House Finance cuts school debt reimbursements - Must Read Alaska
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Wednesday, October 23, 2019
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House Finance cuts school debt reimbursements

THE PROCESS OF FUNDING STATE SERVICES CONTINUES TODAY

House Finance Committee trimmed education spending Wednesday, as it worked through dozens of amendments to the budget.

The committee voted to stop reimbursing school districts for the past debt they’ve incurred for capital projects.

Those costs — about $140 million a year — will now fall on the local districts and their taxpayers.The budget amendment was put forward by Rep. Ben Carpenter of Nikiski.

At least on this item, the committee agreed 7-4 with Gov. Michael Dunleavy, that local jurisdictions need to cover their construction costs — even if they incurred them during a time when the State of Alaska picked up the tab “subject to appropriation.”

For decades, local voters could incur bond debt for school construction and the State would make the payments. After all, the State of Alaska had the cash.

That ended in 2015 when the price of oil crashed. But the the old debts were grandfathered in and the Legislature has been appropriating payments for them. In 2018, the Legislature trimmed back to paying 75 percent of the debt, rather than 100 percent.

In Anchorage, these public debt payments will cost property taxpayers. A homeowner would see about $420 more in taxes tacked on for property valued at $331,000 (the median cost of an Anchorage home). That, on top of the $59.1 million school bond that Anchorage voters just passed during this week’s municipal election, which will cost that same homeowner another $50 a year. The cost of living in Anchorage will definitely go up.

Anchorage already has one of the highest median property taxes in the United States, ranking 103rd of the 3,143 counties in order of median property taxes, according to tax-rates.org.

But the property taxpayers in the Mat-Su will be the ones really taking the hit because that district is the fastest growing in the state and has had the most construction. The Mat-Su has grown 65 percent in the past 20 years, and voters approved a $241 million bond package in 2011, which they’ll be on the hook for without state reimbursement. It could cost local property taxpayers about $60 million more than the share of the bond they are already paying. The median property tax paid in the Mat-Su is $2,436.

Opponents of the cut say it’s just shifting the cost of school construction down to the local level. Supporters say that’s not a bad place for construction costs to land and will make local voters pay attention to what they are approving at the ballot box, since they will be unable to shift that cost to the State.

The committee thus far has made few cuts to its working budget, which is the one that former Gov. Bill Walker proposed in December. That budget has $1.6 billion more spending than the amended budget offered by Gov. Michael Dunleavy. The Democrat-controlled House is struggling to trim the unfunded spending in the Walker budget, and making the budget balance will require much of Alaskans’ Permanent Fund dividends at this point, although that amount will depend on the final budget number and is subject to the governor’s veto.

The Senate will have its work cut out for it when the House votes on the floor and transmits its version of the operating budget in coming days. House Finance will continue working through the amendments today.

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

Latest comments

  • Get ready all you “conservative” Alaskans…cause this is just the tip of the iceberg.
    Instead of cutting oil tax subsidies and other “fat” from the budget, taxpayers…especially homeowners throughout the state will see the biggest hit in the years to come.
    These increases in property taxes along with smaller dividends and little to no economic improvements will continue the tide of young educated Alaskans leaving the state to attend college and find better jobs in more supportive environments.
    Further raising the burdens on working people who pay local taxes while the state is still in a recession is a bad idea.

    • Not sure where to start. Take a look at Mr. Holleman’s comment below. Local tax increases will not feel good. At the same time, it might cause some to look more critically at the expenditures in the unorganized borough where to State pays for everything and the locals next to nothing.

      As for driving young people away, creating a vast, free social network that consists largely of government jobs will NOT build a strong economy. My son left almost ten years ago for a high-paying, high-intelligence job where he produces things and does things.

      Governor Dunleavy wants to stimulate real economic development. The road to that end will be bumpy, but it is the right road.

    • As an Anchorage property owner and owner of a commercial building, I’m very well aware of Anchorage’s and Alaska’s issues. Sure, the shift from state to local responsibility will hurt, but hopefully voters will start paying more attention.
      I still don’t see either party even willing to discuss some of the underlying problems, like unfunded pensions, high number of state employees, and the union-controlled cronyism in state contracts that help drive up building costs.
      I’ve been chatting with my Representative about the benefits of making Alaska a Right to Work state, in couple with (some) deregulations, to try to bring in new businesses, not just oil and tourisms, but try to welcome clean energy businesses, manufacturers, and more choices for phone/cable/internet. You can’t just quit cutting oil tax subsidies without developing a better way to do business.
      Regardless, the state has a lot of waste, some duplicate departments, and some departments need to be privatized. The university and API are shining examples of this.
      Those are my suggestions. Do you have any?

    • Well maybe voters will be smarter st the polls next time. Bottom line, the funds do not grow on trees and every bond package voted for will be paid for by someone. Entitlement gravy train is ending and the adjustment starts with spending cuts. Our state as well as local jurisdictions need a big budgetary reset and people need to be a tad more self sufficient.

    • From what I’m reading in last weeks newspaper, Anchorage is in LOVE with TAXES. Except on alchol.

