Maximizing Local Government Resources in Alaska

Alaska's Municipal Services Dividend aims to maximize local self-government by reducing compliance costs, sharing taxes on local economic activity, and negotiating devolution of state powers. This innovative approach leverages local government resources for sustainable budgeting and service provision.

• Alaska
• Local Government
• Resource Maximization
• Budget Sustainability
• Municipal Services

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1. Alaska Municipal Service Dividend Vision: To maximize local self-government and leverage local government resources on behalf of State services and budget sustainability

2. Four Steps to Maximize Local Government Reducing the Costs of Compliance Unfunded and underfunded mandates limit municipal capacity to undertake service provision. A review of State statutes reveals *** examples of un- or undercompensated requirements of local governments. The estimated cost of these is ***. Removing these burdensome regulations and developing a new compliance reporting mechanism is a cost-effective approach to maximizing local self-government. Municipal Services Dividend The original formula for revenue sharing corresponded to law enforcement, health, road miles, etc. The State could clearly see the connection between investment and responsibilities provided. Reestablishing something similar, as a % of the POMV draw on the Earnings Reserve, would result in something like a block grant for communities that leverages existing capacity and builds in new incentives. Shared Taxes on Local Economic Activity Where the State collects and redistributes taxes with local governments, that revenue is often a primary source of funding and is used to provide for State responsibilities at the local level. It strengthens local communities and directly corresponds to growing economies. If sharing goes away, additional taxes will be necessary in those regions, thereby presenting a burden on that economic activity. Negotiated Devolution of State Powers Many State services are better provided at the local level. However, the devolution of State powers must be negotiated and compensated. Shared taxes and the municipal services dividend go some way toward compensation, which leaves the two parties to determine local provision of State responsibilities. Areas where devolution make sense include law enforcement, road and airport maintenance, and many others.

3. Alaska Municipal Services Dividend is Not Hickel s Community Dividend (1980s) Instead of Individual PFD Earnings from the Permanent Fund would be distributed to local governments and set aside for priority development sectors Schools, ports, hospitals, etc Moses Community Dividend (2001+) Establishing a Municipal dividend fund Appropriations to organization grants, tax resource equalization, priority revenue sharing, and safe communities. Excess to capital matching grants and municipal corrections costs. Equal to lesser of the amount calculated by multiplying $100 by the # of PFDs, or balance of earnings reserve. Berkowitz Community Dividend (2017) Designated fund similar to PCE endowment drawn from earnings reserve, earnings to enhance Community Assistance, unrestricted use

4. Alaska Municipal Services Dividend fits within Discussion of how to allocate earnings reserve POMV draw Instead of 50% to State Government, and 50% to Individual PFD Increase local control, local decision-making AML proposes a 40-40-20 plan 40% to State Government = $1,172,000,000 40% to Individual PFD = $1,172,000,000 or $1,808 dividend 20% to Community Dividend = $586,000,000

5. Goals and Justification Goals Connect State funding to services provided, similar to original revenue sharing program Negotiate increasing number of responsibilities to move from the State to local governments Incentivize the adoption of powers, borough formation and class upgrades Justification Reduction in State Government allocation Identifies and directs funding for State priorities Responds to public faith in local decision-making Responds to Governor s belief that local issues should be dealt with locally Provides sustainable funding mechanism and continued control Reduction in Individual PFD allocation Maintains delivery of local essential services Avoids tax increases at the local level Enhances local decision-making and governance Increases role of Alaskans in State spending

6. Components School Bond Debt Match Port and Harbor Capital Improvements Community Assistance Road and Rural Airport Maintenance Law Enforcement and Community Jails Deferred Building and K-12 Maintenance Senior Citizen Property Tax Exemption Reimbursement $84,000,000 $100,000,000 $40,000,000 $20,000,000 $100,000,000 $80,000,000 $75,000,000 Total FY20 $586,000,000

7. Variation in Decision Making Earnings Reserve POMV increases = CPI increases in funding for each program, excess into municipal capital projects fund Earnings Reserve POMV decreases = flat funding, no new bonding, property tax exemption decreased Hold harmless provision any power or program that has been taken on can t be left unfunded Floor - $200 million Maintain power of appropriation over total % of POMV Allocation by Statutes Add or eliminate programs as necessary, with annual notice of intent

