and Tribes should be prepared to engage in this case.
U.S. Supreme Court
Rothe, a non-minority-owned small business, is challenging Section 8(a) of the Small Business Act, which establishes a business development program for “socially and economically disadvantaged business concerns,” as facially unconstitutional because it provides race-based preferences in federal contracting. The D.C. Circuit’s September 2016 opinion affirmed the 2015 decision of the D.C. District Court that Section 8(a) of the Small Business Act is constitutional on its face. Ultimately, the Circuit Court held that because Rothe only attacked the Section 8(a) statute (not the SBA’s regulations implementing the 8(a) Program), and because it found that Section 8(a) itself is race-neutral, the statute did not have to pass the strict scrutiny analysis applied by the district court. Instead, the statute only needed to pass “rational basis” analysis, which only requires that the statute bears a “rational relation” to a “legitimate end.” This is a lower bar of analysis than applied by the district court, and the Circuit Court found that Section 8(a) easily passed this test.
After losing its case before the D.C. Circuit three-judge panel, Rothe filed a petition for rehearing en banc (by the full panel of judges) in the D.C. Circuit. The D.C. Circuit denied that petition in January 2017.
Rothe’s Petition for a Writ of Certiorari to the Supreme Court, docketed April 17, 2017, asks the Court to consider two legal questions:
Whether a statutory program that requires an agency to distribute benefits to “socially disadvantaged individuals,” and defines “socially disadvantaged” in terms of membership in certain racial minority groups, classifies on the basis of race and is thus subject to strict scrutiny.
Whether a statute that may not classify exclusively on the basis of race, but uses race as a factor in determining eligibility for benefits, is subject to strict scrutiny.
The government now has three options: it can agree the Court should review the case, it can waive its right to file a response, or it can file a brief in opposition. The government’s response is due May 17, 2017. Rothe would have an opportunity to reply. At the certiorari stage, amicus briefs are normally only filed by those who agree that the Court should review the case.
It is not a foregone conclusion that the Supreme Court will chose to take up the appeal. Of the 7,000 – 8,000 certiorari petitions filed each year, the Court only hears about 80. Four of the nine justices must vote to hear the case. Given the current makeup of the Court, it is difficult to predict if the Court will accept the case. However, it has been over 15 years since the Supreme Court has really considered an affirmative action case involving federal contracting.
Small disadvantaged businesses participating in this key program for federal government contracting should continue to closely monitor the progress of this petition at the Supreme Court. Due to the potential far-reaching consequences of an adverse decision for the 8(a) Program and for federal contracting generally, Alaska Native Corporations and Tribes should strongly consider and be prepared to engage in this case through the submission of an amicus brief to the Court – as they did in the previous stages of this case – if the justices decide to grant review.
If your business would like to participate in a potential amicus process, please contact Jon DeVore or Melinda Meade Meyers at (202) 659-5800.
On April 19, 2017, the U.S. Supreme Court heard oral arguments in Trinity Lutheran Church of Columbia v. Pauley, which presents the question of whether religiously affiliated schools can be constitutionally denied equal access to a government benefit, even if the benefit has nothing to do with matters of faith.
This case involves a program in Missouri that provides rubberized material for school playgrounds. In 2012, Trinity Lutheran Church applied for a state program that reimburses nonprofits for the purchase and installation of rubber playground surfaces made from recycled tires. Missouri’s Department of Natural Resources, which administers the playground program, ranked Trinity Lutheran’s application 5th out of the 44 that were submitted. Despite its ranking, the department denied Trinity Lutheran’s application on the basis of a provision in the state constitution that prohibits allocation of money from the state treasury.
At the heart of this case is a provision in Missouri’s constitution that bars parochial schools from such public benefits, otherwise known as the “Blaine Amendment.” The amendment reads in part: “No money shall ever be taken from the public treasury, directly or indirectly, in aid of any church, sect, or denomination or religion.”
The church is challenging the Department’s decision arguing that its exclusion from a state program that provides grants to help nonprofits buy rubber playground surfaces discriminates against religious institutions and, therefore, violates the Constitution. The State argues that there is no constitutional violation because the church can still worship or run its daycare; in other words, the state’s decision in no way impedes the church’s ability to practice or worship. However, in a somewhat unorthodox move, Missouri’s newly elected Governor, Eric Greitens, changed the state’s policy by lifting the ban on state grants for religious organizations. Therefore, the first question the Court will address is whether the Governor’s policy change has rendered this case moot, or is no longer ripe for decision.
Assuming the Court permits the case to go forward, the decision could subject Alaska, as well as 35 other states with similar constitutional mandates, to the same type of challenge. Alaska’s Constitution, at least in its intent, essentially mirrors Missouri’s prohibition for allocating tax dollars to religious or private educational organizations. Specifically, the Constitution states that: “No money shall be paid from public funds for the direct benefit of any religious or other private educational institution.” The Constitution further restricts the use of public money for private or religious institutions by stating: “No tax shall be levied, or appropriation of public money made, or public property transferred, nor shall the public credit be used, except for a public purpose.”
If the Court agrees with the church that the constitutional mandate of separation of church and state is being taken too far because it is no longer being applied neutrally, it could result in taxpayer funds going to groups that discriminate based on sexual orientation or religion. Conversely, if the Court upholds the constitutional mandate, everything from school vouchers to fire and safety protection for private religious schools could be in jeopardy. One thing is for sure, many interested parties are anxiously awaiting the Court’s ruling in this case.