While the Alaska Legislature appea-rs to be at an impasse in dealing with the state’s budget, local municipalities are moving forward with their spending plans for the fiscal year that starts July 1.
On Tuesday, the Kenai Peninsula Borough Assembly has several fiscal measures on its agenda, including public hearings on the budget for the coming year and an ordinance to shorten the seasonal sales tax exemption on groceries from nine months to six months.
Also on the agenda is a resolution that would raise the borough property tax to 5.0 mills, a half-mill increase from the current year. That amounts to a tax of $500 on a piece of property with a taxable value of $100,000, $50 more than last year’s tax bill.
It’s important for borough residents to note that changes to borough taxes aren’t happening in a vacuum; the borough’s fiscal situation is impacted by the uncertainty at the state level and by previous decisions by borough residents, including last year’s votes not to raise the sales tax cap and not to scale back the senior citizen property tax exemption.
Borough residents should also note that the budget discussion will follow the Kenai Peninsula Borough School District’s quarterly report to the assembly. Why is that important? Well, education funding accounts for roughly two-thirds of the borough budget, and the school district is facing significant cuts in state funding. The school district is looking to the assembly to help offset some of the cuts.
Sales tax collected by the borough is dedicated to schools, and a reduction in the grocery tax exemption would generate about $1.3 million. In his memo to the assembly on the measure, the ordinance’s sponsor, Dale Bagley of Soldotna, noted that voters have weighed in on the grocery tax numerous times over that past several years, but “the current fiscal climate is substantially different from those years, and these funds are needed to continue with local government services by both the cities and the borough.”
As for the mill rate, it is one option left to the assembly to balance the budget when the other options — which were intended as part of an overall update of borough tax policy — were rejected by voters.
Our point is this: too often, we tend to focus on the short term, immediate impact of decisions, especially when it comes to tax decisions, and we miss the bigger picture, particularly how decisions made today will affect things down the road.
With state funding sources, particularly for education, the borough and school district more or less have their hands tied when it comes to thinking about spending beyond the coming year.
But with local decisions, such as property and sales tax, the borough assembly and administration have the opportunity to examine longer term trends, and develop a plan that ensures borough finances remain healthy beyond the next fiscal year. Part of that responsibility is evaluating revenue to make sure it matches proposed spending, rather than drawing on savings and hoping for a change.
It’s much better to plan how we’re going to weather the storm than to have to react every time the winds shift.
