YES he can because he has line item veto power. 
Call the capon up and tell him to go ahead and do it -- effective this year.   

The people in the Juneau area in 1999 voted 2 to 1 against using Permanent Fund earnings to run state government.

But what's going on he doesn't have the testicles to use it because he wants the Legislature to do the job for him.

So the legislature becomes the bad guys and he walks off smelling like a rose.

If you were Gov. Walker you would do the same thing, because that is the way things are done.