This story was originally published by the Alaska Beacon.
President Donald Trump’s order to pause the spending of billions of dollars in federal grants triggered a wave of anxiety, fear and uncertainty on Tuesday in Alaska, a state dependent more than any other on federal spending.
“For me, it was pandemic-level chaotic,” said Nils Andreassen, director of the Alaska Municipal League, which works with cities and boroughs statewide.
A federal judge’s ruling late Tuesday temporarily blocked the presidential order, but that only defers an act with broad consequences.
“We’re waiting for the other shoe to drop,” said Senate President Gary Stevens, R-Kodiak.
Federal money pays for more than 40% of Alaska’s state budget. The federal government directly employs about 5% of Alaskans. On a per-capita basis, Alaska received more money than any other state from the federal Infrastructure Investment and Jobs Act. Federal grants support most of Alaska’s nonprofits, which employ tens of thousands of people here.
“Alaskans should be deeply concerned,” said Sen. Löki Tobin, D-Anchorage. “Even though this has been communicated as a pause and an opportunity to evaluate federal spending priorities, the consequences of even this brief moment could be catastrophic across our state.”
Much of Tuesday’s uncertainty came from the way that the freeze was announced with few details on Monday.
At the start of Tuesday, it wasn’t clear how the order would affect hundreds of millions of dollars in public school funding or more than $2 billion in Medicaid funding that comes to the state each year. Clarifying memos released throughout the day reduced but failed to eliminate the anxiety.
“I can tell you, my constituents back home certainly have thoughts about it. Our phones have been ringing off the hook all morning, wondering what it means, how long it’s going to last,” said Sen. Lisa Murkowski, R-Alaska, as she spoke to reporters at the U.S. Capitol.
With firm information in short supply, rumors spread on social media, including one post incorrectly claiming that food stamp benefits through the Supplemental Nutrition Assistance Program would be paused at 1 p.m. Alaska time, the official start of the freeze.
“SNAP is not affected by this temporary pause. Anyone who currently has SNAP benefits will continue to receive them. Anyone who is approved during the funding freeze will also receive their approved benefits in that time,” said Alex Huseman, a spokesperson for the Alaska Department of Health.
The University of Alaska, which has already directed some federally funded scientists to stop work under a separate spending freeze, said that for now, “we’ve advised employees to continue with their business and operations as usual.”
The university doesn’t believe GI Bill benefits or federally funded student loans will be affected, a spokesperson said.
The U.S. Department of Education issued a statement saying that the freeze will not affect formula-funded programs that pay for a large part of public school education in Alaska, but that still leaves some programs vulnerable, such as those that support teacher training or aid homeless students.
By the end of Tuesday, it still wasn’t clear what spending would be paused and what would continue.
Lon Garrison of the Association of Alaska School Boards said his organization is seeing “a lot of consternation about this from our members and certainly within our staff, because we implement so many grant programs that are designed really to focus on the conditions for learning for students within each school district. So we’re pretty worried about it, and obviously it would have a big impact in our ability to work with districts on those things.”
In the state Capitol, where lawmakers are debating the size of next year’s state budget, senators spent the morning considering Gov. Mike Dunleavy’s proposed budget, which would spend from savings in order to increase the size of the 2025 Permanent Fund dividend.
The governor’s budget proposal would leave about $500 million in the Constitutional Budget Reserve, the state’s principal savings account.
Pausing federal Medicaid reimbursements for just a month would require the state to front several hundred million dollars to maintain cashflow until federal payments resume, said Alexei Painter, the Legislature’s chief budget analyst.
“That’s why we need to keep some money in reserve, not just for that regular cash flow, but when events like that happen,” he said.
Painter’s comments came early Tuesday, when it was uncertain whether Medicaid would be affected by the freeze.
Later in the day, federal budget officials issued a memo stating that they don’t intend to affect that program, but legislators said they remain cautious — they don’t know what will come next.
Will federally funded highway construction projects be affected?
“Possibly,” Transportation Commissioner Ryan Anderson said between meetings on Tuesday in the state Capitol. “There are a lot of questions right now.”
The office of Gov. Mike Dunleavy released a general statement in response to questions, saying that his office is communicating with the White House Office of Management and Budget.
“It is our understanding (that) programs providing direct benefits to individuals are not subject to the pause and that federal OMB is working quickly with their agency partners to evaluate programs. We are awaiting further guidance from federal OMB and continuing to assess potential impacts as further information is released.”
Even with a court ruling that temporarily pauses the freeze, Andreassen of the Alaska Municipal League said he expects nonprofits statewide to hit the brakes.
Many operate with limited financial reserves, and he expects many to halt work if there’s a risk that the federal government will not reimburse them via grants that were promised.
“I think that everybody’s probably risk-averse during this period,” he said. “It’s like, just lay down your pencils, time’s up until we hear more, and then you’ve got to figure out, what do you do in the meantime?”
James Brooks is a longtime Alaska reporter, having previously worked at the Anchorage Daily News, Juneau Empire, Kodiak Mirror and Fairbanks Daily News-Miner. A graduate of Virginia Tech, he is married to Caitlyn Ellis, owns a house in Juneau and has a small sled dog named Barley.
