Ten communities drop city insurance

Municipal League anticipates another dozen to follow

Posted: Thursday, December 02, 2004

Ten small communities across the state have recently discontinued their municipal insurance due to a decline in assistance from the state and rising insurance and fuel costs.

Another dozen could follow within the next few months, according to Kevin Smith, executive director of the Alaska Municipal League Joint Insurance Association.

Smith would not release the names of the communities affected, but the league confirmed that Juneau is not one of the 10 cities. Juneau expects to pay roughly $12 million in various forms of insurance in 2005, according to Juneau Finance Director Craig Duncan.

The league's insurance program covers workers' compensation, natural disasters, third-party injury liability and other costs for about 134 Alaska cities, boroughs and school districts.

Gov. Frank Murkowski vetoed $22 million in municipal revenue sharing last year, which had helped many communities pay insurance costs in the past. Combined with the rising costs of fuel, the cuts have made it impossible for some cities to continue paying.

"In the past when they could count on a municipal assistance and revenue-sharing check, we'd carry them until the state checks were cut," Smith said. "They can't pledge zero, so I can't carry them. We carried them as long as we could and finally had to pull the plug."

In an effort to offset the cuts, Murkowski sent $15 million to cities that same year in one-time federal money from President Bush's Jobs and Growth Tax Relief Act, with minimum payments of $40,000 going to smaller communities.

This year Murkowski is asking the Legislature to approve $6.8 million in aid for about 125 small, rural communities. The program would provide $25,000 for communities with fewer than 100 residents, $50,000 for those with 100 to 500 residents and $75,000 for those with 500 to 1,200 residents. The program is intended to offset rising fuel costs.

"These communities have experienced higher energy costs than the rest of Alaska and they have no tax base and insufficient commerce to support a sales tax," Murkowski said in a statement released in October.

But it is unlikely that the revenue-sharing program will be reinstated this year as it existed before the cuts, said Becky Hultberg, a Murkowski spokeswoman.

"Things are still open," she said. "We are still considering alternatives. The state this year will have some very important priorities, education being one of them. It is unlikely that insurance for cities would rise to that level. But the governor has recognized the needs of some of the smaller communities due to the disproportionately high cost of fuel and is making an effort to address those needs."

The Alaska Municipal League has made the reinstatement of some form of revenue sharing for cities its top priority this legislative session, which begins in January, according to program and policy coordinator Kathie Wasserman.

Wasserman, the former mayor of the Southeast coastal community of Pelican, said some communities drop their insurance before cutting other costs because citizens often are not informed.

"The mayor and councilmen have to react to their communities," she said. "If the roads aren't plowed, you'll get calls every day. They're not going to call you about the lack of insurance because it's not going to touch them."

Insurance costs have increased substantially, according to Mike Black, director of the state's Division of Community Advocacy, who also said the loss of insurance is often not visible to the public.

He said communities without insurance would have to appeal to the Legislature, Alaska's congressional delegation or some other state or federal agency for assistance. Black said he's advised communities with municipal employees to maintain their workers' compensation insurance policies because injured workers can sue the city, resulting in large court settlements.

"It's required under state law that an employer have workers' compensation insurance," he said. "We tell them that's something you have to retain."

• Timothy Inklebarger can be reached at timothy.inklebarger@juneauempire.com.

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