At its regular meeting Tuesday, the City and Borough Assembly met with returning Rep. Dan Ortiz (I-District 36) to talk about the state budget.
He had previously stopped by on similar visits to the councils in Hydaburg, Metlakatla and Ketchikan, and was hoping to get input from Wrangell’s before the upcoming session, which begins next week.
“Marching orders, if you will,” he said.
The biggest issue on all legislators’ plates this session will be the budget deficit, which is hovering at around $3.6 billion this year. Revenues for the state largely come from its oil royalties and production taxes, which a combination of high prices and high production translated into a high point in 2007.
These persisted more or less for several years, plunging in the state since 2012 with a drop in both oil and production. State revenues went from over $9 billion that year to a little over $1.2 billion anticipated for this current fiscal year.
While oil prices are anticipated to recover somewhat, Ortiz pointed out the diminished production levels – which are expected only to continue to decline – mean the budget will not be saved through a rebound in that resource alone.
“They’re going to have to go way up before we get out of deficit spending levels,” he said.
The state was slow to adapt to ever-diminishing annual revenues, and as such has maintained a multibillion-dollar deficit for several years running, drawing on savings to make up the difference. At present, the remaining undesignated budget reserves at the Legislature’s disposal would be exhausted within little more than a year’s time if spending is left as is. Going forward, talk among legislators has been indicating a shift to the structure of Alaska’s Permanent Fund earnings, as well as implementation of a combination of income, fuel and statewide sales taxes.
Weighing in, Assembly members were strongly against implementing a sales tax. At seven percent, Wrangell’s is already among Alaska’s highest rates, which would stack up with any instituted at the state level.
“We’ve even sent resolutions against that,” Assembly member Becky Rooney pointed out.
Fellow member Dave Powell, himself a business owner, pointed out a sales tax would likely be harmful to local sales of nonessential items. “Ticket items are going to go right out of this town,” he hypothesized. “It would help the state, but you’re going to destroy some towns.”
Mayor David Jack saw an income tax in a more favorable light, pointing out the state had a number of seasonal workers and project staff who earned their livings here but lived elsewhere. “If they work in this state they should pay an income tax.”
Assembly member Patty Gilbert wanted to know whether the state would be able to ensure continued revenue sharing with municipalities, funding levels for which has dropped off markedly in recent years. Ortiz replied the arrangement would likely depend on whether a stable source of income could be hammered out for the long-term.
“That uncertainty trickles down to communities,” Gilbert noted, particularly when it came time to drawing up municipalities’ own yearly budgets.
Members Steve Prysunka and Mark Mitchell pointed out agency funding was still quite high compared to 15 or 20 years previously, after a sharp rise in the decade following 2005. Agency operations are distinct from capital project and operating budget items, which have been the most impacted by the past three years’ cuts.
Ortiz pointed out that, when adjusted for inflation, spending levels now are about on par with those in the early 1980s. The latest growth coincided with a combination of health and education spending, some of which was to meet unfunded federal mandates. Still, he admitted: “Government got fat, there’s no doubt about it.”
“I’d like to see those cut a little more. I think you’re going to have to cut till you’re bleeding,” said Mitchell. After that, he would be more amenable to additional taxes. He also recommended the Legislature look at encouraging business in the state by streamlining licensing and regulatory requirements where possible.
On the upside, Ortiz said there were some potential positives to find within the general gloom. “I’m positive about the prospects of this upcoming session.”
Funding for Shoemaker Bay Harbor float replacement, for instance, will be a priority for Ortiz during the coming session. The $5,000,000 Wrangell’s Harbor Department requested of the Department of Transportation and Public Facilities’ harbor grant program has been included in the governor’s budget draft released in December. The amount will need to run the gauntlet between the House and Senate bill drafts before a final budget is drawn up.
“As long as that money stays in this year’s budget, that’s gonna happen,” Ortiz told the Assembly.
Newly appointed to serve on the House Finance Committee, he felt he would be well-placed to advocate for the funds’ retention. Ortiz noted the money should prove easier to defend now that the amount has been allotted than it would be to request its addition.
His other regional concern would be to seek to preserve funding levels for the Marine Highway System, which saw cuts in the previous two budget cycles and has had to reduce scheduled services to coastal communities as a result.
In the audience for another item during the meeting, Stikine Inn owner Bill Goodale testified his business had been adversely affected by the shortened scheduling and several maintenance issues over the summer. He reckoned cancellations and reschedulings may have cost the business $100,000 in just one season, which would have been worse overall were it not for an unusually busy tail end.
“The ferry system seriously hurt us last year,” he summarized.
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