The city of Kenai took another blow to its finances this year when Gov. Frank Murkowski vetoed state funding from the Revenue Sharing and Safe Communities programs Thursday.
Kenai was in line to get $153,075 in safe communities funding and $73,500 in revenue sharing money, of which $18,000 would have gone to health agencies in the community, like the Women's Resource and Crisis Center and Central Peninsula Counseling Services, said Larry Semmens, Kenai's finance director.
These cuts come on the heels of Big Kmart closing its doors this year denying Kenai about $800,000 in sales tax revenue a year skyrocketing insurance rates, an increased cost for the Public Employee Retirement System and dismal interest rate revenues.
At its meeting June 4, the Kenai City Council passed a fiscal year 2004 budget that included a 1.5 mill rate increase, cut four full-time and 14 part-time positions and called for spending $572,000 less than the previous year's budget. Even with cuts and increased taxes, the budget still was in the red to the tune of $485,477, which will be covered by the city's general fund.
That deficit jumped to about $700,000 with the governor's cuts.
The city does stand to receive a one-time allocation of funds from the federal State Fiscal Relief Program that will help offset the city's losses from the governor's cuts.
According to Kenai Mayor John Williams, even with the federal money, the city is still looking at about a $103,000 deficit for the fiscal year 2004 budget.
The council will have to decide how to address that deficit in its upcoming meeting Wednesday.
"It will be an after-the-fact discussion, since the budget has already been set," Williams said. "If anything, we will have to amend the budget the first meeting in July."
According to Williams, the council already has set the city's mill rate at 5 mills, so that won't be changed. In lieu of upping city taxes, the council could choose to further cut the budget, which is not an easy task when the budget is lean to begin with.
"A lot of people can say 'do this, do that, cut this, cut that,' but when they sit down and scope out the whole budget, nobody can come up with a really good answer," he said.
Williams said the city's administration already has instituted a hiring freeze in some departments and postured that the freeze could be extended to the police and fire departments, since those are the city's two largest.
"The bad part about that is both departments do an exemplary job," he said. "To detract personnel from the departments will detract from their ability to provide services to the community."
Rather than further cut the budget, the council could choose to pay for the additional deficit out of the city's savings an option Williams is not pleased with.
"I certainly don't like the idea of going to the savings account anymore," he said. "We're already in there for nearly half a million."
Any capital expenditure projects that aren't already under contract will likely be canceled in an effort to save the city money, Williams said. This includes the paving of McCollum and Aliak drives, since the governor also cut municipal matching grant funds.
The city expected to get $141,893 in matching grants this year, which would be used for paving projects. Without that money, the McCollum-Aliak project will not be done.
"We don't have enough money in the road improvement fund," Semmens said.
Semmens pointed out that Kenai could be further affected by other cuts the governor made to the state's budget, like the longevity bonus program.
"It will have an indirect impact in that those dollars won't be in our community," he said. "When the state government is cut drastically, it has an impact on the sate economy as a whole. What the impact of that will be for the city of Kenai, I don't know. It is unlikely that it will be a positive impact."
Semmens didn't voice any animosity against the governor for his cuts, however.
"From a personal standpoint, the governor is in the same situation the city of Kenai is in you've got a limited amount of resources and you have to prioritize the spending of those resources in the way that makes the most sense," he said.
"I'm not insensitive to what the governor has to do, and hopefully the general public will understand too. ... If you want to reduce (either city or state) government, it's going to mean a reduction is services in most cases. You don't just cut things and have no impact."
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