Anchorage mayor: State cutbacks leading to an extra $24 million in city expenses

Anchorage Mayor Ethan Berkowitz said Friday that spending cutbacks by the state have added up to roughly $24 million more in expenses for the city, a budget hole that elected officials will now have to figure out how to fill.

Berkowitz made the announcement in a meeting with members of the Anchorage Assembly. He said the state, confronting a nearly $4 billion deficit, is in some cases unfairly "cost shifting" its expenses to Anchorage.

"That's a significant sum that represents 5 percent of our budget," Berkowitz said of the total expense bill. "We can accommodate some of these costs, but it represents a structural change in the relationship between the state and the municipality."

More than half of the added expenses are associated with the city electric utility, Municipal Light and Power, Berkowitz said. Alaska utility regulators are blocking the city from collecting a dividend from the utility as its owner, and the city is also losing out on millions of dollars that could have been collected from oil and gas tax credits, Berkowitz said.

City attorney Bill Falsey said the city is fighting to reverse the decision about the dividend.

Other costs Berkowitz referenced on Friday:

* The amount of oil wealth the state shares with Anchorage next year will be about $4.5 million, a large drop over earlier payouts. The city had averaged payments of about $15 million a year since 2008.

* The nearly $1 million charge to house city prisoners at state lock-ups, under a recent state decision.

* A reduction of about $412,000 in fees and fines that the city will collect as a result of the criminal justice reform bill, Senate Bill 91, signed in July.

* A reduced Permanent Fund dividend this year that will lead to Anchorage collecting about $2 million less in dividend garnishments from debtors.

* About $1 million more in snowplowing costs this year due to staff and equipment cutbacks by the state Department of Transportation. The city and state have historically shared snowplowing responsibilities for Anchorage roads but city manager Mike Abbott said officials are reworking the agreement.

* The closure of the Alaska State Troopers post in Girdwood, resulting in Girdwood residents taxing themselves $600,000 for police protection.

* A $100,000 increase in the charge to the city by the state-owned Alaska Railroad to use the line's right of way.

Berkowitz and Abbott also said the city will have to start paying $250,000 a year to use an airport-owned snow dump on Northwood Drive. But that's separate from the state's fiscal woes and instead involves federal land rental rules, said airport manager John Parrott. The city has been working for years on a long-term lease for the property so it could do critical upgrades to reduce water pollution threats.

In a statement released through a spokeswoman, Gov. Bill Walker said he's traveled the state in recent months to talk to local representatives.

"As a former city mayor myself, I understand that deficits roll downhill and when lacking a sustainable state fiscal plan, municipal governments are often the last safety net for Alaskans," Walker said. "These struggles are not unique to the Municipality of Anchorage. These are consequences municipal governments across the state are grappling with."

"However, at the end of the day, the state cannot spend money that it doesn't have," Walker added. "This is just further evidence of why legislators must pass a balanced fiscal plan this next legislative session that includes new sources of revenue."

Next week, the mayor is due to unveil his budget proposal for the upcoming year. Berkowitz said Friday the city will have to make tough choices about where to cut.

That budget is expected to include more money for public safety as Anchorage's homicide rate approaches a record high. But that will mean paying less for other services, or cutting some programs entirely, Berkowitz said.

"The problem is what to cut to get public safety," said Assemblyman Dick Traini. Abbott, the city manager, said the administration would have proposals next week that suggest whether the city should use savings to fill budget holes.

Assemblywoman Amy Demboski indicated in a text message that the Berkowitz administration and the Assembly could have found ways to lessen the gap.

"I find it ironic that the mayor says we can't focus on the blame, rather than be honest with the situation we are facing, yet spends most of the meeting blaming the state," Demboski wrote.

She noted that the Assembly rejected millions of dollars in cuts proposed by more conservative members last year. Demboski had sought cuts to the travel, supply, equipment and furnishing budgets for several departments. She said those proposals, "coupled with the amount they over-taxed residents," would have made up for the lost state revenue.

In his discussion with the Assembly on Friday, Berkowitz used the word "inappropriate" to describe several actions by the state, such as the Department of Corrections and the regulatory decisions for Municipal Light and Power.

He said the city was investigating what it already pays to cover state expenses. He said that may include police officers testifying in court or apprehending prisoners who walk away from halfway houses.

Devin Kelly

Devin Kelly was an ADN staff reporter.