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Governor's Fiscal Plan Would Greatly Benefit
Local Governments and Local Taxpayers
by Edgar Blatchford


May 25, 2004

The most underreported aspect of the debate over the fiscal plan is the impact on local governments and local taxpayers. Local governments are political subdivisions of the State government. The framers of Alaska's Constitution viewed the state government as being critical in making Alaska's local governmental system work effectively. As Constitutional
photo Edgar Blatchford
Convention Delegate and local government expert Vic Fischer wrote in his book Alaska's Constitutional Convention (p. 123) "Several factors strongly argued for a continuing state responsibility for local affairs." Those include varying levels of local government capability and of the requirements for local services throughout Alaska.

The Governor's Percent of Market Value (POMV) proposal would limit the annual payout of the permanent fund to 5% of the average value of the Fund. Half of the payout would be used for dividends, and the other half would be used to fund education and assist local governments.

The Governor's proposal provides a means to sustain the critically-needed $82 million increase in education funding approved by the Legislature in the last days of the session. The municipal assistance component of the plan would provide an additional estimated $67 million annually to support fundamental local services such as roads and public safety.

Sustaining the increase in education funding and providing local government assistance would provide $149 million annually for essential services. Projections indicate that the Municipality of Anchorage would receive approximately $54.3 million of the $149 million; Fairbanks (North Star Borough and City of Fairbanks) would receive just over $17 million; the Matanuska-Susitna Borough would receive $13.6 million; and the City and Borough of Juneau would receive approximately $6.3 million.

On average, the Governor's proposed level of funding for the Municipality of Anchorage is equivalent to $700 in annual property taxes on a home with a taxable value of $250,000; for Fairbanks (North Star Borough and City of Fairbanks) it is equivalent to $1,350; for Matanuska-Susitna Borough it is equivalent to $950; and in the City and Borough of Juneau it is equivalent to $600 in annual property taxes.

Because of the elimination of State Revenue Sharing and other State aid to local governments, many small municipal governments have been forced to eliminate or substantially reduce basic services. Examples include police and fire protection and road maintenance. In other municipalities, significant increases in local taxes have been necessary to offset the effects of reduced State aid.

Property owners and renters alike need to ask themselves if they want to continue to bear most of the costs of municipal services. If the State Legislature allows the Governor's proposed constitutional amendment to be on the November ballot, the people of Alaska, the taxpayers, will dictate whether they are sufficiently pleased with the status quo or would like to see a more diverse funding source for education and local services.

It is unlikely that we can resolve the fiscal gap by budget reductions alone. Since 1996, Alaska is the only state in the union that has cut its budget while the other 49 states have increased spending by an average of 22%.

A statewide poll indicated that 93% of Alaskans want a fiscal plan. Now is the time for Alaskans to express their views on this matter. Contact your legislators and advise them of the type of government you'd like to see.

The most pressing problem facing Alaska today is the lack of a sound fiscal plan. The lack of a fiscal plan is likely to mean continued deficit spending, increased property taxes, higher or new sales taxes, user fees, and a possible income tax. However, under the Governor's fiscal plan Permanent Fund dividends would continue, education would be funded, and State aid to local governments would be restored to allow a reduced burden on local taxpayers.



Edgar Blatchford is Commissioner of the State Department of Community and Economic Development ­ and an Associate Professor at the University of Alaska Anchorage, currently on leave.



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