The Kodiak Island Borough Assembly received advice from its state lobbyist on how to guide the spending of projected oil revenue windfalls during a recent work session.

Mark Hickey of Hickey and Associates, the borough’s state lobbyist, said the state projected a $1 billion revenue increase for the current fiscal year based on an early oil revenue forecast.

According to a news release from the Alaska Department of Revenue, the state projects $1.2 billion more in oil revenue during the current fiscal year and additional $1 billion over what’s already been forecast in Fiscal Year 2022-2023 due to rising oil prices. In total, the state projects $5.97 billion in oil revenue by the end of the fiscal year and $6.12 billion in FY 2023.

“We’ll see if that proves to be the case,” Hickey said. “But if oil prices stay up we will have money to work with and will probably take away the impetus for some of the bills mentioned, such as a fuel tax increase.”

Hickey added it was too soon to predict what the legislature might do as its next regular session doesn’t start until January. 

“It is election year, oil prices and revenue are going up, but the likelihood of ‘more of the same’ that we’ve had in the past few years is more likely than not,” Hickey said. 

Hickey added that Gov. Mike Dunleavy’s administration could likely push for a higher Permanent Fund Dividend than was already issued by the state earlier this year. Eligible Alaskans received a $1,114 dividend check this year following a series of special sessions. Dunleavy had insisted on a much higher dividend and he wanted to constitutionalize the dividend payments.

For municipalities, including the Kodiak borough, school bond debt reimbursement remains a major topic of concern. 

The Kodiak Island Borough School District is expected to pay a total of $7.57 million in school general obligation bond debt for the current fiscal year. 

The final state budget signed by Gov. Mike Dunleavy indicated the state would reimburse 50% of all eligible bond debt. The borough was informed by the Department of Education and Early Development that only 36.86% would be reimbursed, leaving the borough with a $713,767 projected shortfall.

In Fiscal Year 2021, the governor completely eliminated the school bond reimbursement from the state budget, placing the burden of full payments on the borough’s shoulders. 

Hickey said revised data from DEED would boost bond debt reimbursement to 42%, improving the borough’s shortfall.

“You’ll likely still have a shortfall, but it’s better than what was reported a few weeks ago,” Hickey said. 

Borough Mayor Bill Roberts voiced concerns about the state’s increased oil revenue being funneled into more dividends.

“Our question is, ‘What do we have to do to show him it’s more important to taxpayers in Kodiak and a lot of other areas to increase what he originally gave to school bond debt reimbursement and bring it to 70%?’ ” Roberts asked. “I know some people rely on that money from the dividend, but a lot of people also don’t want to pay more taxes.”

He said if the borough has to pay an increased amount in its bond debt obligations, “then that means we have to raise taxes.”

While the borough has a maximum allowable tax cap that prevents it from raising mill rates above a specific percentage, personal and property taxes related to bond debt reimbursement are exempt.

Roberts asked who the appropriate people would be to put pressure on to get additional funding for school debt bond reimbursement. 

Hickey said a resolution could get the point across.

“A resolution alone won’t get you there, but it continues to put the message out to the legislature,” Hickey said. “School bond debt reimbursement is just as important to the legislature as it is to the governor because it’s an obligation the state has made by law.”

Hickey said the Alaska House of Representatives and state senate had programmed a 100% bond debt reimbursement into their budget over the past few years, but it’s been consistently slashed or eliminated in line item vetoes or reductions by the governor’s office.

Hickey advised continued advocacy through groups such as the Alaska Municipal League and the Southwest Alaska Municipal Conference to get the message across the governor’s desk.

“It’s going to be a lobbying effort because there are a lot of communities that have lobbyists in Juneau working on this,” Hickey said. The challenge, Hickey said, is that Gov. Dunleavy has made it clear his priority is to use more revenue for a higher dividend, “and he’ll keep pushing for that.”

Assembly Member Scott Arndt voiced support for a joint resolution between the Borough Assembly and the Kodiak City Council as a way to strengthen the overall message. 

“Basically we would be requesting full funding for the current fiscal year for school bond debt, and full bond debt reimbursement for the previous fiscal year, where we got nothing,” Arndt said. 

Hickey suggested a different approach: Draft a resolution asking the state to make up the difference in debt reimbursement for the current fiscal year and fully fund it for the following fiscal year. 

“I would stop there and not try to take it back further,” he said. “The idea of placing that money for this year for school maintenance to get legislative support would be a good suggestion.”

He said a joint resolution with the city would “give legislators in Juneau something to point to that is important to communities.”

 

 

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