The municipal tax cuts approved by Juneau voters in this fall’s election are expected to create a $6.4 million hole in the city’s budget this fiscal year. But that’s only scraping the surface.
Next year — and every year moving forward — the city will face an estimated $12 million revenue loss. That’s due to the tax exemption on food and utilities and cap on the city’s property tax rate that voters passed.
This year, the funding gap is smaller because the city is already partially through this fiscal year. The new food and utility tax exemptions take effect starting Nov. 20 and the property tax rate cap will begin next year.
During a finance committee meeting on Wednesday night, Assembly members began to discuss how to move forward. Assembly member Alicia Hughes-Skandijs said the decisions ahead won’t be easy.
“I think that when people understand the magnitude of the decisions made in the last election, there is going to be a little bit of whiplash,” she said.
For the immediate $6.4 million hole this fiscal year, Assembly members agreed on Wednesday to absorb the revenue shortfall using interest earnings from last fiscal year that came in higher than expected. They opted against implementing any broad service reductions — for now.
Angie Flick, the city’s finance director, said it gives the Assembly more time to figure out how to address the recurring shortfall beginning next fiscal year.
“We have the opportunity to take some time to make thoughtful decisions about reductions,” she said.
Flick and city staff floated a few directions the Assembly could take to fill the recurring gap — though no major decisions were made. She offered options like implementing a blanket reduction in funding across all city departments, hiring freezes, cutting services and major line-item expenses, or increasing revenue.
The Assembly also agreed to distribute the remainder of the grant funding that the city withheld from local organizations before the election. The city originally withheld the funds out of concerns about the revenue loss if the ballot propositions passed.
Assembly member and finance committee chair Christine Woll advocated for providing the full funding promised.
“I think it plays into this idea that our community grants are philanthropy, that we’re doing this to be nice,” she said. “We’re doing this because these are needed services in our communities that others can do more efficiently and better than we can.”
City staff and the Assembly plan to evaluate the city’s finances in the coming months and develop a plan to engage the public as it moves forward with any potential reductions to services.
Disclosure: KTOO is one of the organizations that will receive previously withheld grant funding from the City and Borough of Juneau.
