COVID-19 funding could help Alaska’s local communities, but questions remain

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ANCHORAGE, Alaska (KTUU) - Local communities across Alaska are waiting to see how much federal coronavirus aid is made available to them, and they are seeking more guidance for how the money can be spent.

Many Alaskan municipal officials say $562.5 million earmarked by Gov. Mike Dunleavy for communities from the CARES Act would make a big difference.

“If we could get all the money allocated for Stika, it would have a major positive impact,” said Mayor Gary Paxton of the City and Borough of Sitka.

The island community looks likely to have its seasonal fishing season hit by the novel coronavirus. Sitka’s summer tourism season could also be devastated by cruise ships not coming to Alaska.

“Watch my language here," Paxton said, "we might lose the whole darn season and that would be catastrophic."

What remains unknown to local leaders is exactly how the federal coronavirus funding monies can be spent.

“For cities and boroughs throughout the state, they probably have more questions than answers,” said Nils Andreassen, the executive director of the Alaska Municipal League.

Direct costs incurred in combating the pandemic would be covered in areas such as health care.

Cheyenne Heindel, the finance director at the Matanuska-Susitna Borough, says $206,000 in direct coronavirus-related costs have been incurred by the borough to date.

Covering economic losses is a more complicated question.

“We have not incurred a lot in direct costs,” said Mayor Clay Walker of the Denali Borough. “We have incurred a lot of indirect costs.”

Around 80 percent of the borough’s annual revenue comes from its bed tax. With fewer tourists expected this summer, the borough faces a big budget shortfall.

“If we were able to use those monies as we see fit, we’d use them to plug the $3 million hole in our budget this year,” Walker said.

Guidance from the U.S. Treasury Department is clear that federal coronavirus funding cannot be used to supplant lost revenue.

After a call Tuesday with the National Association of Counties, Walker said he’s looking at ways to use $3.8 million earmarked for the Denali Borough to cover necessary expenditures.

For some local communities, there is frustration with the amount allocated by the governor.

On April 15, Dunleavy said the federal coronavirus aid would be used to compensate for a “majority” of his vetoes.
After more guidance from federal officials, the governor announced that over $100 million in school bond debt reimbursement would not be covered by the CARES Act funding.

The $562.5 million in community aid would be used to make up for that but some local governments are set to see a shortfall.

Kodiak Island Borough would receive $5.3 million in school bond debt reimbursement from the State of Alaska. Under the governor’s plan, the borough would receive $3.9 million.

Mayor Bill Roberts said the borough would need to raise property taxes by 40 percent to fill that hole. Roberts is set to have a conversation with the governor soon.

The Northwest Arctic Borough is also set to lose out. Mayor Lucy Nelson said her community is set to receive $1.2 million less under the governor’s plan than if it received school bond debt reimbursement and community assistance payments.

“All of the progress that we have made in improving basic services like water and sewer, sanitation, fire protection, search and rescue and other public service programs over the last 20 years will be negatively impacted,” Nelson wrote in a prepared statement.

The formula used by the administration was taken from the one used to pay out community assistance grants but was also written in consultation with the Department of Commerce.

“The administration considered a wide-range of available economic indicators to approximate the municipal impacts of COVID-19, and found that a combination quantified economic activity metrics – such as retail, hospitality and tourism, regional commercial fishing, and other measures of commerce activity – and population as distributed through the Community Assistance Program served as the best and most expeditious way to distribute funds to municipalities,” wrote Glenn Hoskinson, a spokesperson for the Department of Commerce.

Disagreements over how the funding can be released also remain.

Rep. Chris Tuck, D-Anchorage, said using the Legislative Budget and Audit Committee process for local government assistance won’t work. Under advice from the Legislature’s top attorney, Tuck says legislators will need to reconvene to make a specific appropriation. The Dunleavy administration, meanwhile, maintains the funding can be made without the full Legislature meeting again.

However, both the governor’s office and Tuck want the funding out as soon as possible.

“We’re going to get this money out as quickly as possible to these communities because we know Alaskans need relief due to this covid crisis,” Tuck said.

Dunleavy had called for the first batch of local community funding to go out Friday, followed by another release in July and a third in October. If the Legislature needs to meet, it could feasibly be weeks before the funding is approved.

To complicate matters further, if funds are misspent - according to federal guidelines - they may need to be repaid.

Rorie Watt, the Juneau City Manager, said $53 million earmarked for Juneau could have a big impact. He’s advised the assembly not to spend it until it’s approved by the Legislature, and more guidance is received.

“We simply don't want to get the cart in front of the horse,” Watt said.

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