Kindergarten teacher Daniel Bowen (at podium) speaks to the Kenai Peninsula Borough Assembly in favor of full funding for the Kenai Peninsula Borough School District at the assembly’s meeting on Tuesday, April 3, 2018 in Soldotna, Alaska. About 40 people attended the meeting Tuesday, many wearing red, to show their support for public education funding. (Photo by Elizabeth Earl/Peninsula Clarion)

Assembly hears tax options, postpones sales tax decision

The Kenai Peninsula Borough has a lot of options to balance its budget and fund public schools, but not everyone is on the same page about which is the best path.

The Kenai Peninsula Borough Assembly is considering an ordinance that would ask voters to raise the borough-wide sales tax from 3 percent to 3.5 percent. If approved, the measure would go to the ballot this Oct. 2.

The proposal received support at the assembly’s Tuesday meeting from the public, largely because sales tax proceeds in the Kenai Peninsula Borough are dedicated to the Kenai Peninsula Borough School District. The school district’s Board of Education approved a budget on Monday, requesting a total of about $53 million in cash and in-kind contributions from the borough, which is the maximum amount the borough could contribute. The borough has until May 31 to modify the request or approve it.

A crowd of public education supporters, many wearing red, attended the assembly meeting Tuesday to comment in support of fully funding the school district’s request or to support those who did. Some also voiced support for the sales tax increase as a way of offsetting that cost. David Brighton, president of the Kenai Peninsula Education Association, the school district’s union representing teachers, said he’d support the increase as a way to support education.

“It’s been tough to see the cuts — over $8 million over the last few years,” he said. “I’ve seen programs leave our schools, opportunities that (my sons) have missed. … I ask you to pass this, and that will be able to help you fully fund education.”

The increase, proposed by assembly member Kelly Cooper, would bring in an estimated $1.4 million between April 1 and June 30, 2019 and $5 million more annually in the following years. She said at the assembly meeting that she proposed the tax as a way to help offset the borough’s approximately $4 million budget gap.

If voters choose to pass the tax, it would add an extra 50 cents per every $100 purchased. For most $100 purchases, people currently pay $103 in the borough outside the cities; if the proposal passes, they would pay $103.50, depending on what they are buying, as the borough has a seasonal sales tax exemption for nonprepared foods. Within city limits for the borough’s six cities, sales tax rates vary and are added atop the borough’s 3 percent rate.

Soldotna resident Linda Hutchings voiced support for the increase to the borough assembly, saying it would tap into some of the more than 560,000 out-of-state visitors coming to the peninsula every year as well as the visitors coming from other areas of the state.

“To me, it sounds really, really simple,” she said. “Let the people that come and enjoy our Kenai Peninsula Borough pay for it.”

Assembly member Norm Blakeley proposed an amendment to include a sunset clause on the tax, based on the possibility of the economy recovering in a few years and the tax no longer being necessary. The amendment failed 6-3, with Blakeley, assembly member Paul Fischer and assembly president Wayne Ogle supporting it. Assembly member Hal Smalley said the amendment was unnecessary because the assembly could choose to eliminate the tax increase at any time in the future but it would likely be necessary, based on sales tax revenue projections.

If the borough stages its budget balance on the sales tax increase passing the ballot, it will require an education effort, Smalley said.

“I believe the battle is not going to be here, it’s going to be in convincing the voters,” he said.

The assembly voted to delay voting on the sales tax increase proposition until the May 1 meeting. Assembly member Brent Hibbert said the assembly is likely to hear more options for revenue as well.

“We need to come up with a solution before the election,” he said. “We’ve got to have something in place. My feeling is the nine of us are going to have to make some tough choices here, and I don’t want to wait until the election to try to figure this out.”

Earlier in the afternoon, during the assembly’s Finance Committee meeting, Borough Mayor Charlie Pierce presented the assembly with a number of tax options as alternatives to the sales tax increase. Some include increasing the mill rate and leaving the sales tax rate level, while others involve reducing the mill rate and raising the sales tax or lifting the cap on taxable sales, which is currently set at $500. Lifting the sales tax cap entirely would require voter approval by borough code.

The goal is to stabilize the borough’s fund balance, which based on current spending levels and revenues will fall below the minimum recommended fund balance level by the end of fiscal year 2020. One option that may have a good chance at passing would be to increase the sales tax to 5 percent and reduce the mill rate to 2.3 mills, shifting the majority of the borough’s revenue to sales tax over the next four years, with an estimated about $51.7 million in sales tax. It may have a chance of passing the ballot box because it would appeal to property owners, Pierce said during the Finance Committee meeting.

“It covers the cost of education for the most part,” he said. “If you’re looking for options that have a potential of passing and trying to sell or market, this is an option that is actually pretty favorable from a marketing perspective and gaining some support from the voters that are out there, in my opinion.”

Pierce’s administration is also banking on withdrawing about $3 million from the borough’s land trust fund to balance the budget for fiscal year 2019. The assembly considered an ordinance to approve that but also postponed the decision to the May 1 meeting. The land trust fund currently has about $7 million in it.

In response the public comments requesting full funding for the school district, Pierce said the assembly could consider withdrawing another $1.5 million from the land trust fund to supplement that funding.

“You could argue to leave the land trust fund alone, but it’s not doing anything for you right now, and your option is to go out and tax the taxpayer during a recession to gain more revenue, and I can’t support that,” he said. “I would never support that policy right now. I think we need to give some relief during a recession, buy as much time as we can.”

Reach Elizabeth Earl at eearl@peninsulaclarion.com.

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