8. School Bond Debt Match School Bond Debt Match - Develops sustainable spending plan Justification continued State obligation to education Inability of school construction program to suffice Begin with and fund current system of 70/30 or 60/40 match Two community drop off in next two years, five in 6-7 years ($43,420,767) The State s liability is $82,689,586 by FY22, and $58,050,846 by FY25 As the State s obligation is reduced, approve new bond packages Determine changes to debt ceiling based on needs and 3 year earnings/POMV draw average Determine match 70/30, 60/40, or 50/50 based on local tax recovery Available to all organized boroughs and Home Rule/First Class cities

9. Port and Harbor Capital Improvements Port and Harbor Capital Improvements - Develops sustainable spending plan Justification: State transfer to municipalities of undermaintained ports and harbors Current HB528 DOT debt $16,451,706; 50% drops off in FY23 Port and Harbor Matching Grant Program is 50% match by community, with annual requests of from $5 to 7.5 million Maintain $25 million fund for port and harbor capital improvement bond debt matching Potential priority of AMHS ports Rolling regional project calls Southeast, Southcentral, Southwest, West/North with prioritized allocation Port and Harbor STIP

10. Community Assistance Community Assistance - Decreases current State spending Justification keep the lights on, increase capacity in majority of local governments 39 local governments currently receive more than $100,000 average 3% of their budget For the 126 others, average receipt of $82,229 average 9.91% of budgets $100,000 equal allocation benefits majority of communities Those who see reductions most likely to be beneficiaries of other programs For those negatively impacted, suggest step down decreases over next five years Add Human Service Matching Grants, Transit Matching Grants and OWL Link to CPI adjustments in future years

11. Road and Rural Airport Maintenance Road and Rural Airport Maintenance - Devolution of State programs Available to all Boroughs, and Home Rule/First Class Cities Coordinated by DOT&PF relative to current program needs Road maintenance reflected by miles within municipality 15,718 miles of public roads, @ $28545 per mile / population Caps at different tiers: $10, $5 and $1 million Rural airport maintenance determined by average annual flights 155 airports @ $100,000 annual maintenance * population Tiers $1 million, $500k and $100k Contract basis for second class cities depending on capacity Hold harmless in case of funding decreases and/or population increases

12. Law Enforcement and Community Jails Law Enforcement and Community Jails - Responds to public safety priority, strengthens local capacities and capabilities - Potential reductions in State Trooper budgets, DPS Community Jails currently in place - $7,000,000 needs assessment Strengthen municipal police base funding for officers, liability insurance Cap of $10 million; $100,000 per officer, based on 16.9 per 10,000 population Village police officers transition to municipal police, with base funding, liability insurance, increase regional oversight VPSOs transition to municipal police, with base funding, liability insurance, with regional oversight Incentives for adoption of police powers, multi-year investments Joint training Add Local Emergency Response, current formula

13. Deferred Building and K Deferred Building and K- -12 Maintenance - Replaces existing GF requirements in operating and capital budgets - Devolves State programs to local governments 12 Maintenance Develop Municipal Deferred Maintenance Schedule Currently unaccounted for outside CIP process Conduct needs assessment and evaluate similar to DOT STIP Grants with match component, increase/decrease by class Develop K-12 Deferred Maintenance Schedule Organized by DEED Municipal implemented by local government Local contribution variable mechanism fund will match local contribution as part of funding REAA administered by Municipal Council of REAAs $20 million cap; per capita formula

14. Senior Citizen Property Tax Exemption Reimbursement Senior Citizen Property Tax Exemption Reimbursement - New, but builds local capacity and could include devolution of State programs State law exempts real property owned and occupied as a permanent home by a resident, 65 years of age or older, or, by a disabled veteran with a 50% or greater service-connected disability, or by a widow/widower to or greater than the age of 60 of either of the two prior categories. The exemption applies to the first $150,000 of assessed valuation, and applicants must apply directly to their municipality. In Statute, but not funded since 1997 Since 2008, this has resulted in loss of tax revenue to 24 local governments of $673,109,088 2018 s Total Exempt Taxes = $84,684,847 Local governments have an increasing role in supporting senior services Program could support Senior Benefits and potentially Pioneer Homes Should be unrestricted revenue, but directed to vulnerable population support

