The Alaska Municipal League (AML) is pleased to see the Governor’s proposed appropriation of the American Rescue Plan (ARP) funds, which we believe will need quick but thoughtful action by the Legislature. AML is offering a number of considerations for that process, which we hope will be beneficial to communities impacted by this public health and economic crisis.
The Alaska Municipal League (AML) is pleased to see the Governor’s proposed appropriation of the American Rescue Plan (ARP) funds, which we believe will need quick but thoughtful action by the Legislature. After listening to OMB’s presentation of this proposal, we would offer the following.
Local governments will receive $230 million through the ARP, which we understand to come directly from Treasury to Anchorage and to boroughs (it will go directly to counties elsewhere across the nation, which we’re basing this on), and the rest to come through the State. We further understand that this will come in two tranches, half this year and half next. There will be direct, formula-driven amounts, and then we understand some additional portion that will need to be distributed to cities within census areas. We (just like the State) are waiting for US Treasury guidance, which will apply the same to cities and boroughs as the State and tribes, but which will also clarify some of the questions about requirements of Treasury for the distribution by the State to local governments. We aren’t sure that all of these points have been raised thus far in committee, but we’re all waiting for more information.
All of that to say that we hope to stay engaged on this issue, including in the implementation, then, of the State’s distribution of federal relief to Alaska’s local governments.
It’s important to remember that this federal relief has a purpose specific to the needs of communities in relation to the public health emergency and economic crisis. It will be used by local governments consistent with Treasury guidance and the law, to meet the needs of residents and businesses, to replace lost revenue, and to make capital improvements. It’s an opportunity to recover!
We encourage the Legislature to avoid viewing this as replacement funding for things like Community Assistance or other transfers of State funds to local governments, which are in place for different and specific purposes. If Community Assistance is in place to keep the lights on, to make sure that communities have what they need to deliver elections, and to manage water, sewer, and landfills. We hope that these items are fully funded utilizing any of the funds available to the State, but not decreased based on what communities may receive from the ARP funding.
At the same time, we know that for more than 30 communities, this year’s ARP allocation is more than $130 million less than the losses they’ve experienced in FY20 and FY21, and projected losses for FY22. Keep in mind that just like the State, cities and boroughs are busy preparing their budgets for this coming fiscal year, and their projections are important and accurate calculations to base their decisions on. For these local governments who are “disproportionately impacted” we encourage the Legislature and Governor’s office to consider ways in which the State can avoid exacerbating the challenges they are experiencing and provide supplemental support.
Fully funding school bond debt reimbursement, or port/harbor reimbursement programs, is one way to avoid adding on to the challenges facing local governments. The cost-shifting that comes with the Governor’s proposed 50% reduction means that the additional burden falls on at least 10 of the same local governments who are facing extreme levels of lost revenue. Full funding would mean that for these communities, additional costs would not be piled on to existing reduced budgets, and potentially onto residents and businesses in those communities that are similarly struggling.
In terms of additional and supplemental support, we think this fits well within the Governor’s plan to allocate some portion of the State’s ARP funding to economic recovery and investment. Local governments will need this just as much and in the same ways that businesses, nonprofits, schools, and other organizations, as well as individual Alaskans, may need the State to fill the gap between other relief programs and the dramatic revenue losses they have experienced. There is even a substantial overlap, we believe, in how those impacts have been distributed around the state. So there is a geographic nexus where those businesses who are experiencing that difficulty are in the same community that is also experiencing that impact.
A local government in need is less able to support its businesses and residents who are also in need. What we hope to achieve with State support is a city or borough that isn’t in a position that reduces services, adds to resident or business costs, or lays off employees. Strong local governments will ensure a strong, statewide recovery.
There are existing mechanisms to accomplish this. Some of these impacted communities could see some of their needs met through State processes related to DGF, including for instance by holding harmless these communities in relation to commercial passenger vessel fees, or shared fish taxes. There’s a lot of overlap between these two programs and impacted communities. Others might benefit from something like the State picking up currently mandated expenses, or otherwise identifying costs that could be waived in some way. More broadly, to maximize partnerships between local governments and the State, we would suggest consideration of reinstating Municipal Matching Grants and/or converting current Revolving Loan Funds into grants, both of which fall into the water and sewer priority outlined within the ARP as an allowable expense. Where there isn’t an existing mechanism, we believe a process could be developed that includes the potential for criteria of the State that enables local governments to demonstrate this impact, and we are available to work together to achieve a viable process that provides access to additional funds for those in need.
Thank you for your attention to these challenges being experienced by local governments, which mirror those of the business and nonprofit sector, and others. It really requires a targeted approach to have the most impact. We appreciate the Legislature’s consideration and continued partnership.
Respectfully,
Nils Andreassen
Executive Director
Alaska Municipal League