By WIN GRUENING
As the Alaska Legislature adjourned quietly into the night several weeks ago, you could almost hear the collective sigh of relief. The usual end-of-session drama was absent as legislators took the historic step of officially designating earnings from the Permanent Fund to subsidize state government. By doing so, Alaska’s budget deficit was reduced from $2.4 billion to under $700 million.
Hopefully, current oil prices will stabilize. If so, the deficit disappears and the budget will be balanced without additional taxes or draws from state savings accounts. But that’s a big “if” as Saudi Arabia and Russia are increasing oil production in hopes of moderating rising energy prices.
While plenty of other what-if’s need to be answered within the budget, for many Alaskans this seemed like a bright spot in a long and contentious debate.
But, in Juneau, clouds loom on the economic horizon.
In a recently released study commissioned by the City and Borough of Juneau, several municipal budget-related trends were identified. The report, authored by economic consultant Gregg Erickson, pointed out Juneau’s “unusually persistent recession” has resulted in fewer jobs every year since 2012 and indications are that job losses will continue.
The Erickson report also contends that jobs are a leading indicator of imminent changes likely to negatively affect future city/borough budget decisions. Specifically, school enrollments (which already have declined precipitously) will continue to be impacted. It also suggests continued and larger population declines are likely in 2018, and possibly beyond.
Inflation-adjusted sales tax revenues and gross sales have also declined recently, even with the uptick in cruise passenger traffic. Indeed, as Erickson explains, the growth in visitor-related expenditures may be masking the effects of a greater economic downturn Juneau is experiencing.
All these factors are worrisome but particularly concerning are further drops in our school population. The school district is struggling with financial issues – recently laying off 10 teachers, announcing program cuts, and requesting additional funding from the Assembly.
On the heels of the Erickson report, during a Chamber of Commerce presentation last week, Caroline Schultz of the Alaska Office of Management and Budget noted, while the Legislature reduced the budget deficit to a manageable number, it’s likely that supplemental funds will still be needed.
Continuing pressure on state finances due to rapidly escalating Medicaid costs and other factors suggest that even when the state budget is eventually balanced, we can expect lower state employment and reduced capital expenditures to be the “new normal.”
With this information as a backdrop, it’s clear Alaska communities must carefully rank their budget priorities. Public safety, K-12 education, essential infrastructure and basic services deserve funding priority. Non-essential items require careful scrutiny.
In Juneau, we must continue to address serious public safety issues – partly fueled by an epidemic of opioid abuse, property crime, and homelessness.
Funding for necessary infrastructure and deferred maintenance, in some cases, hasn’t yet been identified.
For example, the aging North Wing of the Juneau Airport is in dire need of renovation to improve traffic and correct deficiencies. But plans to demolish and rebuild it were put on hold since only half of the $38 million project funding is available.
Given that, it’s difficult to grasp why this is the time to build a new $26 million arts and cultural center prior to fixing our airport.
Or why we are considering adding $2.8 million per year to the CBJ budget to introduce a Pre-K childcare program to Juneau.
Lower priority programs and projects like these will only cannibalize necessary funding for ailing infrastructure, our struggling K-12 programs, and existing cultural arts amenities and youth activities.
Because private fundraising efforts for the new Juneau arts and cultural center have stalled, proponents are lobbying the CBJ Assembly to consider a bond issue repaid with sales taxes to pay for much of it – robbing essential facilities, like the airport, of a possible funding source.
Juneau’s population and tax base are shrinking. Until and unless we get serious about economic development that will reverse this trend, our options are limited. This isn’t the time to increase debt.
As families and individuals, we strive to live within our means.
We expect our city government to do the same.
Win Gruening retired as the senior vice president in charge of business banking for Key Bank in 2012. He was born and raised in Juneau and graduated from the U.S. Air Force Academy in 1970 and served as a Air Force pilot for six years during the Vietnam War. He is active in community affairs as a 30-plus year member of Juneau Downtown Rotary Club and has been involved in various local and statewide organizations.