15. Total Impact by Community Municipality Municipality of Anchorage Matanuska-Susitna Borough Fairbanks North Star Borough Kenai Peninsula Borough City & Borough of Juneau City & Borough of Sitka Kodiak Island Borough Ketchikan Gateway Borough City of Fairbanks Northwest Arctic Borough City of Valdez City of Ketchikan City of Kodiak North Slope Borough Haines Borough Petersburg Borough City of Cordova City of Unalaska City & Borough of Wrangell City of Homer City of Wasilla Aleutians East Borough City of Bethel City of Dillingham Lake & Peninsula Borough City of Kenai City of Nome Population 297483 104166 97738 58024 32269 8748 13287 13754 31905 948 3937 8125 5952 10344 2459 3175 2279 4341 2387 5313 8797 3008 6151 2335 1721 7038 3691 Employees CA new 2656 310 404.18 289.7 582 147.51 44 108.75 178 34.38 133 264 133.2 5.625 52.75 99 58 173.17 56.13 101.5 131.25 10 99 44 5 106.8 46 Senior Property Tax Police 39,952,025.00 $ 10,322,158.00 $ 12,172,630.00 $ 3,395,758.00 $ 3,140,609.00 $ 496,072.00 $ Road and Airport FY20 SBD $10,000,000.00 $43,153,298 $10,000,000.00 $19,954,904 $10,000,000.00 $10,064,193 $10,000,000.00 $5,000,000.00 $5,000,000.00 $5,000,000.00 $5,000,000.00 $500,000.00 $577,906.87 $1,000,000.00 $500,000.00 $500,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $500,000.00 $500,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $1,000,000.00 $500,000.00 $1,000,000.00 Deferred Maintenance $20,000,000 $10,416,600 $9,773,800 $5,802,400 $3,226,900 $874,800 $1,328,700 $1,375,400 $3,190,500 $94,800 $393,700 $812,500 $595,200 $1,034,400 $245,900 $317,500 $227,900 $434,100 $238,700 $531,300 $879,700 $300,800 $615,100 $233,500 $172,100 $703,800 $369,100 CapProj.ReimbHarborGrants FY19 HSCMG OWL AMHS Total Impact $125,029,340 $61,795,486 $52,715,274 $31,949,927 $25,732,416 $16,908,005 $14,420,038 $11,574,497 $9,182,445 $5,013,183 $4,529,438 $4,511,131 $4,354,792 $4,186,489 $4,045,555 $3,903,214 $3,899,899 $3,375,007 $3,254,999 $3,029,197 $2,966,393 $2,945,622 $2,754,619 $2,618,611 $2,525,301 $2,493,222 $2,491,609 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 10,000,000.00 10,000,000.00 10,000,000.00 9,806,056.00 5,453,461.00 1,478,412.00 2,245,503.00 2,324,426.00 5,391,945.00 160,212.00 665,353.00 1,373,125.00 1,005,888.00 1,748,136.00 415,571.00 536,575.00 385,151.00 733,629.00 403,403.00 897,897.00 1,486,693.00 508,352.00 1,039,519.00 394,615.00 290,849.00 1,189,422.00 623,779.00 $997,786 $826,231 $289,311 $271,458 $712,513 $333,193 $2,845,713 $8,551,446 $2,458,721 $5,745,835 $2,774,671 $260,000 $6,500,000 $4,080,264 $1,686,718 473,292.00 725,506.00 1,153,704.00 $ 228,834.00 $ 373,622.00 $ 483,089.00 $ 222,376.00 $ 43,665.00 $ 344,861.00 $ $ $ $210,375 $1,000,000 $1,000,000 $75,119 $904,190 $466,050 $962,072 $670,819 $168,035 $6,272 $1,000,000 $1,000,000 $2,400 $1,000,000 $27,099 $1,000,000 $1,000,000 $365,695 $654,762 $381,708 $ 138,496.00 $744,230 $962,352 $7,770 $ 172,734.00 $221,202 $4,794

