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Alaska governor reverses course on controversial budget cuts

ANCHORAGE, Alaska (Reuters) - Alaska’s governor signed a budget bill on Monday rolling back most of the deep, highly controversial spending cuts he imposed weeks ago on the University of Alaska but rebuffed a renewed bid by lawmakers to restore funding he slashed from health programs.

The partial funding restoration marked the latest in a pitched budget battle between Governor Mike Dunleavy, a Republican serving his first year in office, and a bipartisan coalition in the Republican-dominated state legislature.

Dunleavy, who sought to slash state spending while seeking a record hike in an oil-revenue dividend paid to state residents each year, said on Monday he reversed course on higher education and some other programs due to public sentiment.

“I understand that this budget approach and timing, being so late in the legislative year, caused significant angst among Alaskans,” Dunleavy said in a video statement. “However, certain programs, programs we value, got caught in a budget discussion that went on way too long.”

A highlight of the revised budget bill signed by Dunleavy limited cuts to the University of Alaska to $25 million in the current fiscal year, compared with the $130 million line-item veto he announced on June 28. The earlier reduction amounted to about 40% of the university’s budget.

University regents declared “financial exigency” in July, a bankruptcy-like status that allows for swift cost reductions, including dismissal of tenured faculty and closure of entire programs and campuses.

Lawmakers tried to override the university cut and other line-item vetoes last month but they fell short of the three-quarters majority needed to do so. Instead, they passed entirely new budget bills that restored most of the items the governor vetoed out, including the university funding.

In signing the new operating budget, Dunleavy backtracked on a few additional line-item vetoes aside from university funding. However, he repeated earlier vetoes that slashed other parts of the new budget, especially Medicaid and other health programs.

Dunleavy has argued that deep cuts are needed to pay for a big annual dividend from the Alaska Permanent Fund, the state’s oil-wealth account.

He has pushed for a dividend of about $3,000, which would have been the highest since payouts began in 1982. Alaska has no income tax and has long been reliant on oil revenues.

The legislature’s new budget set this year’s dividend at $1,600, the same as it was in 2018. Dunleavy criticized that as an “incomplete dividend” but let it stand, citing his inability to add money to the budget.

Dunleavy’s budget decisions and other policies and actions have spurred a backlash. A campaign to oust him from office is gathering signatures for an official recall election.

Reporting by Yereth Rosen; Editing by Steve Gorman and Paul Tait