Budget Angst

The budget is taking most of our attention these days. I thought I would talk a bit about some of the issues we are dealing with. The Assembly must pass a balanced budget each year, and shortfalls in property and sales taxes present a fiscal challenge. The lag in revenue collections means the shortfalls will hit us hardest in FY 10 - beginning in another year. At that time our Finance people predict at least a 5 million dollar deficit, and higher in future years. We will have to balance the budget either by cutting services or raising taxes, and in hard economic times, raising taxes really isn’t an option.

Against this backdrop the Assembly is being asked to fund a number of very worthy projects from United Way, the Affordable Housing Commission, the Juneau Economic Development Council, the Juneau Arts and Culture Center, the Juneau School District, Care a Van, funding for rebuilding McPhetres Hall and preserving the Russian Orthodox Church. At some point this year the school district will ask us to put several school bond issues on the ballot for next October to renovate schools. If the Assembly and voters approve the debt service mill levy - which means your property taxes – will increase.

The city does have budget reserve funds. We are much better off than many cities down south. We have something like 4 million in emergency reserves and something like 10 million in the sales tax budget reserve. Those reserves, by the way, impact the city’s bond rating. Drain the reserves and the bond rating goes down and borrowing costs go up. I believe the manager will propose funding part of the deficit through cost cutting and part through the budget reserve. We could do that for several years if things did not get worse.

There are other complexities. Large amounts of our budget go to capital projects: schools, the pool, a new computer system, the parking garage, the new public works shop and many others. You can view this year’s Capital Improvement Projects (CIP) proposals which were presented at our last Public Works Meeting. http://www.juneau.org/clerk/PWFCAGENDA/documents/CIP_Recom.pdf. This file is useful because it includes funding sources – sales taxes, water funds, harbor, port and cruise ship fees and state grants.

When we go to the voters to ask to continue various sales taxes, we tell them that what they are approving is “intended” to fund this or that project, but there is not any legal obligation. In Alaska most dedicated taxes are unconstitutional. We can only say we “intend” to spend the money on project X or Y. Legally, we could take money that we told you we were going to use to fund project X and do something else. We could fund operational shortfalls by canceling building projects that voters thought they “approved.” If we do that – I wonder what the likelihood is that the sales tax will be approved the next time around.

This recital is oversimplified, but you get the idea. The bottom line is less money means jobs and/or services have to be cut. To the extent we hold the line or reduce funding this year, we won’t have to cut as much next year.

As I said, the good news is that the city is in a lot better shape than many. If the economy turns around quickly, all this angst goes away. If it stays down or declines further, our deficits will increase. If oil prices stay low, revenue sharing from the state will decline, increasing our deficits even more.

So just like each of us individually, CBJ needs to live as frugally as possible for the moment and hope things turn around so we won’t have to sell part of the farm next year and all of it the year after that. We’re OK for the moment. We’ve got some money in the bank to help us through a few hard years. Hopefully, that will be enough.

Juneau continues to await the resolution of our state senate seat. I’m sure we all have opinions there. Mostly I am trying to focus on the city and leave that battle to others—but it certainly can be distracting. As more and more names are discussed, inevitably Assembly members’ names get tossed out. Jeff Bush’s is prominent in that mix. I assume the Mayor’s name is there, too, maybe Bob Doll’s. Somebody might have even said “What about Anderson?” At which point everyone looks at each other and says “Nah.”

More importantly we are awaiting the final budget decisions of the state. Those seem to change daily so it is hard to make firm plans until the final bills are both passed and signed. Wednesday the 15th at 5:30 the Assembly Finance Committee will meet and continue its hearing of funding requests for the coming year. Currently, Johnson Youth Services and the Youth Activities Board will present their requests. When the agenda is posted it will be at http://www.juneau.org/clerk/FC.php

Tuesday the 14th at 7pm the Planning Commission meets and there is a hearing on another proposed WiMax tower—this one downtown on Capital Street. There are some interesting applications in the consent agenda on development in Lemon Creek and at the Rock Dump. It’s worth a glance at http://www.juneau.org/plancomm/Agenda041409.php