News from Patrick Flynn

Tax cap gymnastics

Full disclosure warning; the topic of this post has previously been described as falling into the MEGO category.  If you want to keep reading I obviously can’t stop you, but don’t later complain you weren’t warned…

Obviously, that means it’s time to once again talk about the tax cap.  For those who haven’t before it might be helpful to review the tax cap primer, previously published in 2009.  This time we’re going to talk about first quarter budget amendments considered at the April 24 Assembly meeting, which were the final touches on the 2012 municipal budget immediately prior to our setting the mill levies that determine how much property tax will be collected this year.

More than one observer of Tuesday’s debate and voting thought they were witnessing something out of the Twilight Zone; the mayor trying to boost municipal spending and a right-left coalition of the Assembly instead cutting it.  At issue was a $6.2 million infusion of state money appropriated by the legislature in the waning hours of the 2012 session.

Backing up to Friday, April 20, the administration proposed using those funds to replenish street maintenance accounts depleted by this year’s record snowfall, pay higher-than-expected fuel costs and use cash rather than credit for some capital expenses.  It was, on whole, a relatively reasonable approach except for one thing – the first version of the legislation in question, introduced on April 10, vastly understated shortfalls in the city budget.  Put another way, the administration withheld information from the Assembly and several members, myself included, found that action deplorable.

And while the administration did make several excuses, they never apologized.  I can’t speak for others, but that was almost enough to convince me to support Bill Starr’s plan to use the state dollars for tax relief rather than one-time costs.  Almost.

After my anger subsided I thought a little further about the situation and recognized that the tax relief could seriously hinder our ability to fund services in coming years as said tax relief would lower the 2012 tax levy and therefore reduce the tax cap.  It was amazing to see the mayor make just that argument, the same one he pilloried my former colleague Mike Gutierrez for making a few years ago, and directly opposite of his support for the ill-considered Taxpayer Protection Act!  (It was even more amazing when one of my colleagues who supported the TPA asked me to explain how the use of state funds for tax relief would affect the cap…) Nevertheless, I knew the mayor was in trouble when he deigned to meet with me in private Tuesday afternoon – he never calls me unless he’s seriously short of votes.

But what was done was done and after the MOA mill levy was set I was contemplating just how much more difficult the 2013 budget process was going to be (since I’ve often been the one rallying Assembly support for filling budgetary holes in public transit, programs for kids, libraries, and so on).  Then we got to the Anchorage School District mill levy.

Another 11th hour legislative action made changes to the state’s Education Foundation Formula, which allocates state funds to support school districts throughout the state.  (If you want to learn more about that find a real expert – I’m not sure I understood that formula even when I worked in the legislature and it’s morphed since then.)  Long story short, what apparently happened lowered the cap on Anchorage’s municipal contributions to public education and back-filled those dollars with state funds to the tune of about $8.1 million.

So what? you might reasonably ask.  Here’s what:

Because this change happened so late no one is sure how much we should reduce the ASD mill levy (property tax collection) to comply with the new state cap.  Rather than guess and goof up we left the ASD mill levy as originally proposed, which means municipal tax collections will likely exceed the level we can actually give to ASD.  Here’s why that matters:

Anchorage has one tax cap and we generally split that cap into two roughly-equal halves; one for the MOA budget and one for the ASD budget.  In theory we could cut one budget and use those funds to increase the other but, to the best of my knowledge, the Assembly has never done so – each budget and each budget’s use of property taxes under the tax cap is considered on its own merits.  Because of the legislature’s action we’ll like have tax cap capacity ASD can’t use in 2013 and it can migrate to the MOA side, possibly resolving the mayor’s concerns (even though I spend a lot of time on subjects like this, I only recognized this “solution” at that moment).  And, in fact, when Mr. Starr subsequently made that point during debate on the ASD mill levy the soon-to-resign and very frustrated OMB director Cheryl Frasca loudly exclaimed “Hello?”  Bill kind-of and kind-of-didn’t appreciate the sarcasm.

So, all in all, it was a fascinating evening of political theater without the final act.  That’ll come during the 2013 budget debate this fall.



This contribution was made on Friday, 27. April 2012 at 01:37 and was published under the category Fiscal matters. You can follow comments on this entry through the RSS-Feed.

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  1. the key will be if ASD insists on getting all the money and want to spend it rather than returning some or all of the “overtaxing” due to the too high ASD mill rate. I think it should go back to the taxpayers.

    Comment: R. Braun – 04. May 2012 @ 1:18 pm

  2. Pat, it sounds like a confusing situation for a lot of reasons, and I don’t envy anyone working through the issues you list. But I’ll add another.
    The state lowered what a city CAN contribute to the school district, and right now the school district continues to fund items that, in most worlds, would be Muni expenses. Yes, the SROfficers are probably the biggest. Fees have been hiked at Kincaid, and ASD pays half of the freight of the tax office.
    The city COULD have taken some of that 8 million and unloaded some of the Muni burden, but I don’t think that even got proposed. I have to admit, of everything that’s happened fiscally with school dollars, this one blew through like an aborted landing. Everything else involving school money seems to take months or years.
    So, those of us that might have wanted to comment on it missed our chance.
    Meanwhile, the contribution from the city WILL get dialed back, but the expense the city pushed off to the school budget appear to be sticking.
    Luckily it’s only a few million, and what’s that among friends?

    Comment: Andy Holleman – 05. May 2012 @ 6:12 pm

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