By Jenny Neyman
In a fiscal year 2011 Kenai Peninsula Borough budget of about $113 million, $50,000 here or $640,000 there may not, comparatively, seem like much. But as borough Mayor Dave Carey puts together his proposed fiscal year 2012 budget for the assembly to review, every dollar counts as he tries to cut expenses and raise revenue to cover a $9 million to $12 million expense of a new solid waste transfer facility to be built in Homer.
Carey has said he doesn’t think a bond measure — the usual method of paying for large capital projects such as waste transfer facilities — would pass with voters, and doesn’t know how much money might come from the state Legislature to help pay for the new facility, so he’s planning for the worst in preparing next year’s budget, and that means cutting expenditures and generating revenues wherever he can.
Among expenditures on the chopping block are “non-departmentals” — organizations that provide services of benefit to borough residents, but that aren’t part of borough government. Those include Kenai Peninsula College, the Economic Development District, Central Area Rural Transit System Inc., lobbying activities, Kenai Peninsula Tourism Marketing Council and the Small Business Development Center. In the fiscal year 2011borough budget, nondepartmental funding totaled just under $2 million.
Carey has said he plans to cut all funding for nondepartmentals in his proposed fiscal year 2012 budget. That’s in conjunction with other cuts, such as reducing the hours of operation among borough employees and services, and revenue-generating measures, such as suspending the sales tax holiday on nonprepared foods. Carey has proposed eliminating or reducing funding for most nondepartmentals in his last two budget proposals, as well, though the assembly chose to continue funding in both years.
“I am not comfortable with us funding things we are not required to by statute,” Carey said. “I believe those things are unmandated funding. I believe that if taxpayers want to be funding those things they can certainly choose to do so on their own. But it is not, I think, a proper decision for us to take out of everyone’s taxes.”
Drop in the bucket or tide of support?
The recipients of that funding, however, argue that their services to borough residents are well worth the tax dollars they receive, and that cutting their budgets would have a negative net effect on the borough’s finances, because that money is used to generate much more revenue.
CARTS, for example, last year used the $50,000 it received from the borough as a local match to secure $163,953 in federal funding, said Jennifer Beckmann, executive director.
“We leverage federal dollars with it, and the federal side of the funding really likes to see local involvement, so it would definitely make a difference,” Beckmann said.
Losing the borough contribution could mean losing out on the much-larger pool of federal dollars CARTS uses to operate its transportation service. In an area as spread out as the central Kenai Peninsula, and without a municipal public transportation service, CARTS provides a way for people without their own means of transportation to function, Beckmann said. Less funding would mean less rides.
“We would certainly be looking at having to cut back services. More than likely what that would look like is a reduction in hours,” Beckmann said. “Thirty-three percent (of CARTS rides in a year) are work-related trips. I think that’s huge. They’re making a contribution to the community, and that’s a big deal. We want our residents to do that. I just think it’s important to try and put yourself in that position — how would it be for you if you didn’t have your car or somebody that could drive you around?”
For KPTMC, its $300,000 borough funding from last year was spent in operations to market the Kenai Peninsula to prospective visitors. Revenue from tourism is a significant contributor to the borough economy, said Shanon Hamrick, executive director.
“Tourism marketing is done through tax dollars throughout the country, throughout the world. It’s a reinvestment to grow the industry to continue to have that money flow into the community,” Hamrick said.
She noted that the tourism industry is, in effect, taxed at a higher rate than other industries on the peninsula, since there is no sales tax cap on tourism-related bookings and purchases. For instance, when the per-seat, per-day tax went into effect, in 2008 it generated an estimated $480,000 in revenue for the borough, Hamrick said.
Much of the marketing in the tourism industry is done by individual businesses, either through their own advertising or through participation in regional marketing organizations, such as city-operated visitors programs or KPTMC, which focuses on marketing the areas outside incorporated cities and the borough as a whole.
“Tourism is brand-new money that is coming into the borough, and all the industry is asking for is to reinvest a portion that money. It’s just a drop in the bucket from the entire impact that the visitor industry has,” Hamrick said.
Borough funding for KPTMC may be, in Hamrick’s sense, a drop in the bucket to the tax revenue it generates, but it plays a major role in keeping her organization afloat.
