Opinion: Municipal budget crunch looms, questions remain

We should be focusing on economic recovery, budget discipline and responsibly conserving resources.

  • Thursday, May 28, 2020 7:54pm
  • Opinion

Alaska communities are facing municipal budget deadlines while coronavirus concerns and uncertainty surrounding their economies continue to frustrate their efforts to cobble together sustainable financial plans.

A massive amount of federal aid under the Federal CARES Act is available, but it won’t offset all the immediate or long-term losses communities will experience. $568.6 million in federal spending for communities and local governments impacted by COVID-19 was recently ratified by the Alaska Legislature. The Alaska Municipal League, however, estimates in many communities that won’t be enough to cover total unanticipated spending and lost revenue, leaving a shortfall of roughly $500 million through the end of 2020.

Additionally, there are strings attached to this financial assistance and, even with another possible round of CARES funding, this assistance will inevitably end long before the effects of the pandemic have subsided.

If the resultant widespread layoffs and loss of revenues weren’t enough of a challenge for communities to deal with, stay-at-home advisories along with the shuttering of schools and many businesses due to COVID-19 health mandates have further stretched the social and economic fabric of our communities.

Fortunately, Alaska has suffered least of all 50 states in terms of the health effects of this pandemic and, recognizing this, Gov. Dunleavy has taken steps to reopen our economy – allowing most mandates to expire and businesses to start back up while following recommended social-distancing and health guidelines.

It’s not clear that all businesses are ready to reopen or that some business models can co-exist with current social-distancing guidelines.

With this as a backdrop, elected community leaders must balance the challenge of keeping citizens safe while actively encouraging economic recovery. This will require judicious use of available funding today while planning for unknowns in the future.

In Juneau, CBJ Mayor Beth Weldon established an Economic Stabilization Task Force (ESTF) comprised primarily of local business leaders. The ESTF has been meeting regularly and recently presented some recommendations to the CBJ Assembly. These recommendations would be funded solely from CARES Act monies and fall under two areas:

■ Business Sustainability Grants and Utility Rebates for $12,000,000, which includes three rounds of funding through 2020. The initial round totals $3.5 million.

■ COVID Related Childcare Funding — $1,057,000

Some assembly members have questioned the large investment in helping businesses and childcare providers in contrast to directly supporting workers. While recommendations for other programs are forthcoming, passing these initial recommendations are critical if local businesses and childcare services are to survive. Individual employees have been helped through the Payroll Protection Program and extended/expanded unemployment benefits, but small businesses have received little support to date. Many businesses are on the brink of closing permanently and without additional support will not make it through this year.

What good will temporary employee assistance be if workers don’t have jobs to return to or access to childcare as the economy recovers?

Alaska’s U.S. Sens. Dan Sullivan and Lisa Murkowski are co-sponsoring legislation that would permit

existing CARES Act money to be used to replace revenue shortfalls resulting from the pandemic. This would be a game changer, allowing municipal governments to mitigate large budget deficits. So far, CBJ staff has only been able to identify $18 million of other COVID-related expenses qualifying for CARES Act funding. Added to ESTF recommendations, this represents barely half of CARES Act funding allocated to Juneau.

However, even if funding guidelines are liberalized and all CARES Act monies are utilized, these funds are temporary. The temptation to use them to kickstart new or expanded social programs that require on-going funding will be irresistible. This would be short-sighted. Case in point: the Assembly’s current effort to fund a brand-new childcare program (not to be confused with one-time COVID-related childcare funding needed to stabilize currently licensed childcare slots).

The new childcare program envisions ramping up to $1.7 million annually in just a few years. How will we pay for that when the CARES Act money expires? Eventually, the result would be higher property taxes — a non-starter in a depressed economy.

With all the questions remaining, our community is best served focusing on economic recovery efforts, maintaining budget discipline, and responsibly conserving resources to deal with unknowns in the future.

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