      Don’t blame the conservative voters when young people can’t afford to keep a home in Anchorage and leave.

  • Seems to me in a large state, with a small population (tax base), which has seen lots of government income from oil revenue, when that revenue decreases we’re in for a crunch.

    High oil revenue is nice when its happening but if you build infrastructure with that revenue, in a state with a smaller tax base like Alaska, when it’s cut we may find ourselves unable to afford some of that infrastructure unless you tax people to death. But that won’t last long as at some point your tax base will depart. That’s especially true when there is a high cost of living.

    I look around where I live and I see nice stuff (and it is nice) but you look at the funding that built it and usually at leadt 1 oil company is there. Without that oil revenue that infrastructure might never have been built. Now we’re not sure we can maintain it. Oil prices may bounce back up for all kinds of reasons. Or they may not. We have no idea. So we should plan budgets assuming they will not.

    Recently Soldatna tried to pass a sales tax increase to build a “sport house” which would house all kinds of indoor sporting events, maybe even competition events in the area. That tax failed to pass voter approval. Yet they still want the facility. This is the kind of thing, the nice wants, that maybe we need to let go of, at least for the time being. I heard this facility described as a “quality of life issue” which I guess means we must have it. No we don’t. Maintaining a household budget is an even more important quality of life issue! And this may start happening alot more throughout the state. And thats a good thing. We don’t need to have the best of everything…just what we need. After all, we already have the best! We live here….

  • Infrastructure for the Anchorage School District has Balloned out of control, since someone else has picked up the tab, the State of Alaska.
    Current ASD enrollment levels are at early 1990’s levels. Difference is that ASD has roughly 1 Million more Square Feet on the Books.
    The Article only speaks of the reduction in enrollment this year, would justify the closing of two elementary schools.
    What about the previous years of decline. Where is the overall downsizing of ASD?
    It sounds like ASD would not do anything if the funding was left uninterrupted. Kinda Scary.

    • Yes, you go to the late 90’s for the same numbers, but the rise (and fall) over that time is only a few percent. In the meantime, scores of relocatables that were in use in the 90’s are gone. Better security and lower utility costs.
      The State’s Base Student Allocation heavily favors smaller schools. Anchorage is caught between the question of doing what is economic for Anchorage vs. the most efficient and perhaps beneficial for the State. At the same time, there are clear benefits for students in having more small schools at elementary than fewer larger ones. We did close Mt. Spurr and Mt. Iliamna, but the long term impact for Anchorage is a hit on revenue, even though we lost no students there, and even after you subtract elimination of administrative staff, a librarian, custodian, etc.
      It’s not a simple puzzle and the state can solve this in logical ways rather than punitive ones.
      Every bond that the state promised to participate in was approved by DEED in advance, and they’re trying now to back out and hand the average homeowner in Anchorage a bill for about $300 to $400 a year for broken promises.

  • Time for paid as you use the services
    Have a child paid for their education
    Want a bike pathway put a toll on it
    And so on . This is what you are going to in this state Stop spending money that you don’t have cut all spending Stop acting like adolescent and do your jobs

  • Which means the budget is not being trimmed at all. Folks in organized boroughs get hit in the shorts, and if anywhere else was thinking about organizing, they sure aren’t now.
    This is leading us backwards.

    • Andy: Unfortunately, Alaskans have been enjoying an economy based on self-deception at a grand scale over several decades. The state pumping money into ‘urban’ school facilities lead to the ‘Molly Huche’ case that imposed the requirement to provide similar facilities for rural schools. Excessive income was used to cover this folly and it will take several years to work this out.
      It is sort of like families that purchase a home that is ‘affordable’ based on financing ‘secured’ by two incomes and Constant price inflation several years ago. Many families defaulted when one income was lost and it snowballed into financial crises. The defaults and crises were inevitable. We need to learn from our mistakes.
      .

  • How much of the bonds that were passed went for the stated reason that was put before voters?

  • The ASD has used the excuse that the “State will pay for 70% of the cost, so let’s pass the bond”. That’s like me wanting to do a very fancy remodel on my kitchen and telling my neighbors they have to pay for it. Connect the cost of building new buildings for schools to the customers–those that benefit fm that cost. That is a big problem in Alaska where lots of stuff is “free”. It reminds me of Chilkoot Charlies saying, ” We cheat the other guy (state) and pass the savings on to you.”.

  • Voting on bonds that were being paid by somebody else was a sure fired way to get all the free money one wants. Look at this latest election in Anchorage, how many millions of dollars were bonded out? How many people know how many untold millions in bonds were already bonded out but sitting unused? This is one way to hold voters accountable for their votes, if you want to take on debt then you get to pay for it.

    No more free ride. It’s time we live within our means. Time to cut spending to a rational level.

    • Steve-O, How about the ASD has more than $100 Million of approved and unsold bonds sitting on the shelf?

      • Isn’t that just nucking futs! And there they were again this week with their hands out asking for more.

        As long as people keep giving them free money they will keep taking and taking, unfortunately the people are going to have to finally pay the bill for all the notes they’ve been writing.

  • Stunning, given Anchorages ranking that voters still went out yesterday and approved every proposed bond.

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