Sitka’s top local official sees a way out of Alaska’s current financial struggles, using several strategies — including taxation.
Sitka Mayor Gary Paxton held a town hall-style meeting at the Sitka Chamber of Commerce last week (3-6-18), to gather information for the Alaska Municipal League on the potential harm that could be inflicted on Alaska’s communities by the governor’s proposed budget.
The following week (3-11-18), the Sitka School Board and Sitka Assembly spent almost four hours hashing out potential budget scenarios for the local school district — none of them especially appealing.
The meeting was unexpectedly upbeat and solutions-oriented, but that might of been the tone set by Paxton himself, who’s been mayor for only five months, but has nine years of previous service as Sitka’s administrator during the period following the closure of Sitka’s pulp mill, and the ensuing economic upheaval.
In this excerpt from his remarks, Paxton argues that Alaska has sufficient resources — including the Permanent Fund — to maintain basic services critical to communities in the Alaska Municipal League.
In my view, and in the general view of the AML — which represents all municipalities, all mayors, and assembly members — we’ve got to use some part of the (Permanent Fund) Dividend to help pay for the cost of state government. If you gave every person $400 as a dividend, we could pay for everything. 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. So should it be $1,600 or whatever, that’s for our legislature and wise people to figure out. How do you reduce the dividend? In my view you’ve got to reduce it in some way. You have to have a broad-based tax. Listen troops, in the last four years we’ve spent $10-billion of our Constitutional (Budget) Reserve, because we didn’t want to face the fact that oil was going to pay for state government. We’ve got to pay for state government. (Former administrator and mayor) Rocky Gutierrez said — he was a conservative — you’ve got to pay for services of city government and state government. We need to have a broad-based tax, and what it should be — whether it’s an income tax or sales tax — I leave to other people to figure out.
Under different fiscal circumstances, proposing a broad-based sales or income tax might be fighting words in Sitka, and in Alaska. But the large chamber audience didn’t put up any resistance.
Greg Dahl, who manages Lakeside Grocery, commented that there were 80,000 Alaskans who lived below the poverty line. He agreed that an income tax was the most equitable choice.
“A lot of people think of dividend time as a money holiday, which it is to probably most of us in this room,” said Dahl. “To those 80,000 people — and that’s the federal poverty line, Alaska’s a lot more expensive to live in — they buy their groceries, pay their heating fuel bills. Getting rid of the dividend, or cutting it, is going to affect them the most. It’s very difficult when you live here in the state. It’s a tough one, but keep that in mind: An income tax — I don’t want to pay it — but it’s a lot more fair to everyone in the state, especially the most disadvantaged.”
Still, there were audience members who felt the city and state could slim down fiscally. Pat Alexander likened government services to buying ice cream: You’ve got to start with plain vanilla, and then buy more flavors if you can afford them. Assembly member Richard Wein testified that the state’s fiscal problems had been going on for years. Although he doubted that the budget presented by the governor would ever happen, he thought some self-examination was warranted. A physician, he said “the first person’s pulse you take in the emergency room is your own.”
Paxton said that he had taken a meeting with Sitka Sen. Bert Stedman and agreed that Sitka’s top budget priorities were 1) keeping the governor’s hands off Sitka’s share of raw fish taxes, and 2) keeping the state ferries running.
Sitka’s school district is also under threat from the governor’s budget, and faces the potential layoff of 42 staff — 30 of them teachers. At a school board meeting later that evening, a member remarked that he would make an offensive hand gesture at the governor if he could. Paxton verbally swerved into that same territory, but straightened out in the nick of time.
“People have said, ‘The governor’s good. He’s made us talk about it.’ But he’s made us talk about it in an awfully difficult way,” Paxton said. “Rather than being part of solutions like we’re talking about today, it’s like… it’s just too darn… I’ve given up swearing for Lent! It’s Ash Wednesday now… but it’s crazy.”
Paxton said that he anticipated that the City & Borough itself would likely have to come up with a taxation solution of its own to fund schools.
In the audience, realtor Nancy Davis agreed that the governor was smart to force a deep rewrite of state finances — but not all in one year. Robin Sherman, the director of the Sitka Legacy Fund, also gave limited credit to the governor for forcing a conversation on state spending — and for also “turning Sitka’s mayor into a liberal.”
Paxton — as conservative as they come — said he was getting used to it.
