PHOENIX - Alaska's government is bracing for a government shutdown if the legislature fails to pass a budget in the next three weeks.

The state’s executive branch is prepping for a shutdown and warning legislators and the public of what they might be able to expect in the event that no budget bill is signed into law when the new fiscal year begins on July 1.

The state is running an approximately $3 billion annual budget deficit and relying on its constitutional reserves to keep operating, and lawmakers have not been able to agree on a path to closing the unsustainable budget deficit that has already resulted in downgrades for the once unanimously triple-A rated state.

The Alaska State Capitol, where the legislature is working to pass a budget.
The Alaska State Capitol, where the legislature is working to pass a budget.

“A shutdown would put the State in a constitutional crisis,” said Alaska Attorney General Jahna Lindemuth. “Our constitution clearly says the power to determine where and how to spend money lies with the legislature. In the face of the legislature not upholding its constitutional duty, where does that leave state services and programs? That’s the question we are working to answer by evaluating every program or service provided by the State.”

Gov. Bill Walker has ordered the preparation of a special incident command center as the legislature labors in a special session. Walker said in a statement that he remains hopeful that a budget bill will pass in time to avert a shutdown, but that he needs to prepare for a worst-case scenario.

The Alaska Permanent Fund Corporation, which manages the state’s nearly $60 billion pool of investment cash that would play a key role in rescuing the state under a plan floated by Walker, said through its leaders that a business continuity plan will be in place to keep the fund well-managed in the event of a shutdown. The plan would not provide for active forward-looking investments that the corporation typically engages in.

“Based on the advice received from the Department of Law, it is anticipated that during a shut-down no new investments will be pursued,” chief executive officer Angela Rodell said in a statement. “There can be no assurance that a government shutdown will not have a material impact on the earnings and performance of the fund for fiscal year 2018.”

Daily services could be crippled and result in huge economic consequences, the Walker administration warned. Without staff, the state could lose millions in federal infrastructure funding and construction activities would stop. Maintenance of roads, bridges, and all kinds of public facilities could end for the duration of the shutdown.

No matter how long the government is forced to shut down, the Attorney General warned, there will be potential liabilities that accrue. There will be contracts that are not paid, which may result in penalties and interest. There will be statutes that would not be fulfilled that will create additional legal liability, requiring more legal work to untangle the issues later.

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