Gov. Frank Murkowski could have ignored a legislative committee vote that took nearly $3 million in federal funds from rural communities.
But the administration will instead wait until October when additional federal funds become available to fix the shortfall.
Murkowski considered reversing a Legislative Budget and Audit Committee vote last week to dole out $14.7 million between local governments that lost state municipal assistance.
The Republican governor said he decided not to take that route in an effort to maintain good relations with the GOP-controlled Legislature.
Instead, he will make a request in October to ensure that the rural communities get the money they lost due to the vote, Murkowski said Thursday.
"Obviously, our intent is to work with the Legislature," Murkowski said.
The administration had vetoed $37 million in state assistance to local communities and proposed using federal funds from a tax break approved by Congress as a one-time phase out of the program.
Murkowski proposed dividing $14.7 million based on the amount of money local governments received from the state's fiscal 2003 revenue sharing and Safe Communities program.
Under the formula, larger communities such as Anchorage would have lost some funding in order to ensure a minimum "floor" of $40,000 for the smaller communities.
But last week, the Legislative Budget and Audit Committee rejected the administration proposal to guarantee a floor and instead approved a plan that favored the larger communities.
That means Anchorage would receive about $1.3 million more than the administration proposed. The city of Fairbanks and the Fairbanks North Star Borough received about $420,000 more, and Juneau and Matanuska Susitna boroughs were also spared from significant cuts.
In all, about $2.9 million was shifted to the larger communities by the committee, which voted 6-3 to change Murkowski's proposal.
In the village of Ouzinkie, which relies on municipal assistance for a quarter of its budget, the cuts will be felt deeply, said Tom Quick, utility manager and council member.
Already bracing for a $12,000 reduction under Murkowski's plan, the village could instead lose more than $27,000. After years of cutting, there's nowhere left to cut the village budget, Quick said.
Lawmakers who supported the plan argued it was a fair way to divide the money and that the previous formula was arbitrary.
As municipal assistance has been cut in past years, smaller communities have received a larger percentage of the money than larger cities and boroughs, said Senate President Gene Therriault, a North Pole Republican.
Therriault is a member of the Legislative Budget and Audit Committee, an interim committee that has the power to appropriate money when the Legislature is not in session, and voted for the proposal.
Under state law, the governor could have waited 45 days and gone ahead with his original plan anyway regardless of the legislative committee vote.
"Historically, if you look at all governors, they've been reluctant to do that," said Therriault.