(Bloomberg) -- The University of Alaska will consider a rare declaration of financial exigency after lawmakers failed to override Republican Governor Michael Dunleavy’s veto of $130 million in funding for the system.

Dunleavy’s veto last month drove a nearly 41% cut in state funding, an unprecedented pullback that the University of Alaska warned could result in layoffs and slashed programs. Credit rating companies Moody’s Investors Service and S&P Global Ratings had warned the budget cuts could lead to a downgrade of the system of three universities with more than 26,600 students.

As part of the fiscal 2020 budget, Dunleavy had made about $400 million in line-item vetoes, slashing funding for Medicaid and senior benefits, according to his office. He said the cuts would help close the estimated $1.6 billion deficit the state faces.

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The University of Alaska Board of Regents will consider declaring financial exigency during a meeting on July 15, the system said in a statement. Such a declaration would allow the university system to rapidly cut services and personnel.

Democratic state lawmakers warned that the university cuts could cause young people to leave the state.

“These cuts are not about balancing the budget -- they’re about making sure Alaskans are living in fear and on the edge,” said Sara Hannan, a Democratic state lawmaker, who spoke during a joint legislative session on July 10.

To contact the reporters on this story: Amanda Albright in New York at aalbright4@bloomberg.net;Nic Querolo in New York at jquerolo1@bloomberg.net

To contact the editors responsible for this story: Elizabeth Campbell at ecampbell14@bloomberg.net, Michael B. Marois

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