The Murkowski administration announced Monday it will save $37 million in the state budget this year by cutting funding to municipalities.
Chief of Staff Jim Clark said Gov. Frank Murkowski will use his line-item veto to cut funding for the Municipal Revenue Sharing Program, Safe Communities programs and capital matching grants.
About $1.06 million of that will come out of Juneau's annual budget, said City Finance Director Craig Duncan. About half of the $1.06 million will come from cuts to revenue sharing and the other half from the Safe Communities programs, formerly known as the Municipal Assistance Program.
Clark said the move is part of the administration's plan to reduce state spending to meet Murkowski's budget target of drawing no more than $400 million this year from the state's Constitutional Budget Reserve. The reserve holds about $1.9 billion and has been used in recent years to balance the state budget.
"We feel that the municipalities are much in the same position as the state, and like we are doing at the state level, (they) are also going to be needing to tighten their belts," Clark said.
City governments will have to tighten their belts by cutting programs or increasing local taxes, Clark said. He also noted that the administration is working to help communities receive federal grants to cover the cuts.
Kevin Ritchie, executive director for the Alaska Municipal League, said the organization opposes the cuts but will try to work with the administration to help bear the state's fiscal burden.
"What's best for municipalities in the long run really has a lot to do with what's best for the state in the long run, because we are a state of communities," Ritchie said.
The policy move could, however, hurt small communities that do not have a sales tax or property tax base, he said.
"(For) the small communities in rural Alaska, economically, it's unclear whether they can survive without some sort of support from the state, and then the question becomes: How does that economically impact the entire state," Ritchie said.
The Municipal Revenue Sharing program was started in 1969 to provide municipalities a portion of state's resources. The revenue sharing money is added to the general fund of each city's budget and used at the discretion of local governments.
The Safe Communities program is to be used for police protection and public safety services, fire protection and emergency medical services, water and sewer services not offset by user fees, solid waste management and other services.
Capital matching grants are used for projects that are partly funded by the state and partly funded by the city.
To help offset the impacts of the cuts, the state will provide a one-time amount of $15 million to cities from the $25 million the state will receive in federal money from the State Fiscal Relief Program section of President Bush's Jobs and Growth Tax Relief Act. Clark said the administration is not ready to say what it will do with the remaining $10 million.
"What we're trying to do is terminate the program, but do it in a way that is sensitive to the fact that (municipalities) would have one more year, at least with a little less than half the funding, to make decisions with respect to how they are going to use it and then realizing next year that this money won't be available," Clark said.
State Budget Director Cheryl Frasca said the state will receive another $25 million through the federal program in October, but Clark said the administration does not have plans on how to use the additional money, noting that some could be sent back to municipalities next year.
The state will use the revenue sharing formula to distribute the $15 million. Juneau will receive $563,163, making the overall cut to the capitol city about $500,000, according to the city. The city budget passed Monday night by the Juneau Assembly totaled about $195 million.
Juneau City Manager Rod Swope said the Assembly will meet again July 9 to discuss amendments to the city budget, to address the cuts to revenue sharing and to discuss any additional cuts made by the administration.
The municipal cuts are part of the administration's decision to trim $133 million from the budget this year because of the Legislature's unwillingness to pass new revenue measures to address the state's chronic budget gap. Cheryl Frasca, the state's budget director, said the administration plans to announce additional cuts by the end of the week.