Students appeal Superior Court ruling on higher education funds

Funds for scholarships are ‘sweepable,’ Judge says

University of Alaska students last Friday appealed a decision from an Anchorage Superior Court judge that sided with Gov. Mike Dunleavy’s decision to subject higher education scholarship funding to a state accounting mechanism known as “the sweep,” which annually empties state accounts.

Students argued the decision to subject the Higher Education Investment Fund to the sweep violated state law. The sweep moves funds to the Constitutional Budget Reserve and requires a two-thirds majority of the Legislature to reverse, a vote recent Legislatures haven’t been able to achieve because of political divisions.

The suit stems from a decision by former Attorney General Kevin Clarkson and former Office of Management and Budget Director Donna Arduin to subject the Higher Education Investment Fund to the sweep, a position not taken by previous administrations. A similar lawsuit rejected the administration’s decision to sweep the Power Cost Equalization fund, shielding that program from legislative impasse.

In his decision, Judge Adolf Zeman said the PCE fund’s enabling language establishes it outside of the general fund. Zeman also rejected the students’ claim funds were dedicated to various scholarship programs — such as the Alaska Performance Scholarship and Washington, Wyoming, Alaska, Montana, Idaho Program at the University of Washington School of Medicine — citing a previous court decision, Hickel v. Cowper.

“Without further legislative action, the funds in the HEIF stay in the general fund. This interpretation of the HEIF follows Hickel’s binding definition of ‘available for appropriation,’” Zeman wrote.

Speaking to the Empire by phone Friday, attorney Scott Kendall said he understood and respected the court’s decision but said an appeal had been filed earlier that day.

“There is some language from a prior case (Hickel) and I think Judge Zeman felt bound by that language,” Kendall said. “Our opinion is that the language was not binding.”

Kendall said he expected the Alaska Supreme Court to move in an expedited fashion in the case, and he hopes for a better result with the higher court.

Students were financially and legally supported in their suit by Providence Alaska Hospital and the University of Alaska. UA spokesperson Roberta Graham directed questions to Kendall.

The Legislature filed an amicus brief in support of the students, with the bicameral Legislative Council voting 17-1 in favor.

Speaking to the Empire on Friday, Legislative Council chair Rep. Sara Hannan, D-Juneau, said she was disappointed by the decision, but appreciated the clarity from the court on the issue.

“The concern from the Legislature is that fund had been endowed over previous years,” Hannan said, allowing the earnings from the fund to cover the costs. “The governor is funding only one year of those programs.”

Hannan said the Legislature should create a fund for higher education that can assure students their full multiyear education will be funded without being subject to regular political battles.

In a news release, Alaska Department of Law communications director Aaron Sadler said the sweep has no impact on existing HEIF grants and the governor continues to make scholarship funding a budget priority.

“HEIF scholarships have been fully funded throughout the Governor’s administration, including in the fiscal 2023 budget,” Sadler said.

In his opinion, Zeman said the Legislature had the power to create specific appropriations for the HEIF if it sought to do so.

“However, this is not within the Court’s power. The power of appropriation belongs solely to the Legislative Branch,” Zeman wrote. “The Court’s decision here today stems from its interpretation of legal precedent, precedent it must follow and apply.”

Contact reporter Peter Segall at Follow him on Twitter at @SegallJnuEmpire.