College students sue to maintain designated Alaska scholarship fund

Four students have sued to force the state to maintain a designated fund that provides university scholarships, challenging a decision by the administration of Gov. Mike Dunleavy that emptied Alaska’s $410 million higher education trust fund last year.

The change in policy from previous governors eliminated a source of reliable funding for college financial aid, forcing the scholarships to rely on legislative appropriations from the state general fund, same as any other state expense.

The Alaska Higher Education Investment Fund provided financial support for Alaska Performance Scholarships, Alaska Education Grants and a state program for medical students who attend school out of state.

The Dunleavy administration decided that the fund should be swept at the end of every fiscal year into a state savings account — the Constitutional Budget Reserve Fund — unless three-quarters of the Legislature voted to “reverse” the annual sweep and preserve the account.

The governor’s budget director last year said previous governors had interpreted the law incorrectly and the scholarship funds required a three-quarters legislative vote to remain intact.

Though the Legislature eventually voted to reverse the sweep and restore the account in the first years of the Dunleavy administration — an accounting exercise that didn’t actually move any money — lawmakers last year were deeply divided over the amount of the Permanent Fund dividend and other political battles, and several Republicans withheld their votes, denying the three-quarters majority to preserve the scholarship account.

The Power Cost Equalization Fund was caught up last year in the same political battle between legislators and the governor, who wanted a larger PFD, with the same outcome as the scholarship fund — the rural utility subsidy program lost its dependable source of funding.

The Alaska Federation of Natives and 17 others successfully sued to maintain the program of financial relief for high electricity costs in rural Alaska. An Anchorage Superior Court judge ruled against the state and ordered the preservation of the fund.

That court decision, however, did not apply to the university scholarship fund, which was not part of the litigation.

The students are being represented in the Jan. 4 lawsuit by attorneys from Cashion, Gilmore and Lindemuth, a firm that has repeatedly challenged the Dunleavy administration and includes former officials from the administration of Gov. Bill Walker.

According to the attorneys representing the students, the lawsuit is being funded by Providence Alaska — the state’s largest hospital system — and private funds directed by University of Alaska interim president Pat Pitney.

A spokesman for the hospital said it is supporting the lawsuit because it believes a steady supply of trained health care workers is critical.

Scholarships are funded through the spring semester, but those paid in the fall semester — the 2022-23 school year — are subject to the budget that will be considered in the upcoming legislative session.


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