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

On Oct. 6, Haines Borough voters surprised many assembly members by approving a one-time, $450,000 draw from the borough’s permanent fund principal to reimburse savings accounts for unanticipated costs associated with school bond debt payments. The proposition passed 634-561. Assembly members must now decide what to do with the money.

“I was surprised. I was disappointed,” newly reelected assembly member Jerry Lapp said. This summer, the assembly approved putting the proposition on the October ballot in a 4-2 vote. Lapp and assembly member Paul Rogers voted against the measure.

At the time the ordinance passed, assembly members Brenda Josephson and Gabe Thomas said they supported the ordinance because the decision should be made by voters, but both expressed reservations about depleting the permanent fund.

“I was a little bit surprised that it passed. I think there didn’t seem to be a lot of support for it in the assembly, and so when the voters supported it and passed it, it wasn’t surprising, but I was mildly intrigued by the outcome,” said outgoing assembly member Zephyr Sincerny, who originally introduced the ordinance that put the proposition on the ballot.

Sincerny said he thinks the ballot measure’s passage is evidence of democracy at work.

“I’m really glad that the assembly decided to put this question to the voters. I think it was a good opportunity for the community to give input and make decisions about their money and what to do with it,” he said.

Some theorize that voters may have been under informed about the issue when they went to the polls.

“Maybe on our end, we didn’t get enough information out there. I don’t know if people knew what they were voting on,” Thomas said.

Sincerny said he thinks there were resources available to voters. He said he received some calls ahead of the election with questions about the proposition.

“As folks vote, I trust that they are educating themselves to the extent that they need to, to make an educated decision,” Sincerny said.

The proposition asks, “Shall the Haines Borough withdraw $450,000 of the permanent fund principal to reimburse the areawide general fund for a portion of the FY20 and FY21 school bond debt payment?”

One potential area of confusion for voters may have been that, although the borough has had to scramble the past two years to find a way to cover unanticipated school bond debt payments, it has found a way to do so in both years.

Traditionally, the state paid for 70% of municipal school bond debt with the municipality responsible for the other 30%. Last year, Gov. Mike Dunleavy reduced the state’s share of school bond debt payments to 35%. In that year, the borough covered the unanticipated costs by spending down savings accounts.

When drafting this year’s budget, borough staff had anticipated a repeat with the state paying 35%, but then the governor eliminated all state support for school bond debt.

The complete loss of state support left the borough with a roughly $450,000 deficit, which it offset using a combination of capital funds and CARES Act money.

Rogers said the assembly approved the ballot proposition when how to pay for school bond debt was still an open question.

“You put something out there because you think you have a problem, and then the issue is resolved, but people don’t realize that the cause of why it was put out there no longer exists,” he said.

Once election results are certified on Oct. 27, staff will sign for the withdrawal of money from the permanent fund and the budget will need to be amended to reflect the transfer of funds to the areawide account, borough chief fiscal officer Jila Stuart said. After that, it will then be up to the assembly to decide what happens.

Current and newly elected assembly members have a range of ideas about what should be done with the money.

Caitie Kirby, who was vocal in her support for the proposition while campaigning for assembly, said one option is adding money back into the current budget.

“I think probably the first thing to do is sit down and see which essential services we cut the most to pay for school bond, and see which will be in the most dire straits and start putting money back into those,” she said.

Another option would be to return the money to the permanent fund principal, according to Rogers.

“The purpose of (the proposition) was to help fund the school and the school has been funded in the current budget, so I don’t know that there is a purpose for it at this time,” Rogers said.

Under borough charter, the permanent fund’s principal consists of invested income from land sales. Each year, a certain amount of the fund’s earnings must be reinvested in the principal to protect it from the effects of inflation. The remaining income can be used for borough expenses. The fund’s principal can be spent, but only with voter approval.

Rogers said he worries the draw from the principal will deplete the money it contributes to support borough expenses. At present, permanent fund earnings add roughly $300,000 to the budget each year.

Stuart said the $450,000 draw from the fund principal will reduce earnings by somewhere between $10,000 and $16,000 annually.

Others say returning the money to the fund would ignore the will of the people.

“Returning it to the fund would essentially nullify the proposition and the vote. The proposition asked, ‘Should it be used for school bond debt reimbursement?’ To me that’s clear,” Sincerny said, adding that it would be better to hold onto the money for next year when budget pressures are likely to persist and there’s no assurance of another federal aid package.

Lapp and Thomas expressed similar sentiments.

“I think people were thinking COVID-wise,” Thomas said. “People want the school funded and other essential services funded.”

Lapp said though he didn’t support the proposition, he thinks the money could be useful next year.

“I think next year, we’re going to be hurting worse than this year because our revenues are going to be way down,” Lapp said. He said the borough should also replace money taken from the permanent fund through land sales.

Both current and incoming members agreed that the question of what to do with the money will require a conversation at the assembly level.

“I think that’s a much larger conversation that we, as a legislative body, need to have together,” newly elected assembly member Cheryl Stickler said, adding that she will need more information to reach a final decision.

The next regular assembly meeting is Oct. 27. At the meeting, Stickler, Kirby and Carol Tuynman will assume seats currently occupied by Sincerny, Josephson and Stephanie Scott.