How Anchorage and Urban Alaska Gets Shortchanged in the State Budget

Anchorage Pays More and Gets Less State Service

By Senator Dave Donley - 9/21/98

There has been a lot in the press recently about the political rift between urban and rural Alaska. It has been alleged that the Republican majorities in the Legislature have been treating rural Alaska unfairly. A close look at the state budget and the budget process indicates just the opposite. Residents of the Municipality of Anchorage (MOA) who constitute 42% of Alaska's population are consistently treated unfairly in the state budgeting process. Anchorage pays for and provides many services that other Alaskan communities receive free or are fully compensated for from the state. Some of the areas that Anchorage receives unequal state funding include education, road construction and maintenance, public health, law enforcement, the municipal capital matching grant program, and water and wastewater services. There are many other miscellaneous services provided by the MOA that are provided free of charge by the state to other communities.

The State Department of Education (DOE) distributes K-12 Education Foundation Formula dollars to school districts statewide, based on average daily membership of students. Although about 37% of Alaska school children attend Anchorage schools, Anchorage before the Education Foundation Formula rewrite in 1998 (SB 36) only received about 28% of Foundation Formula dollars. After SB 36 Anchorage does better but still only receives about 30% of K-12 education funds. Similarly, the state's school construction grant program was written such that projects in small communities score higher on state priority lists than those in larger communities. Accordingly, direct state funding seldom reaches Anchorage school construction projects. Funding for Anchorage school construction has mostly come through limited matching grant programs. Even in this program (AS 14.11.008) school districts with small student attendance are required to contribute only 5% of school construction project costs, while the Anchorage School District must contribute 30%.

The State Department of Education (DOE) reimburses all school districts across Alaska for the cost of providing bus service to K-12 school children. For many years prior to 1998 while all other school districts were fully reimbursed for their transportation costs, the state DOE only reimbursed the Anchorage School District for about 66% of the cost for bus routes operated by its own employees. This DOE discrimination cost Anchorage over a million dollars a year that had to be spent on school buses instead of classrooms. In 1998 SB 36 contained a provision that will prevent the continuation of this unfair discrimination against Anchorage.

Within the University of Alaska system, Anchorage is also badly underfunded. The University of Alaska - Anchorage campus has about 46% of statewide student enrollment, yet only receives 32% of University of Alaska state general fund operating dollars. Thirty-three states use funding formulas for cost analysis, budget and resource allocation at their state universities but Alaska does not have such protections.

The Statewide Transportation Improvement Program (STIP) divides up federal highway funding received annually by the state. Although 40% of automobiles in Alaska are registered in Anchorage, an average of only 17% of total STIP dollars has been allocated to Anchorage road and highway projects the five years prior to FY’99. There is no basis in law for this insufficient allocation of state transportation money for Anchorage, it is simply a political decision based on a biased needs assessment process within the DOT. Years ago the Department of Transportation Bureaucracy decided that Anchorage should get $22 million of the $105 million of annual federal funds designated for community transportation projects throughout Alaska. This $22 million includes about $18 million for "community transportation" roads and about $4 million for trails. In past years the Municipality of Anchorage has failed to aggressively challenge this unfair allocation of only 17% of community transportation dollars. In 1998 the Anchorage Legislative Caucus successfully worked for an increased transportation funding share for Anchorage but much more needs to be accomplished before the system is fair.

Over the years the Municipality of Anchorage has assumed more local responsibility for snow removal and road maintenance. Anchorage makes a greater local effort toward road maintenance than Fairbanks, Juneau or Ketchikan. Based on 1997 DOT information, Anchorage removes snow from 54% of lane miles within the community compared to 42% for Juneau and 21% for Ketchikan. Fairbanks removes snow from only 17% of its community's roadways. (Fairbanks' lower number is mitigated by road service maintenance areas where residents contract out those services.) Clearly Anchorage has accepted more road maintenance responsibility than other Alaskan communities. Comparing state snow removal crews shows Anchorage has 1 crew member per 8,492 residents, so each crew member maintains 37 lane miles. In Fairbanks, Ketchikan and Juneau, there is one road crew member to around 2,900 residents. The disparity between lane miles serviced and the number of personnel indicates Anchorage either has an incredibly higher standard of road maintenance efficiency than the rest of the state or it's being shortchanged with less service.

The Municipality of Anchorage (MOA) provides a variety of public health services that other Alaskan communities do not. These health services include wastewater disposal regulation enforcement, water well standards enforcement and sewer and water plat approvals. The Municipality also inspects and permits restaurants and other public facilities and handles pesticide control. The MOA also provides community health services such as family planning, sexually transmitted disease education and health education.

