Alaska cities seek solution for shortfalls

Leaders want state to share oil wealth with municipalities

Posted: Tuesday, January 02, 2007

While Alaska's oil-funded state government ponders socking extra billions away in savings accounts, smaller communities are struggling to pay for cops and community centers.

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The city of Hoonah is facing a $300,000 shortfall in a $1.2 million budget, said Jerry Medina, city manager.

"We've pretty much trimmed everything we can," he said. "The only thing left is salaries."

Like many small cities, little of Hoonah's services could be considered luxuries, Medina said. Police, public works, city hall and a harbor that's crucial to the economy leave the city with few areas to make cuts that won't hurt.

The state once shared significant amounts of its oil wealth with municipalities, and city leaders across the state are urging a resumption of that program.

"It's really sad, here we are on of the richest states in the union and we've got communities that can't even keep their doors open," said Kathie Wasserman, executive director of the Alaska Municipal League, an organization made up of Alaska's cities and boroughs.

Anchorage Mayor Mark Begich objected when municipal revenue sharing was cut in the Murkowski administration, and has strongly urged its resumption.

"We were very aggressively supporting it," he said. That was mostly "for the sake of small communities, which were having difficulty providing basic core services such as water, sewer and public safety," he said.

The state's oil revenues belong to all the people of Alaska, Begich said, not just state government.

But the money has mostly gone to statewide services, leaving it up to local taxpayers to provide local services. That's unfair to the mostly small, rural communities that have little in the way of retail sales they can tax - and in many cases not much property tax base either.

The league and individual cities have gone to the Legislature for help before, but Wasserman and others are hoping that they can have better luck this year.

In the past, legislators have acknowledged the local governments' need. Many, in fact, are former city and borough elected officials.

"The Legislature has always said to us 'you have to identify a sustainable funding resource,'" Wassermann said.

The league did, and in a November meeting in Juneau, they laid plans for a system which would distribute 6 percent of the state's natural resource revenues to municipalities. Each city or borough would receive $100,000, with the remainder allocated on a per capita basis.

The amounts would fluctuate, and if state natural resources drop, communities would suffer along with the state.

"When the state goes down, we go down; when the state goes up, we go up," Wasserman said.

Under that formula, each city and borough would have received $209 per person, along with the base amount, based on natural resources revenues last year.

Medina said that wouldn't have solved Hoonah's problems, but it would have been a substantial help in closing the budget gap.

"It would be a shot in the arm, it would be at least a third of it," he said.

The league's proposal would benefit the smallest cities more than the larger ones, but Wasserman said the some unfairness is going to happen no matter how the money is distributed.

"No matter how it is worked out, somebody is going to get less," she said.

The state's biggest cities, including Anchorage, supported the proposal, she said, despite receiving less per resident than the smaller cities.

"We think that's great that small communities have a baseline. We're fine with that, supporting our small communities is critical," Begich said.

The league proposal formula would give Hoonah a total of $325 per person, while giving Juneau $212 per person and Anchorage about $209 per person.

Gov. Sarah Palin's proposed budget, released Dec. 15, calls for no increases in revenue sharing, but does continue the current year's $48.1 million for local government support, including power cost equalization.

No matter how bad city financial situations become, Wasserman said it was unlikely any of Alaska's cities would discorporate. That process, she said, is so expensive and complicated that any city that could afford it would spend the money on services to residents instead.

What may happen, though, is they'd simply wither away while they cut services, closing facilities, and dying quietly.

• Pat Forgey can be reached at

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