Borough works to balance budget after pandemic year
The Kenai Peninsula Borough Assembly is in the middle of its annual budget process, and it’s facing some tough decisions of how to pay the borough’s bills.
Borough Mayor Charlie Pierce presented his proposed budget for the upcoming year to the assembly back in April, which includes about $8 million in spending from the borough’s fund balance. That would spend down the fund balance below the minimum recommended level, requiring the borough to bring it back up by fiscal year 2025. The assembly has been workshopping the budget since the end of April and has to finish it before July 1.
The COVID-19 pandemic pushed down revenues, and a few things have pushed up expenses for the upcoming year. That includes a number of new emergency services staff, according to budget documents. Emergency services are handled through services areas like Central Emergency Services and Nikiski Fire and Emergency Services, which have their own boards and budgets within the borough’s overall budget. This year, the departments across the peninsula have added 21 positions at various levels, including four in Nikiski, six at the Soldotna dispatch center, four at CES, five in the new Western Emergency Service Area, and two in Homer.
Part of the reason for that increase at the Soldotna dispatch center was because the state employees no longer work there. In the past, the state and borough have split the positions there, as the center serves the troopers in addition to the borough services. The state pulled its employees out, and now the borough has to pay for all the employees in that center.
Borough Finance Director Brandi Harbaugh said the center is switching to a fee-for-service model, in which the various departments that use the dispatch center will have to pay based on the number of calls they receive through it.
"The fee structure was built so that we are allocating the costs to those agencies: CES based on CES’s call volume for the last three years, an average of that, (The Alaska Department of Public Safety), the city of Soldotna, NOAA, Nikiski," Harbaugh said. "So looking at their average call volume for the last three years, they will be charged an amount.
Like most years, there are a couple of sources of contention, including how much the borough should contribute toward the Kenai Peninsula Borough School District’s operations. With a shortfall, the assembly may look for places to cut as well. However, there are also some areas where revenue might be higher than projected. For example, Harbaugh said there may be funding coming in from the federal American Rescue Plan that could be used to offset some expenses in either operating expenses or capital projections.
Keeping the fund balance up is important to keep the borough in good standing, which ends up reducing expenses overall when the borough gets grants. Harbaugh said if the fund balance stays down and the borough gets designated high risk, the finance department will have to do more reports and won’t get the same benefits.
"Our fund balance policy is important because we are considered a low risk auditee," Harbaugh said. "As a low-risk auditee, it impacts our operations every year in the cost of our annual audit. Not only does it impact that, but it changes the amount of reports the granting agencies require, it indicates to granting agencies that we are good and fiscally sound and good with the advances they provide."
Because of the COVID-19 pandemic, the finance department also projected a drop in revenue this year. It’s still not entirely clear exactly how the tax revenues will recover, but Harbaugh said in her presentation to the assembly that the borough administration is working with the school district on securing grant funds to help offset their expenses and make a plan to bring the borough back into fund balance compliance within the next several years.
The assembly is schedule to have its next hearing on the budget at its June 1 meeting.