Dunleavy's budget cuts will cost Homer and borough

Feb 14, 2019

Gov. Michael Dunleavy introduces his amended state budget to reporters at a press availability at the Capitol in Juneau on Feb. 13, 2019.
Credit Skip Gray-360 North)

Gov. Mike Dunleavy unveiled his far-reaching budget proposal Wednesday and it’s left public officials on the Kenai Peninsula with more questions than answers.

Homer City Manager Katie Koester said the city has a laundry list of concerns when it comes to the cuts that may be in the fine print of Dunleavy’s budget proposal.

“The City of Homer is a university town, the City of Homer is a Marine Highway town, we have a lot of public employees, retired public employees,” Koester said, giving examples of impacts Dunleavy’s budget plan could have on local services funded by the state. “Of course our children are in the schools, and so just trying to understand the impact to our residents is certainly the first part of the equation.”

Koester said the city could stand to lose hundreds of thousands of dollars if Dunleavy’s proposal would cut the state’s revenue sharing program for municipalities, something the city is still looking into.

She adds the city is also trying to figure out whether contracts it has with the Department of Corrections and Alaska State Troopers for the use of Homer’s local jail are on the chopping block. Koester said those are just a few ways Dunleavy’s budget could shift some of the state’s financial responsibilities onto the city, and that the overall price tag may not be clear for some time.

“And there are kinds of little things, whether it’s grant programs to the library, whether it’s a contract we have with DOT for different things,” she said. “The airport is a state-run airport. The City of Homer owns the building, but we actually lease it from the state and we’ve seen those costs go up year after year. So we’re concerned about that. Everything rolls downhill because local municipalities are where the buck stops and we are the ones that end up having to deal with it.”

Koester and some Homer City Council members will be in Juneau next week to speak with legislators. The Kenai Peninsula Borough also stands to lose a major source of revenue. Dunleavy wants property taxes from oil and gas infrastructure to go to the state instead of local governments. The move would require action from legislators, but it would cost the borough about $15 million annually.

Kenai Peninsula Borough Assembly Member Willy Dunne said some of that money goes to emergency services in Anchor Point and is utilized for work on borough roads.

“Particularly, the Anchor Point Fire and Emergency Services Area, this year received about $400,000 from oil and gas property tax, and that is roughly one-third of their entire year’s budget,” Dunne explained. “Another big impact would be the Road Service Area. Road services received about $2 million from oil and gas property taxes. That’s roughly 25 percent, one-fourth, of their entire budget.”

South Peninsula Hospital would also lose over $500,000 per year in oil and gas property tax on top of steep cuts to Medicaid Dunleavy is proposing.

State ferry service to Kachemak Bay, Kodiak and along the Aleutian chain would also suffer. Dunleavy wants to cut 75 percent of the Alaska Marine Highway’s budget and look into privatizing the system by 2020.

Sen. Gary Stevens represents Kodiak, Homer and other coastal areas. He said cuts that large may eliminate service entirely after the Marine Highway’s current schedule ends in October

“The Marine Highway System is extremely important to us and to have that closed up in November, as it looks like this budget would do, is just shocking,” he said. “We need to have a marine highway just as much as folks need to have paved roads. So, I hope we can bring that back to a little closer to that was palatable for our communities.” 

Stevens also raised concerns about Dunleavy’s proposed $270-million cut to K-12 education. He plans to visit the communities he represents during the budgeting process to solicit input from constituents.

KBBI also reached out to Homer Rep. Sarah Vance’s office for comment. Her office said she needs more time to examine the budget before she comments.