High Oil Prices, Legislative Foresight May Mean Local Government Windfall

Local governments say they’ll use an unexpected boost in direct state aid — if it arrives — to cover school costs and a handful of other projects.

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By Fairbanks Daily News-Miner

Story Created: May 24, 2011 at 9:59 AM AKDT

Story Updated: May 24, 2011 at 9:59 AM AKDT

 FAIRBANKS — Local governments say they’ll use an unexpected boost in direct state aid — if it arrives — to cover school costs and a handful of other projects.

State government, which gets much of its income from oil taxes, already shares extra money with communities. It slices $60 million per year from state income and distributes it among local governments across the state, with grants determined by population. 

But the Legislature quietly tacked on an extra $20 million this spring (and added the same amount for school districts), fallout from an unresolved discussion about state government’s revenue-sharing program. 

Some senators want to expand the program, with the size of the expansion varying with respect to oil prices — when state revenue goes up, so would community aid. 

The Senate’s majority caucus included the $20 million this spring in statewide spending plans, money aimed at starting the change.

The Fairbanks North Star Borough can therefore expect an extra $1.2 million — almost 1 percent of its annual budget — and the cities of Fairbanks and North Pole, will respectively receive another $551,000 and $67,000 beyond what would have come under the normal revenue sharing formula. The money still needs to clear Gov. Sean Parnell’s veto.

Borough Mayor Luke Hopkins said the assembly has already committed half its expected bonus grant to help schools cover operating costs next year. He said he could propose spending part of the balance on maintenance needs or, perhaps, new air filters for schools in pollution-prone neighborhoods.

“There are many” needs, he said.

Fairbanks city Mayor Jerry Cleworth said city officials try to avoid making long-term funding decisions — such as adding new employees — with “one time only” money. The city could use the extra money instead for construction or capital projects, he said. Among the options: Demolition and cleanup at a handful of trashed or abandoned properties tagged by city work crews.

“We may also look at putting a portion into the city’s permanent fund so that it can serve as a mini-endowment for years to come,” he said by email.

The Legislature must still decide whether a long-term expansion of revenue sharing programs is merited. The proposal (Senate Bill 97), from Sen. Lyman Hoffman, D-Bethel, has cleared the state Senate and awaits action in the House.

Rep. Bob Miller, D-Fairbanks, noted in a newsletter Monday that revenue sharing also directly reaches groups in smaller communities, including Two Rivers and Fox.

Contact staff writer Christopher Eshleman at 459-7582.

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Think about it! said on Tuesday, May 24 at 4:03 PM

Oil is one of alaska's resource. Everthing else from fishing to tourism to mining, account for a small percentage of our states ecomony and revenues. If your worried about the quality of our lives, think about how it will be with lack of jobs and money for our schools, government, and roads. The only thing that has insulated Alaska from the economic problems you have everywehere else in the US is the money generated from the Oil industry and if you don't understand that you need to enlighten yourselves.

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Alaska said on Tuesday, May 24 at 12:25 PM

Sounds like they want to buy us so we get on board to drill for more oil. Hasn't BP already given us a damn good reason why we shouldn't? Is it worth damaging the quality of our lives to allow it? I THINK NOT! SAVE ALASKA'S RESOURCES FROM OIL DAMAGE!

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