State budget cuts shouldn’t gut economy

By Jenny Neyman

Redoubt Reporter

Given the state’s fiscal crisis in the wake of low oil prices, it’s time for local governments to tighten their belts, but not so tight, Kenai Peninsula Borough Mayor Mike Navarre says, that it cuts off circulation.

“We have to make sure we have a plan. We don’t need to just look at where we’re at right now and overreact and panic,” Navarre said. “What we need to do is look at where we want to be five years from now and 10 from now, and put the tools in place and make the decisions now to help us get there.”

Navarre was one of the speakers at the annual Industry Outlook Forum held in Kenai last month. The borough is already feeling impacts of the state’s budget-cutting — capital funding from the state has declined from $15 million in fiscal year 2014 to $113,000 in fiscal year 2016 — and should expect more cuts to come.

Meanwhile, the borough has been tightening its spending, as well. Navarre said that, even though the peninsula’s population is increasing, the borough has seen a net loss of job positions since 1998, outside of education and public safety. He said that finances have been managed conservatively so that there is a fund balance in all borough budgets, including service areas. Additionally, the borough has the ability to raise its revenues, through tax increases, to compensate for state cuts, but Navarre said he doesn’t want to see things come to that.

“We’re already seeing a slowdown in the economy, and, so, it’s not really a good time to load taxes on anybody. Nobody likes to see tax increases,” he said.

While the Legislature and governor have a big job in responding to the fiscal crisis brought on by low oil prices, Navarre cautions against too many cuts at one time. He’d like to see the state use general obligation bonds to maintain at least some capital projects.

“The reality is, we kind of do things a little backward. When oil prices are high and revenues are high, we spend a lot of money on capital. And then when prices drop off, everybody cuts. Everybody stops their spending at the same time and it creates a downturn in the economy that we’re seeing now in the short term,” Navarre said. “What we need to be very careful about, in my opinion, is that we don’t take the fiscal crisis at the state level and turn it into an economic crisis.”

Navarre anticipates every Alaskan having to shoulder some of the fiscal burden to get Alaska back on track.

“We can’t go to the Legislature and say, ‘We don’t want cuts to local government, we don’t want any cuts to education, we don’t want any changes to oil tax credits or oil taxes.’ Nobody does,” he said. “‘We don’t want to spend any of the permanent fund earnings, we don’t want to see any impacts to the permanent fund dividend, and we don’t want to see any new taxes — no income taxes no state sales taxes.’ Nobody does. But it’s about the economy.”

Navarre said the borough is well-positioned currently to weather the economic impacts that will come in the short term, until things turn around statewide.

“Long term, the state of Alaska is going to be great. We have a lot of things going on, we have a lot of natural resources, we’re really in our infancy as a state, we’ve got great people, we’ve got a good, well-trained workforce. Long term, the state’s economy and our economic outlook is very good,” he said.


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Filed under budget, economics, Kenai Peninsula Borough

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