Municipalities face high insurance costs, cuts

Posted: Friday, August 15, 2003

JUNEAU (AP) State cuts to municipalities, combined with the rising cost of municipal insurance, have some communities scrambling to fill gaps in their budgets.

Kevin Smith, executive director of the Alaska Municipal League Joint Insurance Association, said the cost of municipal insurance more than tripled between 1998 and 2003.

The organization represents 138 cities, boroughs and school districts across the state.

''I'm not hearing that it's going to break the bank (in many communities),'' Smith said. ''I am hearing that the cost of insurance means fewer services on the street or fewer teachers in the classroom.''

Smith said the cost of insurance dropped in the 1990s, due in large part to the technology boom in the stock market. But a decline in the stock market in recent years has pushed insurance costs back up to levels seen in the early 1990s, Smith said.

While facing rising insurance costs, cities are also struggling to make up funds lost when Gov. Frank Murkowski vetoed about $22 million in municipal revenue sharing money that had gone to communities.

Municipal insurance constitutes the majority of some communities' budgets, Smith said. Insurance represents about 94 percent of the budget for the Bristol Bay community of Manokotak, Smith said. And insurance eats up about a third of the annual budget for Tenakee Springs in Southeast.

In Kasaan, a village of about 55 on Prince of Wales Island, city administrator Michael Queen said about 7 percent of the city's roughly $230,000 budget pays for municipal insurance.

With the loss of about $27,000 the city usually receives in municipal revenue sharing, Kasaan is looking for ways to fill the budget gap. Queen said the city may charge more for water, sewer and garbage collection. The city also could close the city-run post office.

Queen said there is talk of dissolving city government altogether.

''It hasn't been on any official table for discussion,'' he said.

He said dissolving local government would put the quality of life in Kasaan in peril.

''In terms of public health, I don't think it would be wise at all,'' he said, noting that discontinuing city government could result in elimination of basic services like garbage collection.

Other communities in Southeast say insurance costs and declining revenues could mean a decline in services.

Gregg Richmond, acting chief financial officer for the Haines Borough, said the cost of insurance this year came in about $50,000 over budget.

''I don't want to minimize this,'' Richmond said. ''That's equivalent to one municipal worker.''

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