Trends 2016: Borough moves cautiously on budget

Much is up in the air for the Kenai Peninsula Borough’s budget for the coming year as it continues with its budget process.

The borough administration plans to present a complete budget to the borough assembly in April. The administration is currently in the process of meeting with the departments and compiling a borough-wide budget.

The state’s budget decisions may bring some impacts for the borough administration, though not immediately, said borough Mayor Mike Navarre. Less funding for municipal revenue sharing and lower state contributions to the public employee retirement funds may shift more cost responsibility to the local governments, which could present a challenge, he said.

“That could be a big hit,” Navarre said. “Those things are still being negotiated.”

As it stands, the state’s budget decisions will have little impact on the borough’s decisionmaking process because the Legislature will likely not finalize the budget until the end of the session, after the borough has finished its process and presented the draft budget to the assembly for approval, said Craig Chapman, the borough’s finance director. So for now, the borough administration is moving forward with its own process.

A couple of unexpected factors may play roles in the borough’s financial decisions. One is an unexpected downturn in sales tax revenue, with a fairly significant impact — the numbers may have an effect to the tune of several hundred thousand dollars less than the borough had originally planned for, Chapman said. That decrease may be in part due to lower gas prices at the pump, which the borough collects a tax on.

Additionally, the state’s contribution to the Kenai Peninsula Borough School District may be less than last year. School district superintendent Sean Dusek has asked the borough to fund the district to the maximum amount allowed by state law. The borough has yet to make a decision about how it will fund the school district, Navarre said.

The borough is also in the midst of its employee negotiations. An initial offer had been accepted on March 11 but was subsequently rejected by the employee union on March 14, said Stormy Brown, the human relations manager for the borough. Brown, who leads the negotiations for the borough, said a new negotiation meeting had not yet been discussed.

“It’s a day-by-day process,” Brown said.

The borough has been looking at new sources of revenue to make up for it. One option being discussed is raising the mill rate, which is currently set at 4.50 mills, with an 8.0 mill tax cap, according to the fiscal year 2016 budget. While raising the mill rate is on the table, it is not a sure thing, Navarre said.

“It’s still too early to tell,” Navarre said. “We’re still waiting on some information on what’s happening with the legislature.”

The administration is also in the process of reviewing the sales and property tax code. While the original plan was to present a set of preferred options to the assembly, Navarre said the team may just present potential changes with the projected effects on the budget and then engage in public hearings on any changes.

To change any tax provisions, the proposals would need to be put to a public vote, Navarre said.

“We’re still working our way through exactly what a strategy is,” Navarre said. “The timeline is that it would need to pass the assembly before late fall.”

Overall, the most difficult part of planning finances right now is to anticipate the future, Chapman said.

“Of course, the big thing that’s on everybody’s mind is the state’s economy and the impact that’s going to have,” Chapman said. “The current year is easy to deal with. It’s planning for future years that is a little trickier.”

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