Alaskan lawmakers are concerned that a particular event in accounting might cause financial upheaval.
This event is referred to as the “sweep”. The sweep has been around for 20 years, and it takes place every year on June 30. Namely, at the last moments of that day, a massive amount of money moves around. The sweep leaves multiple state accounts empty, and the money coalesces in the Constitutional Budget Reserve.
The money switches back to these state accounts in the first second of July 1 (or a fraction of a second later). So the entire sweep occurs within two seconds. There is no way to stop the sweep, as it’s the result of a mandate given in the Constitution.
The switch-back is not under the Constitution’s protection, however. Whether it happens depends on the decision of the legislature. Should the majority of seventy-five percent vote to greenlight it, the switch-back will happen, and the money is returned from where it was withdrawn.
In 2019 the sweep might not happen the same way it normally did throughout the years. This is due to a few key differences surrounding the situation this year.
For one, the administration under Gov. Mike Dunleavy has plans to toss out many of the accounts from which money momentarily leaves. Among these state accounts are the Alaska Marine Highway System and debt retirement.
Secondly, no reverse sweep has been included in the state budget. This means that all the money that seeps into the Constitutional Budget Reserve will stay there, out of the hands of the departments to whom the money belongs.
Interestingly, the initial sweep is to affect other accounts it didn’t in the past. These are the PCE (Power Cost Equalization) fund and an endowment meant for paying student fees, like scholarships or grants. The former energy costs for rural areas of Alaska.
House Majority Leader Bryce Edgmon, an independent Dillingham lawmaker, suspects that the governor has a specific reason for these changes. He has reasons to believe the governor intends to siphon money away from the PCE in an effort to dispose of the funds for the PCE.
The majority leader also recounts how rural Alaska has always struggled to receive funds to cover its ever-increasing energy costs. Now with the sweep including it and trapping its money in the Reserve, the PCE is unlikely to see any endowment going its way.
Since the PCE only receives money from balance interest, the sweep could prove fatal to it in 2019.