Daily Sitka Sentinel

Stedman: Hard Choices Ahead for Budget

By SHANNON HAUGLAND
Sentinel Staff Writer
    As the state runs out of options to balance the budget through cuts and drawing on savings, legislators are bound to turn to the Permanent Fund Earnings Reserve, Sen. Bert Stedman says.
    “We’re sitting here with $14 billion in the Permanent Fund (Earnings Reserve),” he told a Chamber of Commerce audience Wednesday. “That will be the next hot topic of discussion for the next year.”
    Stedman spoke to an audience of more than 60 at the weekly Chamber meeting, held Wednesday in one of the meeting rooms at Harrigan Centennial Hall.

Sen. Bert Stedman speaks in Sitka, Wendesday. (Sentinel Photo)

    He covered issues affecting Sitka and the other 28 Southeast communities he serves, and some of the topics from the last session. He returned to Juneau last night to continue talks in the third special session.
    “Some say stay out of budget reserves, cut expenditures, but the math doesn’t work,” he said. “We can’t cut $2.5 billion from the budget.”
    Stedman favors a “percent of market value” approach of drawing 4.5 percent annually from the Permanent Fund earnings, similar to the way Sitka manages its own permanent fund, and splitting earnings between the state and the dividend program equally. However, he added, “I’m on the losing end of that discussion.”
    He said both Sitka and Ketchikan were hit with pulp mill closures in the early 1990s, and opted against drawing down savings.
    “At the end of the day, Sitka and Ketchikan took aggressive action,” he said. “We didn’t do what the state is doing.”
    Stedman said coastal community legislators are outnumbered by the Railbelt, making the fight for Alaska Marine Highway System funding tougher in recent years. The system’s budget was cut 67 percent in the last four years, with the loss of fuel trigger funds. That’s double the reduction of the rest of the Department of Transportation, Stedman added.
    “The Alaska Marine Highway is a political problem,” he said. “We in the coastal communities have a weak political hand against the Railbelt.”
    On a question about new revenue streams to help balance the budget, Stedman said communities with “cash-based economies” should be on their toes when the discussion turns to a statewide sales tax.
    “Some of my Railbelt buddies want a sales tax,” he said. Those communities with a sales tax already will be hit harder, since negotiating an “offset” for them will be difficult.
    “I would be cautious when that surfaces,” Stedman said.
    He added that the income tax discussion will not be back on the table until the next Legislature.
    Bright spots in the last session included the passage of a bill to stop cashable credits to oil companies; a bill to allow Petersburg to select 14,000 acres of state land; a land exchange between the Alaska Mental Health Trust and the Forest Service; and extending discharge rules for small cruise ships and ferries.
    “We’re trying to work through that, keep our waters clean but keep a viable industry going,” Stedman said.
    Capital projects are on a “Slim Fast diet” in recent years, but Sitka still saw funding come through for fiscal year 2018 for Sawmill Creek Road improvements ($3.2 million in federal funds) and acquisition of property to expand the airport ($400,000 in federal funds).
    He’s looking forward to seeing some projects come to fruition, including the new Katlian Bay road, which should open up recreational and development opportunities.
    The Mt. Edgecumbe High swimming pool should open in December, although it’s about $250,000 short in operating funds. The project is “almost on schedule,” but was slowed by environmental cleanup, Stedman said.
    “I’m working on the $250,000,” he said. “It’s going to be a beautiful (asset) for the community.”
    The pool is intended to serve not only Mt. Edgecumbe High School students, but the state troopers, the Coast Guard and the general public.
    Funding for the 50-50 matching grant program failed to come through for Crescent Harbor, although it ranked second on the list of state harbor projects after a similar project in Wrangell. Sitka can try again next year. Stedman mentioned the presence of invasive species in the harbor, but said it is not the same type found in Whiting Harbor.
    “We’re trying to get the harbor replaced but it’s going to be expensive,” he said.
    (Harbor Master Stan Eliason said today biologists are testing for invasive species in the harbor, and he expects a positive finding will mean the city will have to take additional steps when disposing of pilings and dock structures when the harbor is rebuilt. The city had to take similar steps when replacing ANB Harbor, he added.)
    Stedman spoke passionately against the federal flood insurance program, saying the NFIP “opt-in” program comes with costs, and it has been shown to provide little to no benefit to Southeast residents.
    He has written a letter to Sitka city officials urging them not to have the city sign up for the program. He said he filed the only successful claim through the national flood insurance program in some 30 years, and only a handful filed claims. He feels the program is set up to collect funds to pay down a $24 billion deficit in the federal program, while providing very little benefit to residents, who can always buy their own flood insurance. He added today that the agency’s goal is to push development off the waterfront, but Sitka has other means for guiding development, such as the Sitka Planning Commission.
    Stedman said he is also concerned about the landslide mapping being done in the city, which has the potential to bring development “to a screeching halt.”
    “We need to make sure we have a viable community,” he said.
    Turning to how the state budget crisis will affect the Sitka Pioneers Home, he said there’s no wide support for cutbacks that would harm its operation.
    “The Pioneers Home is a valuable asset to our community,” he said. “We’re not interested in seeing it go anywhere.”