Chilkat Valley News - Serving Haines and Klukwan, Alaska since 1966

There’s still a $400,000 hole in the proposed Haines Borough budget for the upcoming fiscal year. The deficit was created by the loss of state support for school bond debt. At a budget meeting on Monday, assembly members discussed options for addressing the shortfall.

In past years, the state typically paid for 70% of municipal school bond debt, leaving the municipality responsible for the other 30%. In FY20, the governor vetoed half the state’s funding for school bond debt reimbursement, leaving municipalities responsible for 65% of debt payments.

When drafting this year’s budget, borough staff had anticipated a repeat of FY20 with the state covering 35% of school bond debt.

Last month, Gov. Mike Dunleavy vetoed 100% of the state’s support of municipal school bond debt payments, leaving municipalities across the state with unexpected revenue shortfalls.

Borough chief fiscal officer Jila Stuart said she met with acting borough manager Alekka Fullerton and facilities director Ed Coffland to assess the possibility of redirecting capital funds earmarked for future projects or already completed projects to help cover the cost of school bond debt this year.

For capital projects and significant equipment purchases, the borough often sets aside funds a little at a time, Stuart said. The appropriations don’t lapse at the end of the fiscal year. They last until the project is completed.

For example, the borough has set aside roughly $100,000 for improvements to the Chilkat Center air handling unit. The project is very preliminary at this point, Stuart said.

Stuart said she and borough staff had compiled a list of incomplete projects and projects with leftover funds that could be used to cover roughly half of the $400,000 deficit.

Assembly members expressed support for the idea.

“This is actually very good. It takes care of half that debt,” assembly member Jerry Lapp said.

Assembly member Paul Rogers asked Stuart if she had ideas for how to cover the remaining school bond debt.

There’s a possibility CARES Act funding could eventually be used to replace revenue lost due to COVID-19, Stuart said. Sen. Dan Sullivan has introduced a bill that would make this possible.

Aside from CARES Act funding, other options at the borough’s disposal include spending savings and increasing cuts to services, Stuart said.

At the meeting, assembly members heard from representatives of Haines cultural institutions including the museum, library, Chilkat Center and Mosquito Lake Community Center about the potential for further cuts. In general, the assembly was told that additional cuts would substantially impact service to the community.

The borough traditionally covers payroll expenses for the Haines Sheldon Museum.

Museum board president Kelleen Adams said the museum could continue to function with staffing cut back to two full-time positions—the executive director and museum coordinator—for a total of $150,000. The museum board is discussing the potential for partial closure in the winter, but complete closure is not feasible due to collections management that must continue even when the museum is closed to the public, she said.

The library took a proactive approach to cutting costs.

“We did not want to hold back,” library director Carolyn Goolsby said. “We’ve already cut nearly $42,000.” The reduction eliminates the library’s lending materials budget, reduces hours for several staff positions, cuts programs and ensures the library will close one day a week for the year.

“We would say that we feel we’ve done about everything we can without really hobbling service in the library,” Goolsby said. Any additional cuts will have a significant, negative impact, she said.

The Mosquito Lake Community Center was eliminated early on in this year’s budget process. At Monday’s meeting, Friends of Mosquito Lake Community Center chair Dawn Drotos advocated for adding the center back to the budget.

Drotos said there’s potential for operational cost savings through infrastructure investments like finishing renovation of the facility’s ventilation system.

Community members have taken an active role in supporting the facility. Drotos said the community has formed a group to plow snow at the community center, which would save the borough roughly $4,000 a year. Residents are also working to turn the facility into a community garden and agricultural center, which has the potential to make the facility eligible for grants in the future.

Savings could bring the cost of the facility below $20,000 a year, Drotos said. “I think that’s a reasonable amount to ask for some kind of borough representation out the road.”

Assembly member Zephyr Sincerny said he thinks there is value in the borough continuing to operate facilities including the Chilkat Center, Mosquito Lake facility, pool, museum and library, which provide gathering spaces for the community. In addition to further cuts, the assembly should consider options including a small tax increase and use of the permanent fund to cover the deficit, he said.

At the May 12 assembly meeting, Sincerny made a motion to let voters decide in October whether to use the permanent fund to support this year’s school bond debt payment. The motion lacked support from other assembly members.

Stuart said one down side to this option is that, given the economic downturn, taking money out of the permanent fund may require selling assets at a reduced value. The value of the permanent fund had been roughly $9 million before the pandemic. At the end of March, its value had decreased by roughly half a million.

During public comment, multiple residents raised the possibility of a small mill rate increase to offset school bond debt costs.

Josephson and assembly member Gabe Thomas pushed back against this idea.

“I urge us to be careful with raising mill rates at this time because we don’t know what the state’s going to do. If we see an income tax or a sales tax, we’re going to do a triple whammy on the community,” Thomas said.

Josephson suggested those who feel like they can afford a mill rate increase this year use the spare money to support the services they value.

“I would hope that if we can figure out a way to pass this budget without raising taxes, the same people that were promoting that they would be happy to pay taxes will use those dollars to donate to their favorite causes or their favorite facilities,” Josephson said.

The next opportunity to testify on the budget is at the May 26 assembly meeting.