“I’ve looked at the budget and tried to figure out what we would have to cut. Half our staff would have to go, and along with our staff that eliminates a lot of the services that we provide,” she said.
That would mean a cutback in providing information to tour companies and prospective visitors, a reduction in the trade shows KPTMC participates in, and no expansion of marketing efforts to grow tourism on the peninsula.
“We would be reduced down to an organization that was producing a visitors guide, and we could possibly, maybe, mail it out. That’s about it. We could maintain the website we currently have, but we wouldn’t be able to have any growth in our online presence. We would be stagnant,” she said.
The Economic Development District, likewise, can make the argument that the funding it receives is used to stimulate even more revenue in the borough, through its support of businesses. Borough funding, which in fiscal year 2011 was $50,000, amounts to 19 percent of the EDD’s budget, said John Torgerson, executive director. Losing that would likely mean a cutback in services.
“They fund us to do things outside the cities. That would impact some of the follow-ups and things that we do,” he said.
Torgerson said the EDD does have some leeway to generate some of its own funding, through rent at the business incubator center it operates in north Kenai. If the assembly chose to cut its funding, the EDD board would need to decide how to handle that, he said, whether by attempting to raise more revenue through its services, or to reduce the services it offers.
Raising revenue is more challenging for some of the other nondepartmentals. For CARTS, raising rates of rides enough to make up for a discontinuation in funding isn’t feasible, since the main purpose of the service is to serve those with limited financial means. Beckmann said the organization could approach the cities for increased funding, or try to contract with organizations to provide transportation services, as a way to generate the local-match dollars needed to leverage federal funds, but she isn’t optimistic she can replace the $50,000 CARTS stands to lose in Carey’s proposed budget.
“There are other ways to match (the federal funds), but it takes a lot of coordination and a lot of willingness for other agencies to try new things,” Beckmann said.
KPTMC already gets about 40 percent of its budget from businesses within the tourism industry utilizing its services, by buying ads in its visitors guide and on its website, Hamrick said. The organization’s purpose is to use money invested in its marketing programs to make money for those investing — whether it’s the borough or individual businesses — so there isn’t much room to raise additional revenue without hurting the businesses it exists to support, she said.
“There is not the revenue out there to generate. It comes from businesses that invest with us, and some pull-tab revenue. That’s the two places that we make our revenue. Our businesses only have so much money to reinvest, but if these businesses did not exist and were not operating the borough would not be collecting the money they generate from their services. It’s such a hand-in-hand situation, and it’s so shortsighted to not invest to support those businesses,” Hamrick said.
Torgerson said he could understand Carey’s perspective on funding unmandated services in times of tight finances, and of wanting to exercise fiscal responsibility with tax dollars. However, having an axe poised over the nondepartmental budgets year after year can make planning difficult.
“I’m not too sure it should happen every year, but it’s a worthy debate that should happen, under keeping the mill rates and taxes down and everything else,” Torgerson said. “Hopefully there is a balance that can be stuck between the two.”
New kid on the chopping block
Whereas CARTS, KPTMC, the EDD and the Small Business Development Center have found themselves pleading their case for
Photo by Elaine Howell. A protester in a frog suit participates in a demonstration to oppose a funding cut to Kenai Peninsula College during a ceremony rededicating the Borough Building as the George Navarre Borough Building on Feb. 15 in Soldotna.
funding to the assembly for the past two budgets Carey has proposed, and will again this year, this is the first time KPC’s borough funding has been a focus of Carey’s red pen.
That proposed cut came out of left field for the college, said KPC Director Gary Turner. The first Turner heard of it was an e-mail Carey sent outlining his strategy for developing the fiscal year 2012 budget. At the same time came a memo from assembly President Gary Knopp that the budget development process was going to be different this year.
In past years, assembly members have been assigned to gather information on certain areas of the budget, and the assembly held workshops where it met with department heads and representatives of the nondepartmentals to discuss their funding requests. This year, the mayor is to meet with the departments and nondepartmentals in developing his proposed budget. He’ll present the budget to the assembly, which can request further information if it so chooses at that point. If not, representatives of the nondepartmentals are left to address the assembly in a three-minute public testimony slot at an assembly meeting.
