For the first time, the Kenai Peninsula Borough is contemplating funding schools below the legal limit for contributions from local revenues set by state and federal law.
The kind of tough budget realities that in recent years have driven Kenai Peninsula Borough School District budget writers to cut teaching positions, increase class sizes and shave programs are now plaguing borough administrators, as well.
At Tuesday’s meeting of the borough assembly, Mayor John Williams’ administration introduced Resolution 2005-025, which proposed a local contribution of just under $35.5 million about $482,000 more than last year, but almost $1.3 million below the estimated $36.8 million legal cap on local contributions. Williams was in Washington, D.C., meeting with Alaska’s Congressional delegation and not at Tuesday’s meeting.
In early February, Williams told schools’ Superintendent Donna Peterson he was prepared to propose holding the line at the current year’s total, $34.68 million.
However, increases in Public Employee Retirement System costs associated with the maintenance budget and increases in the cost of property insurance required adding back the $482,000, according to Williams’ chief of staff, Tim Navarre.
The assembly won’t vote on the resolution until after the district’s proposed FY 2007 budget is presented on April 4. An ordinance actually appropriating the funds must be approved before June 30.
Assembly member Dan Chay, of Kenai, said that even with all the cost cutting and adjustments accomplished by the district, expenditures are going to increase 7.1 percent from this year to next. Unavoidable increases are driving spending upwards, he said.
If unchecked, a 7 percent annual increase would double the district budget in a decade, Chay said.
“Are we just kind of banking that it is not going to happen?” he asked Melody Douglas, chief finance officer for the district. “Or is my analysis really off, and if so, how?”
“There is the paradox we are living under and have been living under for 15 years or better,” Douglas said. “We operate under a formula that mandates how much our revenue is and we are required to operate within it.”
She called it “a financial vice” that is having an impact in district classrooms.
Chay said the borough and district each face similar dilemmas how to cover rapid increases in unavoidable costs.
“What I want to do is extend the conversation about funding at the cap to the underlying problems so that people are aware of what we are dealing with here,” he said.
On Wednesday, Douglas said district officials fully understand why the borough is considering a reduction in local contributions to schools, but there would be a cost.
“Funding at less than the cap will force the district to use more of its fund balance, which is a limited pool of funds,” she said.
It could also mean the loss of some 41 teaching positions across the district, essentially adding three children to each classroom at the grade school level, and cutting programs in high schools, she said.
Navarre and Douglas noted that the district budget numbers are preliminary and fluid at this point, and it is possible increased funding from the state could alter the equations enough to permit the borough to fund yet again to the cap. But assembly members said that that might not be possible forever.
In other financial business, the assembly heard from members of the Alliance of Concerned Taxpayers who delivered a 10-minute rebuttal to Mayor Williams’ 60-day transition report delivered to the assembly several weeks ago.
ACT members Ruby Kime and Vicki Pate said the group believed the mayor’s report “was biased in favor of higher taxes” and did not address lowering taxes and greater efficiency in government. They also took issue with the mayor’s claim that voters last October had been uninformed of the consequences of approving Proposition 5, which rolled back a 1 percent increase in the sales tax.
“ACT believes the public does get it and elected officials are the ones who do not,” Pate said.
Among other things, ACT officials said the assembly had allowed borough government to grow faster than the economy’s ability to pay, and that a well-managed borough could operate for less.
The group has called for an independent efficiency audit. They also want outside professionals to negotiate labor contracts.
Assembly reaction was mixed. Grace Merkes, of Sterling, said she thought the presentation was “well thought out,” and said she thought a lot of it was true.
Others took issue with ACT assumptions.
Pete Sprague, of Soldotna, asked Pate how she felt about spending to the cap on schools and how much the borough should cut that expenditure.
Pate said she believed the borough was currently spending $5 million over the cap. Kime said the maintenance budget included that $5 million.
Sprague said the maintenance budget was part of the to-the-cap expenditure, not a figure in excess of that.
“That’s a $5 million error (in ACT’s figures) in my estimation, which is pretty large,” Sprague said.
Navarre said there appeared to be other inaccuracies in ACT’s rebuttal, but that the administration would review the ACT report and respond in detail, probably by next week after the mayor returns from Washington, D.C.
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