News from Patrick Flynn

2010 budget finale (almost)

This evening we held our final work session on first quarter budget amendments with final action slated for tomorrow, Tuesday, April 24, after which we’ll set the mill levies that determine how much you’ll pay in property taxes.  Despite offering in excess of 100 adjustments, some up, some down, administration officials seemed reticent to endorse any of the dozen or so proposed Assembly amendments.  One of the tools employed to discourage budget increments is a spreadsheet forecasting a 2011 budgetary shortfall around $19.8 million

In reviewing those numbers one aspect that caught Assembly members’ eyes was debt service, slated to rise from $35.6 million in 2010 to $51 million in 2011.  The reason stems from what is apparently a new administration approach to debt “refunding,” which we discussed in detail during last fall’s budget debate.  To recap, in order to ensure 2010 spending was less than 2009, the administration successfully advocated for refinancing $12.5 million in bond principal payments over the remaining life of the bonds in question.  As I put it then, it’s akin to using one credit card to pay off your balance on another.  This plan was assumed within the 2010 budget and additional refunding of around $10 million was similarly embedded in 2011 budget plans.

As someone who pays his bills on time I was extraordinarily uncomfortable with this approach and said so repeatedly.  I ultimately went along with it, as did nine of my colleagues, once the administration finally acquiesced to some Assembly concerns about funding for items like public transit, community grants and libraries.  Now, four months later, the administration is telling the Assembly they do not support “refunding” as part of the 2011 budget.

To be fair refunding in 2010 and 2011 was presented as a tool, an “option.”  That said, both years were pre-cleared with rating agencies and in looking through the numbers presented by the administration it looks like shelving the 2011 refunding might have more to do with boosting the 2011 deficit back to the $20 million level predicted six months ago than a philosophical change of heart.  What I can assure you of is that I didn’t hear a good explanation for the reversal.  As someone who had to swallow this bitter pill in the first place I don’t appreciate being asked to cough it back up again, and I’m afraid my frustration may have gotten the better of me when I said as much.

In recent months several readers have suggested that the administration’s fiscal policy has less to do with fiscal responsibility than a desire to simply shrink the size of our local government as much as possible.  I have resisted taking up that mantra because I think behaving responsibly with public dollars is a core aspect of my job and because I generally choose that people are being straightforward with me.  I just hope I’m not being excessively naive.

In any event, it appears we’ll close the door on 2010’s budget and open the door on 2011’s shortly thereafter.  That should keep me out of trouble!



This contribution was made on Monday, 26. April 2010 at 19:49 and was published under the category Fiscal matters. You can follow comments on this entry through the RSS-Feed.

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  1. Mr. Flynn,

    This is a very interesting and informative post. While a similar sort of deferment is fairly standard in some circles, I understand your earlier misgivings over deferring bond refunding. And while it appears likely that interest rates will be slightly higher in 2011, I am quite confident that the administration would still be able to save taxpayers some money by proceeding with the 2011 bond refunding plans. Has the administration unequivocally stated that they will not engage in bond refunding actions in 2011?


    Comment: Geoffrey G. Humphreys – 26. April 2010 @ 11:04 pm

  2. Who would be better leading the charge in Anchorage to help the administration come clean re: budgets and pretend shortfalls?

    From KMIR TV Palm Springs today, April 27:

    Unions to Audit Indio’s Finances
    INDIO—Three unions in Indio have put up $11,000 to audit the city’s finances. They say they want to make sure officials are balancing the budget responsibly, and they want to understand why Indio faces a budget shortfall of more than five million dollars.

    That shortfall is down from $13.5 million after a series of cost-cutting measures including layoffs and early retirement incentives.

    The three unions paying for the audit are the Indio Police Officers’ Association, the Police Command Unit, and the Laborers International Union of North America. The audit should be done by mid-May.

    Comment: Fred – 27. April 2010 @ 10:11 pm

  3. After having a look at current interest rates, recent Fed documents, and recently proposed Fed action, I thought I should revisit this post and point out that it does not at present appear likely that interest rates will be higher in March 2011 than in March 2010. It appears that interest rates may start rising near the beginning of December, which is later than I had expected. I expect them to rise slowly.

    Comment: Geoffrey G. Humphreys – 14. October 2010 @ 10:45 pm

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