Governor cuts municipal assistance

Posted: Tuesday, June 10, 2003

JUNEAU (AP) Gov. Frank Murkowski is cutting $37 million in state aid to local communities, but he'll make up for part of that by giving them $15 million in federal dollars.

The cuts announced Monday are part of about $130 million in vetoes Murkowski is expected to make to the state budget for the 2004 fiscal year that starts in July.

''We feel that municipalities are in much the same position as the state,'' Murkowski Chief of Staff Jim Clark said at a news conference Monday. ''Like we are doing at the state level, they are also going to be needing to tighten their belts.''

''Obviously the municipalities have taxing power and can fund their main priorities using that taxing power,'' Clark added.

The governor will veto $22 million the Legislature had appropriated in municipal revenue sharing and safe communities funds. That's money communities use to help pay for services like police and roads.

He's also vetoing $15 million in capital matching grants, which communities can use for repairs or construction projects.

And he does not plan to fund the programs at all in the following year, fiscal year 2005.

Alaska Municipal League Executive Director Kevin Ritchie said the $22 million the Legislature had budgeted for revenue sharing and safe communities was already a reduction of $7 million from the current year's spending. So communities will see about $44 million less in state funds in the coming year than they did this year.

That cut will be partly offset by federal money states are receiving as part of President George W. Bush's recently approved tax cut package.

Alaska is slated to get $25 million in federal dollars in July and another $25 million in October, Clark said.

No definite plan is yet in place for the $25 million coming in October, Clark said. But the state will send $15 million of the initial infusion of federal cash to the municipalities to soften the impact of the state cuts.

As for the other $10 million, Clark said he'd talk about that later in the week. Murkowski has said he will announce the rest of his vetoes Friday. The governor's office announced the cuts to municipalities earlier to give local governments time to react before a June 15 deadline for setting their property tax rates.

Clark had warned lawmakers in the last days of the legislative session that the governor would veto spending if they failed to pass a statewide sales tax.

The municipal league had campaigned against a sales tax because many communities rely on it to fund local government. But the organization also lobbied to prevent the budget cuts to municipalities.

Communities in many parts of the state are struggling economically to cope with a downturn in the fishing industry, the AML's Ritchie said.

''This obviously creates another challenge for those communities,'' Ritchie said.

If communities were planning to use the capital grants program to match grants from federal or other sources, the cuts could represent an even greater loss of funding, Ritchie said.

He predicted the reductions will be particularly painful for very small communities that have little local tax base to tap to make up for the lost money.

''The small communities in rural Alaska, economically it's unclear whether they can survive without some sort of support from the state,'' Ritchie said.

Office of Management and Budget Director Cheryl Frasca said the federal money will be distributed to communities according to a formula that is similar to the state revenue sharing formula, but it will be tweaked slightly to provide a bit more money to smaller communities.

Clark said the governor did not want to make the cuts, but he's trying to limit the draw on the state's $1.9 billion constitutional budget reserve account to $400 million next year.

Otherwise, the account will be empty in 2006, and massive cuts will be required, Clark said.

The governor is trying to stretch the budget reserve fund out for five years, at which time he hopes resource development projects begin to generate more income for the state, Clark said.

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