Ever since Governor Mike Dunleavy announced his proposed budget, it has been a hot topic of debate across Southeast Alaska. The proposed budget does offer a full PFD to all Alaska residents, as well as supply “back pay” for PFDs that were smaller than usual, but it also makes some serious cuts to public education and the Alaska Marine Highway System. Many people in Wrangell have wondered how the proposed budget could affect the city. To discuss these concerns, a town hall meeting was held at the Nolan Center last Wed., March 6.
“I’m confident that the majority of us thought that cuts would be implemented over a period of time, allowing for citizens and local governments the opportunity to adapt,” Mayor Steve Prysunka said in the meeting. “Governor Dunleavy is honoring his pledge to balance the budget and return the PFD payout to traditional levels, but he is unfortunately balancing the state’s budget by robbing municipal budgets. He is proudly announcing that he is not going to have to devise any type of state revenue source while he is leading communities with no option but to either raise local taxes and fees, rob municipal reserve funds, or outright cut services to our citizens.”
State Representative Dan Ortiz was present at the town hall meeting to give the audience some context on Alaska’s financial situation, and to go into some detail on what the proposed budget means for several state services. Adjusted for inflation and population growth, he said, Alaska’s budget is the smallest it has been in almost 40 years. Despite this, the state government has been operating with a deficit for several years. As many people are aware, Alaska’s economic fortunes are heavily tied to the oil industry. When the price of oil began to decline in 2014, Ortiz said, that hurt the state’s revenues. Revenue is down to levels not seen since the 1990s, he said. The state had a large surplus of money thanks to a very good economic period from 2006-2013, he said, but those savings are all but depleted.
“We’ve burned through a lot of those savings monies, about $14 billion in savings over the last six years or so,” Ortiz said.
Ortiz also showed the audience a graph comparing the funds several budget items would receive in the proposed FY2020 budget, compared to the current FY2019 budget. The PFD fund currently sits at approximately $1 billion. The proposed 2020 budget would hike the fund up to just under $2 billion. This increase in funding would help ensure Alaskans receive a full PFD payment of about $3,000 a person, as well as help with the governor’s campaign promise of back pay. PFD payments equal about 37 percent of the total budget, Ortiz said, and is $900 million higher than the next largest item.
That next largest item is K-12 education, which is seeing some major cuts in the proposed budget in the amount of about $300 million. This would decrease education funding from roughly $1.3 billion to $1 billion. Adding in proposed funding cuts to the University of Alaska, the total proposed cuts increase to $524 million. Other proposed cuts include $578 million in funds diverted to municipalities and $336 million to health and social services.
The Alaska Marine Highway System is also facing some hard cuts to the tune of $64 million. The state-operated ferry system, which services communities all over coastal Alaska, has already faced budget cuts in previous years. The marine highway has dealt with high operating costs and high ticket prices for quite some time, as well. These proposed cuts, however, could be the proverbial final nail in the coffin.
“They say that they’re going to, under his [Dunleavy’s] proposal, the marine highway system will shut down at the end of September,” Ortiz said. “We will no longer have a marine highway system if the governor’s proposal goes forward.”
Ortiz went on to say that there are basically five options available to balance the budget: Budget cuts, use of savings, shrinking the PFD, taxing industries and businesses, or taxing Alaskans themselves. He said that the options of new taxes have been taken off the table by the governor this year. They cannot use savings anymore, he added, as there are no more savings left to use. What it comes down to, he said, is a choice between a full PFD and harsh budget cuts, or a smaller PFD and lesser budget cuts.
After Ortiz spoke, Borough Manager Lisa Von Bargen took the microphone to explain how these cuts could hit Wrangell, in particular. Under the proposed cuts, she said, Wrangell could lose approximately $1.3 million. This breaks down to $838,813 cut from the Wrangell School District, $307,405 cut in the shared fisheries tax, $168,875 from school bond debt reimbursement, and $25,000 cut from library and museum grants. Von Bargen added that this was a conservative estimate, as the school district could reportedly lose as much as $1 million. She also added that there are 18 people in Wrangell who are employed by the marine highway system. Losing the ferries would have a trickle-down effect that could seriously hurt Wrangell in a number of ways.
However, there was a bit of good news when it came to education cuts. Von Bargen said that Wrangell did have some extra money to buffer the loss of revenue in the form of Secure Rural Schools money. Secure Rural Schools, or SRS, is a federal program that comes from national forest receipts. Wrangell has been fairly prudent with this money over the years, she said, and has been setting some of it aside in case of emergencies. Von Bargen said they have a reserve fund of about $3.2 million to help offset costs. This reserve won’t last forever, she said, but it could help in the short term.
“It’s possible to be able to use the SRS fund to bridge the education cuts that are being proposed for the short term, but we have to come up with a long term solution,” Von Bargen said. “The cost shifts from the state to Wrangell of just over $1 million. So what that means is we have to do one of four things. At some point we have to cut education, or we have to cut general fund programs to help fund education in this community, or we have to increase taxes, or we have to do some sort of a combination of all those things in order to bridge that gap.”
After Von Bargen spoke, the floor was opened for community input. Wrangell resident Annya Ritchie asked Ortiz what the state was doing to bring in new sources of income, so Alaska would not be so dependent on the oil industry. A similar question was voiced by resident Jim Leslie. Ortiz responded that they are looking into ways to diversify Alaska’s revenue streams, but that is something that takes time. Alaska is rich in natural resources, he said, so the future could potentially hold more mining and logging, or even investing in natural gas. Prysunka added that the Southeast Alaska Power Agency is also looking into further developments in hydropower and even wind power.
One topic of discussion revolved around how the proposed budget could affect people on fixed incomes around the state. Carl Carlisle, Wrangell resident, said that he was very concerned about how this would affect the poor. Pushing people further into a corner with cuts to services, he said, would only lead to an increase in crime, the underground economy, and poaching across the state.
Several community members who spoke up said that they would rather have a smaller PFD than to see these budget cuts. One woman said that she and her family could expect $12,000 from a full PFD, but that would not be enough to keep the ferry running or to cover the cuts to the education budget. Others agreed that they would be okay with a smaller PFD. Some even voiced support for new taxes.
“Personally, I think that Alaska’s got to quit giving everything away for free,” said resident Todd White. “I’d rather pay my taxes in Alaska where I can see it (expletive) away in Alaska versus (expletive) away at the federal level.”
Other members of the community were less supportive of the idea of new taxes, but the general consensus among those who spoke up was that a full PFD was something they could do without in the name of less drastic cuts. The marine highway was a point of division amongst the audience. Some called it an acceptable loss, others saw it as a necessary part of life in Southeast Alaska. The meeting went on for about two and a half hours.
Von Bargen assured the community that this town hall meeting would be the first of many as the city begins putting together its new budget, which is expected to be completed by July.
Reader Comments(0)