Anchorage's budget gap jumps $9 million

Sullivan is expected to release his transition report and discuss its findings this morning.

But revenues from several sources are running below budgeted expectations, city officials said.

A sluggish summer for tourism is expected to drive down money collected in room taxes from hotels and motels, budget director Cheryl Frasca said. Fewer tourists means fewer car rentals, too, and less rental tax collected by the city.

Returns on the city's investment funds are also less than anticipated, and city officials expect money collected in fees for city services to be less than projected in the 2009 budget passed by the Anchorage Assembly in November, she said.

The amount of money Alaskans will get in dividends from the Alaska Permanent Fund is a factor in the fee projections.

"One big chunk of that, frankly, is if the Permanent Fund dividend is lower, that means we garnish less ... for non-payment of fees," Frasca said.

Whatever Sullivan does to fix the latest $9 million shortfall will come on top of previous rounds of 2009 budget cuts implemented by acting Mayor Matt Claman that caused rolling shutdowns of a South Anchorage fire station, closed Loussac Library for three days a week most of this summer, eliminated public bus service on two holidays important to working people, and led to several city unions agreeing to push back wage increases scheduled for this year.

Sullivan already has imposed a hiring freeze on city jobs, curtailed travel and restricted overtime.

Sgt. Derek Hsieh, president of the police union, said he hadn't heard about the new shortfall until Tuesday night and hasn't had a chance to discuss it with union members.

"I'm certain the members hope the city has a way to resolve the problem," he said, noting that his union only a few months ago agreed to wage concessions that will save the city well over $800,000 in the second half of this year and another $1.7 million next year.

He said he hopes the new administration will undertake some long-range thinking about how the city operates and pays for services.

"I understand that the administration is new and they're confronted with this shortfall up front, but at some point or another we're going to need to get out of short-run planning and enter into some real long-term thinking about ... how the city works."

Fire Capt. Tom Wescott, who heads the firefighters' union, said he's had limited contact with the new administration so far but noted that the firefighters were the first bargaining unit to offer concessions when the first deficit became apparent earlier this year.

"At this point, I would assume they would not be coming back again to the employees," Wescott said. The firefighters gave back about $1 million this year, and another million or more next year, he said.

The 2009 city operating budget passed by the Anchorage Assembly in late November totalled about $433 million.

Shortly after Claman replaced former Mayor Mark Begich in January, the acting mayor announced the budget was $17 million in the hole, and he and Assembly members started looking for ways to balance it. Poor investment returns on the city's big cash pools and other funds during the severe national economic downturn in 2008 were largely to blame for the initial deficit, Claman and others said.

Together, the $17 million already slashed by Claman and the Assembly and the $9 million deficit found by Sullivan's team would take the original 2009 budget down to about $407 million, an overall reduction of about 6 percent.

Two Assembly members who serve on the panel's budget and finance committee said they hadn't heard any details about the latest deficit or the mayor's plans for coping with it. But they said it's hard to cut a personnel-heavy budget like Anchorage's without some effects on the workforce.

The committee's chair, Assemblywoman Jennifer Johnston, said she's not surprised to hear of another deficit, and that the city's financial problems probably aren't over yet.

"I knew the deficit was going to be more than we had anticipated," Johnston said. "And I'm afraid it's going to get worse before it gets better."

Assemblywoman Elvi Gray-Jackson, a former budget committee chair, said additional cuts will be felt by Anchorage residents as well as city employees.

"We have cut, in my opinion, just about to the bare bones," she said.

"I'm sure there are areas where we can find a little more savings without affecting public service, but the big bulk, in my opinion, of the cuts are going to be people -- employees -- and employees are the ones who do the job for the people in this community," Gray-Jackson said.

"The people in this community are going to suffer. We need to find other sources of revenue."

Find reporter Don Hunter at dhunter@adn.com or 257-4349.