The MOA also provides and pays for law enforcement that other Alaska communities receive free of charge. The Anchorage Police Department (APD) enforces local DWI and misdemeanor ordinances while Fairbanks repealed such local ordinances to avoid paying costs. The APD also funds and operates its own police training center in Anchorage. Under state law, most traffic citations include a $10 surcharge to help fund police training at the State owned facility in Sitka. The state facility trains village public safety officers, correctional officers, Alaska State Troopers and local police for communities other than Anchorage. While 42% of the population resides in Anchorage and a majority of the traffic citations are written here, little or none of the revenues from the surcharge fund has in the past gone to police training in Anchorage. In 1998 this began to change as the Department of Public Safety began to use some of the funds to assist Anchorage Police Department’s training program.

The Anchorage Police Department also provides prisoner transportation, support for felony prosecution and patrol, summons, subpoena and investigative services. The Anchorage Municipal attorney also provides local prosecution of misdemeanor offenses and operates a civil DWI program. Anchorage is the only community in Alaska to have such local enforcement.

The State of Alaska's Municipal Capital Matching Grant Program was established to provide a state funding match for local capital projects and divides up funds based on the population of each of the 162 municipalities in the state. Over the past five years, Anchorage has received an average of only $6 million, or 35% of the program funds. What's even more unfair is that Anchorage must contribute 30% of project costs while communities with populations under 1,000 only contribute 5%. For smaller communities, the department accepts in-kind donations toward the 5% contribution, or oftentimes even waives the contribution requirement. Another inequity results from the program allocating a minimum of $25,000 to small communities. Allocating a minimum of $25,000 to 121 small communities reduces the per capita allocation to other communities and cost Anchorage nearly $620,000 in 1997.

Over the past five years, the State of Alaska has allocated nearly $240 million to water and wastewater improvement projects annually in the state capital budget. For the past five years Anchorage has received about $2.8 million per year, or 6% of the water and wastewater project funding. In FY’98 the total statewide allocation for water and wastewater projects was over $87

million but Anchorage's share was only $1 million, thereby leaving $86 million to be divided up among the remainder of the state. In FY’99 Anchorage Legislators succeeded in doubling Anchorage’s funding to $2 million but this still only equals less than 3% for 42% of Alaska’s population.

The state statutes on rural water and sewer funding actually prohibit the state from asking small communities to pay anything or any share of most water and sewer projects. The Village Safe Water program (AS 46.07) does not even require a small 1% local contribution to ensure project maintenance or upkeep, while Anchorage residents are often asked to contribute toward the cost of such projects to offset the cost.

The Alaska State Housing Authority through statutory home loan programs seriously and unfairly discriminates against residents of Anchorage and other urban communities. All Alaskans in "rural" areas can receive a 1% discount on their home loans (AS 18.56.470) whereas in urban areas only veterans, poor, or first time buyers can qualify for such discounts. Rich people in the bush are being subsidized by average urban Alaskan home owners.

Other special state subsidies for rural residents also exist. Power Cost Equalization (AS 42.45.100), Bulk Fuel Storage Assistance (AS 44.47.145), and 8% of Alaskans in the unorganized areas of the state pay nothing to support their children’s schools.

Finally, the Municipality of Anchorage provides a variety of miscellaneous services that other Alaskan communities receive for free from the state. For instance, the MOA maintains all state-owned traffic signals within municipal boundaries, but state reimbursement for this service has been declining since 1982. This year, state reimbursement for this service fell $400,000 short of expenses. The MOA also provides elevator inspections, a community work service program, renewal of water rights permits, site inspections and air quality permits.

Residents of the Municipality of Anchorage pay property taxes and special bed and tobacco taxes. Depending on the various mix of local tax revenues generated throughout the nearly 160 communities in the state, it is generally accepted that Anchorage residents pay the forth or fifth highest amount of local taxes per capita in Alaska. An Editor's Note in the December 19, 1997 issue of Alaska Legislative Digest reveals "while Anchorage is often viewed a wealthy community, measured by per capita wealth it is 10th out of the state's 16 boroughs."

Some argue that rural regions of Alaska have no tax base to support local government or local services. The 17 Rural Education Attendance Areas (REAA) are theoretically the poorest areas of the state. A closer examination of government and private employee wages reveals that the average annual wage for residents in the REAA's is just over $25,000. In Anchorage, the corresponding annual average wage is just over $33,000. To argue that residents of rural Alaska cannot afford to pay something for local services or government is simply not true.

I do not advocate that because Anchorage has 42% of the population it should receive 42% of state programs. Economic factors, economies of scale and geographic factors justify some discrimination but the current level of state funding to Anchorage for various state programs is inadequate and grossly unfair. It's time Anchorage was treated fairly and for other Alaskans who are not paying their own way to start doing more. As Anchorage and other urban legislators seek to restore some fairness to the state budget process rural legislators and residents will of course continue to cry foul. The more all Alaskans understand the current inequities within the state budget the less effective these vocal but untrue objections will be.

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