“Okay!… (audience laughter) Twice I’ve been called a liberal in the last 6 months. Beats me!” he exclaimed.
Video of the meeting was forwarded to the Alaska Municipal League, which has already published a formal statement on the governor’s proposed spending cuts, and official responses from league mayors and other local leaders.
Performing Arts Center to go to city, REACH Homeschool and Community Schools to close under possible school budget.
The Sitka Performing Arts Center would be transferred from the school system to the city, under the latest budget scenario drafted by the Sitka School District.
The Homeschool program and Community Schools would also be closed.
The Sitka School Board presented the draft budget in a work session with Sitka Assembly members on Monday night (3-11-19).
The document would make ends meet in any ordinary funding year, but with Alaska’s new governor proposing a 25-percent rollback in education funding, it may be shelved in favor of something far more drastic.
If this were 2018, and the school board was proposing transferring ownership of the PAC to the city, there would be a hundred people testifying on the issue. If it were 2018 and the board proposed closing Community Schools, that would bring another hundred people out to register their opposition.
But it’s 2019, and Alaska Gov. Mike Dunleavy wants to cut government spending by $1.5 billion, with $300 million of that coming out of education.
The Alaska legislature likely won’t buy into the governor’s plan, but coming up with one of its own will leave Alaska’s cities, schools, ferries, and most state agencies and programs completely in the dark about how much money they’ll have to operate — or even if they’re around to operate.
So the latest work session between the Sitka School Board and the Sitka Assembly was mostly an exercise in frustration and worry. Last week the board decided to look at a budget based on the same state funding as last year.
That didn’t sit well with assembly member Steven Eisenbeisz.
“Assuming you’re going to get flat funding, I don’t believe is the correct route to go,” he said. “I think it would be nice, but I forsee cuts coming from the state. That’s very scary to me.”
Even in a flat-funding scenario, the school board still would have to slash nearly $1.4 million from the budget next year, due to projected lower enrollment. The administration proposed cutting one special education teacher to make up the difference, along with drawing $200,000 from reserves, closing the REACH homeschool program at a savings of $40,000, eliminating the Community Schools contract at a savings of $100,000, paying $50,000 less in utilities and substitute teaching expenses, and tapping the city for another $200,000 in direct support.
Transferring the Performing Arts Center to the city — along with its $240,000 in operating expenses — was the single-largest cost saving measure on the table.
Surprisingly, everyone seemed fine with it, as long as the schools still had priority. This is superintendent Mary Wegner.
“How it really shakes out is going to depend on whether we have any skin in the game,” said Wegner, “and then can have some expectations around free performances for our students.”
The skin in the game would be a contract with the Sitka Fine Arts Camp, which currently manages the PAC for $112,000. The camp has offered to absorb those costs, which struck assembly members as too good a deal to pass up — whether the PAC lands on the assembly’s budget, or remains in the school district.
This is assembly member Steven Eisenbeisz again.
“Whatever entity captures that,” he said. “Someone needs to capture that $112,000 value that is being presented by the Fine Arts Camp. I feel it would be unfortunate if neither of us could. However, if we take on the Performing Arts Center, we’ve shifted the burden to the (Sitka) General Fund. So what as citizens are you now willing to live without from the General Fund?”
That was also assembly member Valorie Nelson’s take. Even if the legislature develops an alternative budget to the governor’s, and trims down dividend checks, she believes that it is all going to boil down to Sitkans deciding what they wanted to live without.
“We have this crisis year after year after year,” said Nelson. “Yeah, this year it’s really, really bad, but given everything else that’s going on in the community, with the imminent closure of Sitka Community Hospital — I see more families leaving which means less enrollment in the school — and there are just all sorts of things that have to be balanced. And my main concern is the wants versus the needs. And yes that’s (the PAC) is an important part of education, but having 40 or 50 kids in a classroom to me is more important.”
And finally, the administration explained why state education funding rules would not allow the Sitka district to close one of its school buildings to save money — and in fact, would actually increase the deficit. Superintendent Mary Wegner — who’s made it clear that she prefers to protect jobs — seemed frustrated that three schools in the Anchorage area were closed after last November’s earthquake and consolidated into other buildings — in the space of a couple of weeks. Yet Sitka could not do it over a summer without paying a penalty.
Said assembly member Richard Wein, “So, what you’re saying is we need an earthquake?”