The Kodiak Island Borough Assembly discussed the fiscal 2021 borough budget on Thursday, moving forward with a possible mill rate increase from 10.75 to 12.75 despite some concern over the negative impacts of a tax hike on the community.

Kodiak resident Eric Taber spoke against the mill rate increase during the public comment period at Thursday’s work session, urging the assembly to keep the mill rate fixed.

“I think the best way to balance the budget is to keep the mill rate the same as a starting point, and make spending cuts until it is balanced,” Taber said.

He proposed that additional funding cuts be made to the Kodiak Island School District Budget.

“It’s clear that most of the overspending is going towards the school budget,” Taber said.

“This is a community problem that needs to be solved by everyone working together. No user group should be exempt from contributing to solving the budget crisis, especially the school. If taxes are raised, then you are singling out property owners and the private sector fishing industry through a higher landing tax. If that is the direction you take, people won’t want to live here.”

Duncan Fields, chairman of the school board, called in during the public comment period to implore the assembly not to cut the school district budget. After a push to decrease the mill rate, the district foresees receiving $9.78 million from the borough, down from their original $10.4 million request.

“To cut us now, in the face of uncertainty, to me is irresponsible,” Fields said, adding that the district foresees additional expenses in the months to come related to the COVID-19 response.

“We don’t know what the new norm is going to be. We anticipate it may require hundreds of thousands of dollars in sink improvements, increased busing costs because of distancing, different uses of spaces,” Fields said. “We as a school board, although we have some fund balance, we don’t have other funds that we can go to to cover a gap should we underestimate or be ill-prepared for what lies ahead.”

The school board met on Tuesday to discuss cutting the district budget, but Fields said the additional cuts would put the district in a difficult position, after they requested level funding from the borough.

“We feel that we have already borne a proportional share of that economic burden, by absorbing any increases in the next year and asking the borough for level funding,” Fields said.

“The question we ask in our budget process is, what is the least amount we need to provide the education services required by law ... and what’s expected by the community. By doing so in the last few years, we have had reductions in real dollars to the school district budget over the last three or four budget cycles.”

Fields urged the assembly to consider using federal funds from the Coronavirus Aid, Relief, and Economic Security Act. The borough is set to receive $5.8 million in CARES Act funding, but guidelines from the Department of Treasury prohibit the use of the funds for revenue replacement by municipalities.

Without a change to the regulations, the borough cannot rely on the funds to replace lost state funding for school bond debt reimbursement and community assistance, which left a $6 million gap in the borough budget. 

“It’s my view that you will be able to, with additional analysis, use a fair amount of the COVID money to meet financial concerns in this fiscal year. I think that’s really critical,” Fields said. 

On top of the restriction on the permitted uses of the funds, the appropriation of municipal CARES Act money is currently tied up in a lawsuit, filed by a Juneau resident last week, claiming the appropriation of the funds through the Legislative Budget and Audit Committee was unlawful. The full Legislature is set to return to Juneau this week to approve the funding. 

Borough Manager Michael Powers was skeptical about the borough’s ability to use the funding to balance the borough budget.

“There’s been a lot of discussion from various members of the state in high ranking positions, saying ‘be creative with the money,’” Powers said. “But when pressed … no one wants to give specifics and no one wants to say, ‘yeah, just do whatever you want with it.’”

The 12.75 mill rate is a reduction from the 14.55 mill rate originally proposed by the manager in his budget. The reductions come through reducing the general fund by half a mill, reducing the school district by half a mill and taking the remainder from the general fund balance.

Powers said that in order to achieve the mill rate reduction, he cut some borough positions and cut travel stipends for borough departments. When asked by an assembly member, he said the cuts were similar to a hiring freeze, because they would not permit the borough to hire for unfilled positions. 

If the federal government eventually permits the use of CARES Act money for revenue replacement by the borough, Powers said the funding could be applied as a credit on tax bills, which are issued July 1. Otherwise, future mill rates could be reduced. 

“There are members of the assembly who want to get the mill rate down to 10.75 but being fiscally responsible, there are members that think we need to go to 12.75, and if we can backfill with CARES money, we will find a way to do that,” said Borough Mayor Bill Roberts, concluding the work session.

The mill rate is set for additional discussion during the assembly’s regular meeting on Thursday. 

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