4 Alaska college students sue Dunleavy administration over scholarship funding dispute

JUNEAU, Alaska (KTUU) - Four Alaska college students have sued Gov. Mike Dunleavy’s administration, arguing that it was unconstitutional to drain the state’s scholarship fund.

The $410 million Higher Education Investment Fund is used to pay scholarships to over 5,000 Alaska college students each year. It was emptied into the Constitutional Budget Reserve due to a failed three-quarter vote by the Legislature in 2021, known as the “reverse sweep.”

Attorneys representing the four students argue that was unconstitutional and that the fund should never have been emptied.

Riley von Borstel, 21, is a senior at UAF studying justice, political science and performing arts. She is one of 3,000 college students who receive the Alaska Performance Scholarship.

“These scholarships have meant the world to me, they’ve completely opened up so many possibilities for me in my higher education,” she said.

Von Borstel, the student body president at UAF, receives $4,755 each year through the Alaska Performance Scholarship, the maximum amount available.

Three other Alaska college students are part of the lawsuit. One is a member of a program that loans 20 new medical students up to $30,000 per year to study to become doctors. If they return to Alaska and practice medicine, the loan is forgiven.

A third program paid from the fund is the Alaska Education Grant. It provides needs-based scholarships to 2,000 college students each year and recipients can receive up to $4,000 annually.

The scholarship dispute stems from a 2019 legal interpretation written by then-Attorney General Kevin Clarkson that the list of state accounts subject to the annual sweep needed to be expanded.

The Dunleavy administration was simultaneously pushing for those accounts to be permanently emptied and for spending in areas like college scholarships to become annual appropriations.

When the reverse sweep vote failed last year, the Dunleavy administration relied on Clarkson’s legal interpretation to say that dozens of state accounts would be emptied and unavailable.

One of the impacted accounts is a $1-billion endowment that subsidizes power bills for rural Alaska residents. Twenty plaintiffs, represented in part by Jahna Lindemuth, a former Alaska attorney general, successfully sued the Dunleavy administration, arguing that was unconstitutional.

Attorney General Treg Taylor issued a memorandum two weeks later, saying that funds appropriated during the fiscal year that ended last June were valid and could be disbursed. Taylor’s memo meant funding for scholarships for the 2021-2022 school year could also go out after the university had pledged to cover those costs.

But with the Higher Education Investment Fund empty, college scholarships are set to compete with all other spending areas in the longer term and critics of that approach have argued they could be reduced or cut.

Pat Pitney, the University of Alaska’s president, released a statement on Wednesday, saying there have been “multiple conversations” with the governor, unsuccessfully trying to resolve the funding dispute. Robbie Graham, a spokesperson for the university, said the suit is being funded from a private account directed solely by Pitney.

“The university supports the student litigation in asking the court to decide this important question in the interest of developing Alaska’s workforce and certainty for students and parents,” Pitney said. “Our students deserve a stable and consistent source of scholarship and grant support.”

Von Borstel spoke about what it would mean if she lost her scholarship.

“I’ve seen first hand just how important scholarships are to students, and for many, scholarships make or break if they can actually go to college,” she said.

Tuesday’s lawsuit, again represented by Lindemuth’s firm, argues that since Taylor’s memo, the Dunleavy administration has “regressed” back to an unconstitutional reading of which state accounts must be swept.

The lawsuit says that the Legislature appropriated money to the fund as a “long-term, stable funding source for scholarships” and that private scholarship donations should also not have been emptied.

Taylor said through a prepared statement that the constitution requires that the Constitutional Budget Reserve be repaid from the billions of dollars “borrowed” from it to fill budget gaps.

“If a state account qualifies for the repayment obligation, and the transfer has not been reversed by the Legislature, there is nothing anyone can do to stop the transfer to the CBR. The transfer is compelled by the constitution,” he argued.

Dunleavy issued a statement on Wednesday, urging for a quick resolution to the case. State attorneys and attorneys for the college students filed a joint motion for an expedited hearing schedule so that the dispute could be resolved before the regular legislative session ends.

If Judge Adolf Zeman agrees to that timetable, a decision would be issued before the end of February, but it could be appealed to the Alaska Supreme Court.

Editor’s note: This article has been updated to include additional information.