The city of Anchorage faces a budget gap of $30 million in revenue in order to pay for the same size government next year as this year, Mayor Dan Sullivan said Monday.
More than half of the gap -- $16.3 million -- is due to increased labor costs, he said in a state-of-the-city speech to the Anchorage Chamber of Commerce.
The city also expects to have to pay $4.5 million more than this year to the police and fire pension fund, Sullivan said.
The information is all preliminary, the city's chief financial officer, Lucinda Mahoney, said in an interview later.
The administration's proposed 2013 financial plan is due to the Anchorage Assembly Oct. 1.
"We are still working with departments to identify ways to reduce the gap," Mahoney said.
While the administration isn't ready to talk about what might be cut, Mahoney said it would be "really difficult" to bridge a $30 million gap without layoffs.
Sullivan said it's hard to say at this point what might happen with layoffs.
But it's clear there will be major expense cuts.
"We can't kick the can down the road this year," he said in an interview. "This one (gap) is too significant."
The 2012 city operating budget is $454.6 million. City administrators say with increasing costs, it would take $478.5 million to continue to provide the same level of city services in 2013.
However, the city anticipates revenue of only $448.5 million -- $30 million short. And that's if the mayor and Anchorage Assembly decide to tax to the maximum allowed under the city tax cap, which limits the size of increases from one year to the next.
In April, as the Assembly was revising this year's budget, Sullivan said the city expected a shortfall of $18 million to $20 million next year. But he also said an Assembly decision in April to use $6 million in unexpected state money to reduce property taxes in 2012 would lower the tax cap for 2013 and worsen the shortfall.
That's definitely happened, he said. "We could have even kept it in reserve" for 2013, he said.
Mahoney said the cost of employee incentive programs as well as the required contributions to the police and fire pension fund next year are higher than expected.
Sullivan has often complained that major city union contracts pushed through by the administration of former Mayor Mark Begich in late 2008 -- which included incentive payments -- were overly generous and have led to a need to trim the number of employees. The contracts were for five years and they are still in effect for 2013.
Sullivan takes credit for curbing the growth of Anchorage's city government from the time he took office in mid-2009.
Sullivan and Acting Mayor Matt Claman, who served the first half of 2009, made drastic budget cuts that year after a stock market crash in fall 2008 caused city investment revenues to plunge.
In August 2009, Sullivan laid off 27 employees and announced another 56 vacancies would not be filled.
Four months later, in December 2009, the Assembly approved Sullivan's budget for 2010, which eliminated 200 more jobs, about 55 of them filled with people who had to be laid off.
More positions were cut in 2011 and 2012 but most were vacant or became vacant due to people retiring or quitting.