$13 million surplus may ease taxes, Anchorage School District budget pressures

Nathaniel Herz

Mayor Dan Sullivan and the Anchorage Assembly are faced this month with a good problem to have: what to do with the $13 million municipal budget surplus that was announced Wednesday.

At the end of 2013, Anchorage had $8.5 million extra in its five main funds -- separate accounts for the fire and police departments, roads, parks, and general government -- plus a windfall of $4.6 million from a court decision that forced the owners of the trans-Alaska pipeline system to pay higher taxes. (Anchorage's share stems from pipeline infrastructure housed in the city.)

The Sullivan administration is proposing that the city put nearly $3 million toward property tax relief and $7 million into savings. The rest would go for one-time expenses, like $436,000 for the referendum that will be held in November on the controversial labor law that passed the Assembly last year.

Some Assembly members, meanwhile, said that they're interested in using some of the surplus to ease the budget pressures on the Anchorage School District.

In a radio appearance Thursday morning, Mayor Sullivan said the surplus was "very gratifying," and he credited work by city departments to control overtime and equipment costs.

Dick Traini, one of Sullivan's opponents on the Assembly, said that the excess cash was a "good reflection upon how well the city has done," but would not give Sullivan much credit.

"I think this would have happened regardless of who was mayor," said Traini, who represents Midtown.

Sullivan and Lucinda Mahoney, Anchorage's chief fiscal officer, have both urged caution with how the surplus gets spent.

There are several issues still being discussed in the state Legislature that could put the city under financial stress, like Anchorage's obligations to the state retirement system, as well as the amount of money the city receives under state revenue sharing programs.

"If that happens, the surplus is going to disappear real quick," Sullivan said.

The Assembly will likely consider Sullivan's budget plan at a meeting later this month, where members will have the opportunity to propose their own increases or decreases in spending. Pete Petersen, the newly-elected Assembly member for East Anchorage, said that Sullivan's plan to give some of the surplus to taxpayers "definitely makes sense."

"We just have to see if there's some of it that we need to fill some positions to make services run a little better," he said. He added that he wasn't sure yet which positions he thought could be filled.

Traini said he wanted Sullivan to better explain certain one-time spending line items before he would sign off on the proposal.

Traini also said he wants some of the surplus to help pay for school district police officers. The city assumed some of the district's $3 million annual cost for those officers in last year's budget process, but Sullivan vetoed a measure that would have covered a larger proportion.

If the city puts money towards the police officers, Traini said that the school district would end up with more money to keep some of the more than 100 teachers expected to be laid off as a result of a budget shortfall.

One other consideration for Anchorage officials is whether the state will increase its own level of funding for education.

Right now, a state law limits the amount of property taxes that the city can put toward the school district. If state legislators decide to boost education funding, that in turn would allow Anchorage to spend more city money, as well.

While the state Legislature has not yet set its education policy for the next year, it's likely it will grant some level of additional funding. The proposal from the Sullivan administration anticipates a $200 per-student funding increase, which would allow the city to raise an extra $3.4 million in property taxes annually.

Sullivan, a Republican who's running for lieutenant governor, said he would favor raising property taxes up to the cap. While he questioned what the extra money would buy the school district, he said that any decision to reduce the amount should be up to Assembly members, and that his proposal was simply a "starting point."

"We throw the starting point out there, and the starting point reflects what we think is the responsible way to spend the money," he said in an interview. "Appropriations are the Assembly's job, and I think they should be asking that very question: What are we getting for this money?"

Assembly Chair Patrick Flynn, who represents downtown and Mountain View, said that the city should tax up to the cap to serve as a signal to legislators in Juneau.

"What I heard from legislators when I visited was, 'If we're going to do more, then we want you to do more,'" he said. "So that would be my inclination."

Reach Nathaniel Herz at nherz@adn.com or 257-4311. Follow Herz on Twitter @nat_herz.