JUNEAU — A member of Gov. Mike Dunleavy’s administration said Tuesday the state will stop payments to local school districts unless the Alaska Legislature changes its opinion on funding schools in advance.

The statement widens the chasm between the governor and the Legislature in the ongoing special session, which was called to address crime, the Permanent Fund dividend, state budget and education funding.

This dispute is about paying in advance for education: Is it legal for the Legislature to set an amount one year in advance, even if it doesn’t have the money on hand right now? The governor’s administration has said it is not legal and therefore cannot be paid. Legislators, except for the Republican House minority, say it is legal and therefore must be paid.

On one side of the dispute is a governor who feels he is being locked out of the education budget. On the other are lawmakers who worry the governor could use this strategy to overturn not just education funding but many other laws. Without a legislative solution, the issue will head to the courts, a process that could take months to resolve.

Lacey Sanders, budget director for the Office of Management and Budget, said Tuesday that if a solution doesn’t come before July 1, the start of the fiscal year, the state will not pay local school districts according to the formula that gives them money for each enrolled student.

“It is my understanding that funding will not be distributed on ... July 15 when funding will go out to school districts, without a valid appropriation,” she said.

Matt Shuckerow, Dunleavy’s press secretary, confirmed the governor’s position.

“The viewpoint at this point from the governor is that without a valid appropriation, without money in the budget, funding will not be going out,” he said.

That interpretation includes even temporary adherence to the Legislature’s position during a lawsuit.

Sanders’ statement escalates the dispute from one about education funding to one of primacy between the executive and legislative branches of Alaska’s government, which are supposed to be equal under the Alaska Constitution.

“Sounds like a game of chicken,” said Senate President Cathy Giessel, R-Anchorage, on Tuesday.

After Sanders’ statement, the House Finance Committee rejected legislation that would have legislators side with the governor, effectively demolishing one possible bridge between lawmakers and the governor.

A timing problem

In 2018, lawmakers passed House Bill 287, which says in part that “the amount necessary to fund the total amount for the fiscal year ending June 30, 2020, of state aid calculated under the public school funding formula ... is appropriated from the general fund to the public education fund.”

As intended by the Legislature, that means the state’s K-12 funding formula should be unchanged and fully funded.

HB 287 was intended to solve a timing problem: School districts that follow a fiscal year beginning July 1 must set their budgets before the Legislature completes its work. In recent years, as the Legislature has cut or considered cuts to education funding, that has meant school districts were forced to plan for a worst-case scenario, and laid off teachers only to rehire them when the Legislature approved a larger amount of funding.

In messages to lawmakers and in a legal opinion from the attorney general, the governor’s administration said HB 287 is flawed because it appropriates money that the state does not already have in hand.

In a Monday hearing of the House Finance Committee, Rep. Tammie Wilson, R-North Pole, said all of the state’s appropriations could be illegal under that interpretation because the state relies on revenue from oil that is produced later in the year.

The administration also argues that HB 287 creates a dedicated fund for education, but nothing prevents lawmakers from reversing HB 287. Earlier this year, House lawmakers considered and rejected a budget amendment that would have done so.

The governor also contends that because HB 287 was passed last year, before he entered office, he did not have an opportunity to participate in the process. Legislative attorneys argue that when the Constitution says, “The governor may veto bills passed by the legislature,” it is referring to the office of the governor, not a particular individual.

Under that argument, then-Gov. Bill Walker had an opportunity to veto HB 287 and did not do so.

Legislators see broader consequences

Why not simply go along with the governor to defer a lawsuit and a potential interruption to school funding?

“Because we have the constitutional authority to appropriate. We’ve executed that, and we’ll stand by that,” Giessel said.

Asked the same question, Senate Minority Leader Tom Begich, D-Anchorage, said going along with the governor, even for one year, would be the equivalent of acknowledging that his point is correct. The minority Senate Democrats and the predominantly Republican Senate majority are both agreeing to oppose the governor.

Lawmakers fear that if they acquiesce to the governor on this issue, he could use the approach on other legislation and decline to enforce it by arguing that it was illegal when passed, even if the Legislature has a different opinion.

“I think it’s actually the larger question,” Wilson said. “He’s reaching back in time, saying I don’t like that bill, and I’m going to veto it."