16. Total Impact by Community Municipality Population Employees CA new Senior Property Tax Police Road and Airport FY20 SBD Deferred Maintenance CapProj.ReimbHarborGrants FY19 HSCMG OWL AMHS Total Impact City of Palmer City of Akutan City of Utqiagvik City of Kotzebue City of King Cove City of Sand Point Municipality of Skagway City of Soldotna City of Whittier City & Borough of Yakutat Denali Borough City of Hoonah Bristol Bay Borough Metlakatla Indian Community City of Kake City of Gustavus City of Angoon City of Seward City of Port Lions City of Old Harbor City of Seldovia City of Ouzinkie City of Tenakee Springs City of Cold Bay City of Chignik City of Pelican City of False Pass City of North Pole City of Houston City of Delta Junction City of Craig 6296 993 5041 3154 925 915 741 4333 244 552 1849 773 887 1442 604 544 404 2518 175 214 180 146 135 72 110 67 73 2124 2113 1195 1089 86.5 10 67.5 58 26 30 76 74.06 17.75 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 100,000.00 $ 1,064,024.00 167,817.00 851,929.00 533,026.00 156,325.00 154,635.00 125,229.00 732,277.00 41,236.00 93,288.00 312,481.00 130,637.00 149,903.00 243,698.00 102,076.00 91,936.00 68,276.00 425,542.00 29,575.00 36,166.00 30,420.00 24,674.00 22,815.00 12,168.00 18,590.00 11,323.00 12,337.00 358,956.00 357,097.00 201,955.00 184,041.00 $500,000.00 $605,339.15 $500,000.00 $1,000,000.00 $563,885.92 $557,789.86 $451,718.34 $500,000.00 $148,743.96 $336,502.73 $1,000,000.00 $100,000.00 $1,000,000.00 $879,052.43 $100,000.00 $100,000.00 $100,000.00 $500,000.00 $100,000.00 $100,000.00 $100,000.00 $100,000.00 $100,000.00 $100,000.00 $100,000.00 $100,000.00 $100,000.00 $500,000.00 $500,000.00 $728,479.65 $663,861.37 $629,600 $99,300 $504,100 $315,400 $92,500 $91,500 $74,100 $433,300 $24,400 $55,200 $184,900 $77,300 $88,700 $144,200 $60,400 $54,400 $40,400 $251,800 $17,500 $21,400 $18,000 $14,600 $13,500 $7,200 $11,000 $6,700 $7,300 $212,400 $211,300 $119,500 $108,900 $2,293,624 $1,972,456 $1,960,498 $1,948,426 $1,912,711 $1,903,925 $1,822,851 $1,765,577 $1,664,253 $1,627,089 $1,597,381 $1,422,287 $1,394,665 $1,366,950 $1,362,476 $1,348,736 $1,308,676 $1,277,342 $1,257,755 $1,257,566 $1,248,420 $1,246,896 $1,240,477 $1,230,048 $1,229,590 $1,227,514 $1,219,637 $1,171,356 $1,168,397 $1,152,078 $1,105,214 $1,000,000 $4,469 $1,000,000 $1,000,000 $1,000,000 $ 71,804.00 $ $ 4,573.00 42,098.00 $1,345,300 17 10 26 35 $1,000,000 $14,350 $1,000,000 $ 56,062.00 21.25 9 $1,000,000 6.3 $2,400 $1,000,000 $1,000,000 4 102 $10,680 $1,000,000 $1,000,000 $1,000,000 $7,622 $1,000,000 $4,162 $1,000,000 $10,680 $1,000,000 $1,000,000 $2,141 $1,000,000 $1,000,000 5 10.4 5.925 4.1 2.1 4 4 $ 7,350.00 3.58 42 6 6 $2,143 $6,922 33 $ 41,490.00

17. State Fiscal Note Total State Direct Budget Reduction = $50 million Community Assistance less $10,000,000 DPS less 10% admin of $80 million DOT less 10% admin of $175 million DEED less 10% admin of $135 million DCCED less 10% admin of $10 million Plus matching, leverage and potential for overall employee reductions

18. Additional questions Room to add at 20% PCE endowment and/or program = $30 million PERS on behalf payments = $40 million as 18% of FY20 municipal share To be determined Scope of services within organized boroughs, role of cities What about unincorporated communities? Responsibility of State DPS, DOT, and DCCED