Voices of the Peninsula: Time for a solution

Posted: Thursday, July 14, 2005

Many Alaskans have been shocked, confused and angered by property tax and other recent local tax increases. This has not happened in just one community, but in nearly every community across the state. Financial pressures facing communities will worsen each year unless the Legislature pays more attention to their local taxpayers.

Unfortunately, many legislative leaders are still waiting for you, their constituents, to demand their help in addressing local tax relief.

A growing number of legislators, Gov. (Frank) Murkowski, former Govs. (Walter) Hickel and (Jay) Hammond, and many others are calling for local tax relief solutions such as a community dividend. A local taxpayer relief community dividend could come from existing state oil windfalls, natural gas pipeline revenues, excess earnings of the permanent fund or existing general state operating revenues.

What the governor and your legislators do, or don't do, has a large impact on local taxes in your community. This close financial relationship between the state and its local governments is basically the same everywhere in the United States. After all, cities-counties are formally called "political subdivisions," that is, smaller self-governing components of state government.

In Alaska, cities-boroughs allow citizens to have direct control over the public services they receive, but the architects of Alaska statehood recognized that neither state nor local government could be fully sustainable on taxes alone due to Alaska's high cost of living, harsh climate and sparse population.

In 1969, the Legislature adopted a municipal revenue sharing program to share Alaska's resource revenues with local taxpayers and communities, which were to "help ease fiscal problems facing local governments" and "stabilize or reduce local taxes." In 1985, the state shared $141 million with communities, in 1995, it was $72 million, and in 2004, municipal revenue sharing was eliminated.

Over the next several years local taxpayers will face growing financial challenges primarily due to the elimination of municipal revenue sharing by the Legislature (previously funded by each Legislature since 1969), mandatory increases in the cost of the state's public employees retirement program for school and local government employees, cost increases in other insurance required for local governments, and the negative financial impacts of the high cost of fuel on local government purchases of goods, services and transportation.

Is using statewide revenues for local tax relief the business of state lawmakers? The answer in nearly every state is "Yes."

Given Alaska's high cost of living, sparse population, large pockets of poverty and enormous oil wealth owned by all Alaskans, the answer is a resounding "YES." Citizens must ask their legislators to make 2006 the "Year of the local tax relief." If we don't act, families and businesses will continue to see property and other local taxes rise, or face significantly reduced services, like less road maintenance, more crowded schools and less responsive public safety.

Is legislative local tax relief an issue whose time has come? Yes! In fact, over the past 10 years, the total statewide increases in local property taxes almost exactly mirror state cuts to local governments. Local governments have done an excellent job of meeting every challenge over the past 10 years without raising taxes, except for the impacts of state budget cuts affecting your community, like the annual cutting and final elimination of revenue sharing.

In rural areas, strong and viable communities with very limited local tax bases are beginning to simply stop functioning. Last year alone at least nine small cities were forced to close their doors due to financial crises. Many more of Alaska's small cities will have to close their doors and have the state government pick up the pieces and absorb the liability.

What can you do? Please call, write or e-mail your legislators with one request that will help stabilize or lower your local taxes, improve schools, fix roads and improve your public safety:

Ask for "local tax relief in 2006."

Pete Sprague lives in Soldotna is the president of the Alaska Municipal League. He also has served on the Kenai Peninsula Borough Assembly since 1998.

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