Expenses could outstrip revenues in the coming fiscal year, according to current projections in the proposed FY 2009 budget.
But new data suggests that deficit could disappear and a promised property tax cut could be bigger than expected, borough officials said this week.
The FY 2008 budget, which ends on June 30, is currently estimated to miss the break-even point by just under $845,500. The FY 2009 document estimates a shortfall next year of about $441,000.
As big as those figures seem, they're smaller than in previous years, except for FY 2007 when unexpected state appropriations coupled with higher-than-anticipated property and sales tax revenues actually resulted in a $5 million surplus.
For much of this decade, balancing the borough budget has meant dipping into the General Fund's reserve commonly called the fund balance. Another dip can be expected in FY 2009, according to projections.
The fund balance is money left over at the end of each fiscal year. It is an important feature of the budget since it represents the reserves available for handling unexpected expenses. Fiscal prudence suggests the fund balance should float roughly between $12 million and $23 million, according to the borough's financial advisors.
In 2006, the fund balance fell to about $15.2 million and appeared poised to head south of the $12 million floor in FY 2007. A combination of factors helped avoid that decline, including unexpectedly robust property and sales tax revenue streams and unanticipated levels of state aid.
Finance Director Craig Chapman said the projected shortfalls this year and next assume every dime in each budget would be spent, something that typically doesn't happen. If unspent sums remain, they could serve to lower the amount necessary from the reserve this year to perhaps $480,000. Next year's dip could be as little as $72,000, he said, calling the FY 2009 spending plan "pretty much a break-even budget." According to administration Chief of Staff Tim Navarre, however, recent assessing data suggests the fund balance could escape a draw altogether.
"There will be some other adjustments based on tax assessment numbers that are always late in coming in and being finalized," Navarre said. "We are reworking some of numbers and it's possible we wouldn't have to pull from fund balance."
Still more good news seems possible if the final assessment figures allow, Navarre said. "We may seek another quarter-mill decrease in the property tax," he said.
That would bring the boroughwide mill rate down to 4.75 mills, a cut of 0.75 mills next year atop the 1-mill cut this year.
South Peninsula Hospital Service Area's expected mill rate increase of .6 mills, meanwhile, could be cropped to .5 mills, Navarre said.
Arranging an equivalency between the boroughwide property and sales tax revenue streams has been a prime goal of the Williams administration since taking office a little over two years ago.
In FY 2007, property taxes accounted for 57 percent of general fund revenues. The 1-mill cut from 6.5 mills to 5.5 mills in the FY 2008 budget dropped that to about 49.4 percent. The new budget would put that figure at about 44 percent, and less if the additional quarter-mill cut gets assembly approval.
Meanwhile, sales tax revenues account for 34.7 percent of revenues in the current budget. That would jump to 43.2 percent in the FY 2009 budget.
The sales tax increased by 1 percent on Jan. 1.
The FY 2009 General Fund budget is projected to increase spending by about $4.5 million over the current budget, mostly due to the rising costs associated with educating Kenai Peninsula youngsters and garbage disposal.
Even as costs escalated, the borough government through several administrations held the line on employee numbers, which has helped hold costs in check, Navarre said.
Indeed, over the nine budget cycles since the turn of the millennium, the borough's general government workforce has added the full-time equivalent of just 11.6 workers.
That sector includes the assembly, the mayor's office, emergency management, general services, legal, finance, assessing, resource planning and major projects management.
The new budget adds just 1.3 FTEs to the current year's total, and 1 FTE is actually a transfer from solid waste, a sector outside general government.
Greater growth in the number of employees is to be found within elements of the borough enterprise beyond the general government categories mentioned above. Service areas, solid waste disposal, the land trust, the Kenai River Center, and the like have added 31.2 full-time equivalent workers since FY 2000. Most of that growth is attributable to Central Emergency Services, which grew by 10.5 FTEs and Solid Waste, which grew by 11.2 FTEs at the Central Peninsula Landfill.
"We've been pretty conservative in our growth," said Richard Campbell, director of Human Resources. "We don't have a lot of fat."
It is the services the public has demanded through service areas that have largely driven the increase in personnel since 2000, Navarre said.
"You have to always only allow government to grow as the need is clearly defined," he said. "Otherwise you can't justify it to the people and they are the one's paying the bills."
Several other factors influence the size of the proposed budget.
For one thing, a substantial drop in interest rates, which have fallen from 4.25 percent to 2.5 percent, will result in lower projected earnings in FY 2009 and FY 2010. The cost of supplies is expected to grow by nearly 17 percent, but a one-time upgrade to software is causing the bulk of that increase. The budget includes a 1.4-percent increase in the expense of certain services, such as increases to audit fees, the celebration of Alaska's 50th year as a state, another one-time software expense, and increases to seniors, CARTS, property and liability insurance and other cost centers.
Fund transfers will also grow by 8.2 percent, pushed upwards by increases to schools of about $3.17 million and to Solid Waste of about $528,000.
Another $297,000 will go to various "other" transfers.
Hal Spence can be reached at hspence@ptialaska.net.
