FAIRBANKS -- In 2003, the last time the state eliminated community revenue sharing, the City of Nenana had to shut down its police department, according to Mayor Jason Mayrand.
The state reinstituted the program five years later, and while Nenana has never been able to resurrect its police department, the annual infusion of revenue-sharing cash -- estimated at $115,000 this year -- is essential to keeping what remains of the local government in business, Mayrand said.
"We're a small town and we're very dollar conscious," he said, adding that revenue sharing makes up about one-quarter of the city budget. Nenana, with a year-round population of about 400 to 450 people, is about 55 miles southwest of Fairbanks on the Parks Highway.
He said he was disappointed to hear that Anchorage Sen. Kevin Meyer had suggested cutting revenue sharing in a speech Friday to the Resource Development Council and that the incoming Senate president portrayed the program as a recent addition to the state budget that the state can no longer afford.
Mayrand said he recognizes the challenge facing legislators with a multibillion-dollar deficit but revenue sharing deserves to continue.
"What they should do is find out where they can cut the budget with the least amount of damage to the communities of Alaska," he said.
In his speech, Meyer questioned the need to continue programs that began in 2007-2008, "when the price of oil started going up."
"So what programs did we start back then that obviously we didn't have before then?" he said. "And we got by with not having them back then; why do we still need them today?"
"Revenue sharing is one that got started back then because then the local municipalities were hurting with the high oil prices. We had a lot of money, we wanted to share it. Now, we don't have as much money and prices are down," Meyer told the business group in a pre-session legislative preview.
"What I tell my constituents is that everything's on the table," he said.
In an interview later Friday in Fairbanks, Gov. Bill Walker said he opposes an end to revenue sharing.
"We want to make some adjustments but we want to make sure that we don't go so far as to put communities out of business," he said.
The current version of revenue sharing took shape under former Gov. Sarah Palin seven years ago but the practice of sharing state money with communities began in 1969, with a formula to assist with road maintenance, fire service, police and other services. In 1980-81, when the state enjoyed its first major influx of oil money, revenue sharing jumped to $50 million.
In a 1999 report, the Alaska Commission on Rural Governance and Empowerment, co-chaired by Byron Mallott, now the lieutenant governor, concluded that "state municipal assistance and revenue sharing helps provide the most basic resources needed for rural Alaska communities to remain viable."
A 2006 report by another commission said that 14 communities had shut down their local governments and others were on the verge of following suit. "With increasing costs and decreasing revenues, communities are feeling the crunch," the Advisory Commission on Local Government said.
Most rural communities don't have much of a tax base, and while many places have a sales tax, municipal and state officials have long argued the largest part of consumer spending goes to stores in Anchorage and Fairbanks, which means a sales tax is not enough to run a small local government.
In 2003, faced with a growing budget deficit, Gov. Frank Murkowski vetoed all funds for revenue sharing, and the Legislature did not override the action.
Oil prices and oil income rose in the years ahead, with Gov. Sarah Palin campaigning for the restoration of revenue sharing. Depending upon legislative appropriations, it has been costing about $60 million per year.
In a phone interview, McGrath Mayor Dustin Parker said the $111,000 his community is getting this year is essential for its tiny government to stay in business.
"The city of McGrath is barely getting by now because of the enormous price of energy," said Parker, adding that fuel is still about $8 a gallon in the Kuskokwim River town of about 300 people, located more than 220 miles northwest of Anchorage.
"If revenue sharing goes away, rural communities will close their doors and it will happen within a year," Parker said. "I don't know if I can describe how critical this is."
He said in some towns, that would mean the end of running water and the end of limited road maintenance.
There are 164 local governments in the program, with some small villages getting about $100,000 and Anchorage collecting about $14 million. In addition, more than five dozen groups including village councils and community associations received payments, most of them between $35,000 and $50,000.
Kathie Wasserman, executive director of the Alaska Municipal League, said that in many cities, the revenue sharing money is all they have for operations.
"Revenue sharing is for basic government services," she said in a phone interview.
Reggie Joule, mayor of the Northwest Arctic Borough, said many communities have a sales tax, "but the money they get from the state for revenue sharing is really important to the sustainability of those communities." In a phone interview, Joule said that the years in which revenue sharing did not exist had serious consequences in small towns.
"We came back later and reinstituted it but it had already done its damage," he said. That damage included things like water system maintenance not taking place and the loss of important skills as laid-off employees moved away.
"I think we should learn from prior attempts what happens to a community when we do this," he said.
Mark Springer, a city council member in Bethel, said the state should look at what it would cost for the state to pick up the tab for services that would cease in rural areas without this money.
"Every municipality needs to send a resolution to the Legislature that says, this is what our budget is, what it is used for and how much of the budget is from revenue sharing," he said.
Springer predicted that the Alaska Municipal League would continue to put revenue sharing at the top of its legislative priority list.