By SHANNON HAUGLAND
Sentinel Staff Writer
“The governor says he wants to have a conversation,” Mayor Gary Paxton told the Chamber of Commerce Wednesday. “Well, I think he’s going to have one, and it needs to be constructive. ... We’ve got to tell the governor what the impact is on our community.”
Gary Paxton speaks at Wednesday's Chamber of Commerce noon luncheon. (Sentinel Photo)
Paxton facilitated the Chamber luncheon meeting, and said he planned to send a recording of it to the Alaska Municipal League to use in lobbying efforts this year on behalf of cities.
The mayor opened with some basic information about Gov. Mike Dunleavy’s proposed cuts, and their impact on Sitka, which is already facing its own budget challenges.
Dunleavy’s $1.6 billion in cuts to help close the state budget gap in operations will impact Sitka in several ways, including:
– elimination of school bond debt reimbursement (at a cost of $2 million to the city).
– reduction in the K-12 base student allocation, which would result in a $2.9 million cut to Sitka’s schools.
– elimination of raw fish tax revenue sharing, which brings in $1 million a year and helps cover harbor costs.
“I wish I could say we’ll get all we need to fund our school district, that $5 million I was talking about – I don’t think that’s going to happen,” Paxton said. “Whatever happens at the state level there will be some additional costs to municipalities for education. I don’t have any idea what it is.”
He said he expects the school district to look at cuts, but that the city may need to look at “some increase in taxation to fund education.”
Paxton expressed concern about these reductions as well as services that were fundamental for rural Alaska, including the Alaska Marine Highway System.
“These are sort of a contract between the state and municipalities, when we started out,” he said. “I think the Legislature will honor that and the governor will either willingly honor that or be forced to.”
He said the general view of Alaska Municipal League and its members is that the state has to use at least part of the Permanent Fund Dividend to help pay for state government.
“If you just gave every citizen $400 you could pay for everything,” he said. “I don’t think $400 is a rational number. I think there are too many people in our state who rely on that dividend for important reasons. Whether it should be $1,600 or whatever, that’s for our Legislature and wise people to figure out.”
But the mayor said the course the state government has been on – funding government by drawing down reserves – needs to change.
“Listen, troops, in the last four years, we’ve spent $10 billion out of the constitutional (budget) reserve, and we didn’t want to face the fact that oil wasn’t going to pay for state government,” Paxton said. “We’ve got to pay for state government.”
Paxton said in his view a broad-based tax is needed.
“Whether it should be an income tax or sales tax I leave it to other people to figure out; in my view that’s what we have to do,” he said.
A number of Sitkans weighed in with comments.
Pat Alexander said the city departments need to decide what services will be provided, regardless of the budget.
“Whatever the base is, that’s plain vanilla,” she said. “Everything else is flavors. Flavors don’t get to be bought until plain vanilla is running like a top. ... We do need to think in terms of plain vanilla because we all want services, and we’ve gotten used to not paying for them, and now is the time where we’re going to have to pay.”
Jeff Budd said he sees education as a critical service, as well as important to economic development. He suggested limiting the dividend payout to $1,600 could raise some $1.4 billion to $1.7 billion to help cover costs.
He said bringing back the small state sales tax would be onerous to some but may be needed to fund state and city government.
One member of the public said he believes a statewide income tax as “the best way to go,” in terms of fairness.
“Even though taking away the dividend from my household would be a cheaper option, take away the dividend for 80,000 people in Alaska living below the poverty line, that’s a huge hit to them,” he said. “To those 80,000 ... they buy their groceries, they pay their heating fuel bills. Getting rid of the dividend, or cutting it, is really going to affect them the most. It’s really difficult for them to live in the state, and most of them are actually Alaska Native that have always been there. It’s a tough one, but keep that in mind.”
Assembly member Richard Wein said he has confidence the problem will be solved, but Alaskans need to get through the first stage of anxiety and consider that the final conclusion will be some type of “middle ground.”
“The budget that was presented will never pass,” he said.
Garry White, director of the Sitka Economic Development Association, said he was encouraged by the attitude of some staff at a recent University of Alaska Southeast advisory committee meeting who talked about opportunities and solutions.
“I think we have an opportunity here to find some solutions as a community to try to fix this,” he said. “The governor has given us an opportunity to do that. ... We need to be stronger and have a better economy moving forward.”
Heather Bauscher, from the Sitka Conservation Society, passed on concerns she heard about the impact on coastal communities of cutting the raw fish tax.
Paxton agreed, and said “there are high expectations it will not pass.” He said addressing the cuts to the Marine Highway System is more complex, although he expressed hope the final plan will be better than the one on the table that ends service after the summer.
White said the Southeast Conference is facilitating a plan to turn AMHS into a public entity, similar to the Alaska state railroad. (He said www.amhsreform.com has more information.)
Robin Sherman commented that Dunleavy’s budget has forced Alaskans to have the conversation about “what we think is important, and how much we want to pay for it.”
“I think there’s general acceptance in this community that the governor’s solution is the wrong solution,” she said. “Whether that’s the case statewide or not, I’m not sure ... I guess my real question is, if this solution is unacceptable and we can’t fix the problem by tinkering around at the margins – it’s too big of a hole – how do we come to consensus, because we are divided both as a state and a community about the appropriate role of government and the amount of taxation, and what are the principals we use?”
She said she hopes at the local level “equity” is an important principal, and that there is a conversation here that includes everyone in the community.
Nancy Davis said she is glad the governor has raised the budget question, but that it’s been damaging to discuss fixing the problem in one year.
“That doesn’t even make any sense at all,” she said. “The Legislature and gov can come up with, ‘we can do this in three years or four years’ or something, then that gives municipalities a chance to not just cut schoolteachers and everything.”
