News from Patrick Flynn

Budget whys

I was copied on an e-mail reacting to a media story about potentially cutting police officers whom the city just trained and hired, and chastising the mayor for the situation.  As readers can ascertain for themselves, the administration once again blames both the previous administration and existing labor contracts.  Unfortunately for them, matters are rarely so simple.

Working back from the present moment, one of the more significant factors constricting the city’s 2013 budget actually stems from an action taken in April when the Assembly set mill levies for 2012.  The legislative session had just concluded and the state budget included a boost in funding for local government.  This was good news for local taxpayers.  The administration proposed using the funds to pay for increased street maintenance costs associated with the winter’s record-setting snowfall and to pay down costs associated with new Information Technology systems coming on line.  But there was a problem.

For reasons that have never been clearly articulated, at least to me, the administration had withheld information on the true street maintenance cost overruns in their communications the preceding month.  At that time the mayor was running for re-election and some of my colleagues speculated the motive was political in nature.  That may or may not be true, but it galvanized the Assembly into deciding to instead use the extra state revenue not as the administration suggested but instead to lower mill levies.  I suspect the ideology behind the votes varied; some inspired by the idea that anything reducing taxes and government had to be good, others inspired to teach the mayor a lesson.  It caused some surprise when I was one of two votes supporting the administration’s approach.

The effect of that decision, which was led by the mayor’s Assembly allies, is that 2013 revenues are constrained in such a way that we’re now hearing about the possibility of laying off newly-minted cops.  Adding to the irony, the policy of using state assistance prior to setting mill levies rather than after (see the Tax Cap Primer for more information) is one enforced by this administration and compounds the problem.  Just to be clear, this does not mean the city should always collect as much tax revenue as possible.  Instead, thoughtful readers, we simply note the administration’s own actions have heavily contributed to their restricted flexibility in dealing with changing fiscal conditions.

It’s not all bad news, however, as another change in state budgeting provides additional funding to local government for education and, simultaneously, reduces the amount local government can collect in local taxes for education.  I’d try to explain this more clearly but it involves the state’s Foundation Formula – a creature so complicated and historically twisted I’m sure I’d get portions of the story wrong – but the upshot is that revenues previously collected to support the Anchorage School District will be available to instead support municipal services (and the state makes up the difference for ASD).

Long story short, the sound bites we hear often tell only a portion of the story so please listen carefully!



This contribution was made on Friday, 14. September 2012 at 07:17 and was published under the category Fiscal matters. You can follow comments on this entry through the RSS-Feed.

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