Power Cost Equalization Fund could pay for community assistance

The Senate Finance Committee is looking to re-route money from the Power Cost Equalization Endowment Fund to replace the Community Revenue Sharing program that the state government started when oil prices were higher.

The concept arose from a concern over Senate Bill 210, which would reduce the amount that municipalities receive in revenue sharing. Without a source of revenue other than the state’s annual budget, this program – which legislators want to rename community assistance – would disappear.

That’s where the second Senate Bill 196 comes in. The bill originally was written to use excess money from the Power Cost Equalization Endowment Fund to offset some of the state budget. But under a new version, this money would instead go to assist communities.

Sen. Mike Dunleavy, March 14, 2016
Sen. Mike Dunleavy, R-Wasilla, speaks during a floor debate last month. (Photo by Skip Gray/360 North)

Some legislators wanted to use more — if not all — of the fund this year. Wasilla Republican Sen. Mike Dunleavy asked why this isn’t happening.

“We’re experiencing a $4 billion hole. There’s a billion dollars in this fund,” he said. “Why wouldn’t we use this fund to at least backfill some of the deficit?”

However, under the latest versions of both bills, the $930 million PCE fund would continue to be used primarily for a program to help rural electric ratepayers. In years when the fund earns more than the roughly $40 million that’s needed for that program, up to $30 million would go to community assistance and up to $25 million would go to rural, bulk fuel and renewable energy programs.

Bethel Democratic Sen. Lyman Hoffman supports both bills. He doesn’t want to spend the PCE money all at once on the budget.

Hoffman said the fund could provide a lasting source for both power cost equalization and community assistance – as long as the main PCE fund remains intact.

That will help communities that have come to rely on revenue sharing while taking pressure off the state budget.

“If the dollars were taken, there would be a one-time use, and people in rural Alaska would end up paying substantially more in electric costs,”

But not all municipalities are happy about the change. Anchorage would receive $5.7 million in the coming year, which is $9 million less than the revenue sharing in the past. In future years, Anchorage would receive no more than $2.3 million.

Anchorage Mayor Ethan Berkowitz’s chief of staff Susanne Fleek-Green says it will cost residents more in taxes or reduced services. The municipal government had budgeted for a $5 million reduction, and must make up the gap.

Sen. Lyman Hoffman, D-Bethel, during a Senate Finance Committee meeting, March 29, 2016. (Photo by Skip Gray/360 North)
Sen. Lyman Hoffman, D-Bethel, during a Senate Finance Committee meeting on March 29. (Photo by Skip Gray/360 North)

“To counteract the effects of this legislation, the municipality will have to add to the additional burden being felt by property owners in the municipality,” she said. “This bill effectively is shifting an additional $4 million to property taxpayers in Anchorage, Eagle River, Chugiak, Girdwood and all other parts of the municipality.”

Under the latest changes, municipalities would receive $30 million in community assistance, compared with $50 million in Gov. Bill Walker’s budget.

Rural communities are largely protected from community assistance cuts. An extreme example is Aleutians East Borough, which receives nearly $10,000 for every one of the 39 residents who lives in unincorporated areas.

Every community with fewer than 500 residents would receive at least $400 per person in state assistance.

Alaska Municipal League Executive Director Kathie Wasserman says she’s can support using the Power Cost Equalization Fund for community assistance. But the reduced amount of aid – combined with a formula that benefits some place more than others – puts her in a difficult position.

“I’ve just had trouble with the formula that’s presently in place,” she said. “No matter which direction the Alaska Municipal League goes, whether to support the formula or not support, I throw a number of my municipalities under the bus, so that’s why we’re just not taking a position on the formula at this point.”

Both houses have until Sunday to act on the bills.

Correction: A previous version of this story misstated the amount Anchorage would receive under the legislation.


Andrew Kitchenman

State Government Reporter, Alaska Public Media & KTOO

State government plays an outsized role in the life of Alaskans. As the state continues to go through the painful process of deciding what its priorities are, I bring Alaskans to the scene of a government in transition.

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