Facing an estimated $12 million shortfall over the next two years, the Juneau Assembly will dive into City Manager Kim Kiefer’s budget proposal Wednesday evening at the first finance committee meeting since the spending plan was introduced.
While $12 million may sound dire, the assembly has nearly $20 million in savings to work with.
The money is in two separate funds maintained by the city for unexpected shortfalls and emergencies. One of those is known as the fund balance, which accumulates when the city spends less money than it receives in revenue.
“We do have a central treasury, and that money that’s carried forward from prior years is cash, sitting in the CBJ’s bank accounts,” says Bob Bartholomew, CBJ Finance Director.
Bartholomew says the city will have about $8.1 million in fund balance available on July 1, the start of the new fiscal year. Juneau also has a budget reserve, expected to be about $11.8 million in July, for a total of about $19.9 million the assembly could use to balance the budget.
“Juneau is a financially healthy and stable community,” Bartholomew says. “We just got to a point where, our current operating budget, when we lost some significant revenues [and] had some cost increases, we found ourselves with a shortfall. But I think we have lots of resources for the assembly to take a look at over the next seven weeks to decide how to balance it.”
There are strings attached to the city’s savings accounts. The budget reserve is only to be used in emergencies, and currently it falls short of the amount the assembly wants on hand. As for the fund balance, Juneau does not have a policy for how much to keep. But Bartholomew says the administration wants to maintain between $3 million and $4 million to address unexpected cost increases or declines in revenue.
“In talking with the city manager we decided it would be better to propose some other alternatives that did keep some fund balance available at the end of the two-year budget cycle, so that if other unforeseen issues arose we could still deal with them,” he says.
The assembly has already approved using $3.1 million in fund balance over the next two years to pay for negotiated wage and benefit increases for city workers. City Manager Kim Kiefer’s proposed budget calls for using another $1.3 million in fund balance to address the estimated shortfall.
Historically, Bartholomew says, the city has used some fund balance to make its budget pencil out every year. In the past four years the city has spent significantly less than the amount budgeted. Bartholomew says that’s definitely been the long-term trend as well.
“In good years we haven’t needed it. And in years where our revenues didn’t come through or we had one time expenditure increases − say, bad snow years − we would then spend out of fund balance,” Bartholomew says.
In addition to savings, the proposed budget calls for $3.6 million in cuts to programs and services over the next two years, including a controversial plan to close the Augustus Brown Swimming Pool for at least a year and a half.
The administration is also asking the assembly to raise property taxes to bring in an additional $1.9 million in revenue each year. Bartholomew says the owner of a $300,000 home would pay an extra $132 a year if the tax increase is approved.
Assemblywoman Karen Crane says the administration’s budget is a good starting place for the assembly, which ultimately shapes the final spending plan.
“There are nine ideas about what to do,” she says. “So we will just have to work it out and see if we can come to some consensus.”
Crane, who chairs the finance committee, says all options are still on the table for balancing the budget. While there are savings available, she says the assembly wants to avoid using the budget reserve.
“I think we are in fairly good shape,” Crane says. “It doesn’t seem like it at the moment, but we do have savings. I think we’re going to get some additional money from federal sources next year. I also think revenues are going to go up. But we need to be conservative with the public’s money and how we look at this and what the decisions are.”
Crane says the city budget will also be affected by decisions currently being made by the Alaska Legislature, namely school funding and public employee retirement system contributions by municipalities.
The assembly finance committee is scheduled to meet weekly through May 7 to hear presentations on specific aspects of the budget. Additional meetings will be scheduled after that.
The final budget must be adopted by June 15.