While the borough budget usually draws lively debate, this year puts the assembly in a particular pickle. Because of the COVID-19 pandemic, the borough is expecting a significant drop in revenues, which leaves a shortfall that the administration and assembly will have to find some way to cover.
Most of the time, that would be taxes. But there is one other possibility this year: federal relief funds. Since March, the federal government has been working on distributing money to businesses, individuals, and states to help with the impact of the pandemic. Alaska so far has received about $1.5 billion.
But there are particular ways those funds can be used. For example, until the Secretary of the Treasury made an exception, they couldn’t be used to pay police and firefighters. Cities and boroughs, including the Kenai, have lost revenue through declines in sales taxes and property taxes as fewer people shop and eat out and properties—particularly oil and gas—have lost value.
The proposed budget includes about $82.8 million in general fund spending, which covers items like the borough’s portion of school district funding, the landfill, and general government operations. Service areas like Central Emergency Services have their own budgets, paid for by property taxes. Borough Mayor Charlie Pierce told the assembly that unless the rules change to allow municipalities to use those federal relief funds in more ways, increasing taxes may be inevitable.
“I think there’s not a better way in this nation to utilize CARES money than to be allowed to use it to offset revenue losses,” Pierce said. “And if they allow us to do that, I think it’ll soften some of the overall effects of what we’re faced with. But if they don’t, then you’re looking at a minimum of 6 mills over the next three years. If you look at the forecast that we’ve put together, to bring the fund balance back up, it’s going to go to $6 million. To bring it back up to over $14 million, it’s going to take six mills for the next three fiscal years.”
The Alaska congressional delegation is working on a bill to address that issue. Republican Sen. Dan Sullivan is sponsoring a bill to allow governments to use the relief funds to address revenue shortfalls related to the pandemic. The bill hasn’t gotten a hearing yet, but Sullivan says he hopes to get it moving soon.
“I’d prefer to move it a lot sooner than later, and I’m sure you guys would too. This bill has been discussed at the highest level of government. There’s a lot of interest, a lot of bipartisan interest, and I’m going to continue to press on it because I think it’s one of the most important issues facing our state now,” Sullivan said.
One of the main issues is that the borough will end up spending down its fund balance. That fund is used for items like unexpected costs or making payroll before revenue comes in. Without a healthy balance, the borough wouldn’t be able to pay its bills.
The pandemic isn’t the only pressure on the borough, though. The state has also shifted more costs to local governments, including school bond debt reimbursement and community assistance.
The assembly has to approve a budget before the end of its fiscal year, at the end of June. The assembly meets June 2 and June 16 to hash out the remaining details with budget items. More information about the mayor’s proposed budget can be found on the borough’s website under the finance department.