“It is pretty important for people like me, and CARTS and KPTMC, to go and talk to the borough assembly one on one and allow them to ask questions. Now what we’ve been told is we’ll be able to go in for about three minutes of public testimony and that will be it. I think that’s getting a little bit away from transparent government and providing people, particularly the public, the opportunity to sit in these sessions to hear them, as well,” Turner said.
As for meeting with the mayor, Turner said he wished that could have happened before Carey announced he was planning on cutting KPC’s funding. Doing so might have avoided some of the uproar caused among students and faculty on campus, which resulted in a sign-waving protest at the Borough Building on Feb. 15, as well as a resolution from the University of Alaska Coalition of Student Leaders and a letter from the KPC College Council opposing the proposed funding cut.
“Right now we’re not scheduled to brief the mayor on the budget until March 21. That’s a long time between Feb. 4 when I heard about this when the mayor e-mailed it to the assembly and to his employees. A sit down would have been nice, where he and I could have talked about it and maybe I could have learned a little bit more about his reasoning. Whether I could have changed his mind in such a discussion, I don’t know. Probably not. But at least he would have known from me our thoughts from the college. It might have went a little bit better,” Turner said.
The borough funding, 5 percent of KPC’s budget, goes to a variety of uses, including funding the JumpStart program for high school students looking to obtain college credits, a GED/Adult Basic Education program, academic tutors in campus Learning Centers, the Service Learning/Community Engagement program, and several others.
KPC got $637,570 from the borough in the fiscal year 2011 budget. As part of the University of Alaska system, KPC can’t increase credit costs or other rates on its own to make up for a decrease in local support.
Losing borough funding would mean scaling back and cutting staff and programs.
“We would have to sit down and look across the college as to what we really have to have and what would become a lower priority, because we don’t have a reserve to pick up the slack for a $637,000 deficit,” Turner said.
Carey has said post-secondary education is the last of the nondepartmentals he’d want to cut. Turner said that, even if it ended up being just a one-year reduction of funding, the effects would be felt for much longer.
“The problem you’ve got is if it involves people. Usually people aren’t going to hold on and wait for a year to come back. We have fabulous employees that fill these positions and losing some of these people, that’s not a thought I want to even entertain, but I have to,” he said.
Standalone programs are easier to cut, from a budgetary standpoint, but could be harder to take for students and the community.
“JumpStart. Yeah, that’s something we can turn off and turn back on again. That’s not a problem. But will it make parents very happy? My goodness no. We do about 300 JumpStarts a year. That’s probably 500 to 600 parents out there that are not going to be very pleased if we say, ‘I’m sorry, the year your son or daughter became a senior is the year the borough stopped paying money for that program,’” Turner said.
Turner said this would be a particularly bad time to lose local funding for KPC, since it would hamper continued expansion. KPC has been growing by leaps and bounds in all areas — enrollment, credit hours, degree offerings and facilities — including $14.5 million for a Career and Technical Center and $16 million for a student housing project just approved by voters in November.
“We’ve gotten so much momentum going over the past three years — skyrocketing growth across the board,” Turner said. “We have fabulous faculty, fabulous staff. We’re running as hard as we can to do what we do with really no extra funding out of the Legislature to speak of, and we’ve got 800 more students than we did just three, four years ago. We’re pretty much just doing it with the same staff, so we’re running hard as it is.”
Turner estimates that KPC’s economic impact on the borough is at least $17 million — a return of about $26.66 for each dollar in borough funding. He also noted that in 1990, voters approved directing 1/10th of a mill of borough property taxes to post-secondary education. While the assembly isn’t legally bound to continue that funding, it shows residents’ support of borough funding for KPC, Turner said.
“People talk to me wherever I go on the street, I get phone calls and e-mails, and it’s all supportive, saying, ‘We believe in our college. You folks are doing wonderful things out there and you’re a heck of an economic impact to the entire Kenai Peninsula Borough,’” Turner said.
Carey said that those who don’t want to see the borough budget slashed should direct their attention to the Legislature, and ask representatives to approve funding for the Homer transfer facility. The more state money that comes in for that, the less that Carey will look to cut out of the borough budget.
“If, indeed, Juneau would help to the extent that our fund balance would stay strong, that we fund schools at least at the status quo, then these other things, I think it’s much more likely there would be funding for them,” he said.