On Tuesday, the House Finance Committee changed course on a proposal to cut school bond debt reimbursements. The proposal would have left municipalities from Fairbanks to Wrangell with significant funding deficits.
Haines is one of the municipalities that would have been affected by the proposal.
In 2005, Haines built a new school. The borough took out more than $17 million in bonds to pay for construction with the understanding that the state would help with the bill. The agreement was the state would fund 70 percent of the annual bond payments and the municipality would pay 30 percent. The proposal to reduce state payments by about half would mean a $450,000 loss for Haines.
“That decrease will severely impact our local municipality,” said Haines School Board Member Jeanne Kitayama.
She was one of many who testified to the House Finance Committee over the weekend against the proposed reduction. So did Anchorage Mayor Ethan Berkowitz. The reduction to state payments would have cost his municipality about $18 million.
“There is a moral obligation to honor the bond debt reimbursement,” Berkowitz said. “The state made a promise. The state should keep it.”
“I think the testimony was convincing that we should restore the full amount of school debt reimbursement,” said Rep. Les Gara of Anchorage.
Gara introduced an amendment that would cancel out the previous proposal and restore school debt reimbursement to the full amount.
“This is one that would hit local communities harder than I would like to hit them,” Gara said.
Some of the other finance committee members were opposed to Gara’s amendment, including North Pole Rep. Tammie Wilson, who introduced more than 200 budget-cutting amendments this week.
“Any time you make cuts it’s gonna be hard,” Wilson said. “And unfortunately the state can’t keep taking on responsibility.”
Wilson said when municipalities took out these bonds, they knew there was a caveat that state payments were subject to annual appropriation.
“That’s one thing that was in the comment was that it was a promise that we are breaking,” Wilson said. “And it is not a promise that we broke.”
Rep. Gara’s amendment to restore full bond reimbursements passed 7-4. That takes the proposal that alarmed municipalities out of the finance committee’s operating budget bill. But the legislature still has a ways to go before adopting a final budget. And there may still be cuts to state education funding on the way.
Multiple House Finance Committee members said they were more supportive of a reduction to the state’s base student allocation than a cut to the bond reimbursements. A five percent reduction to the BSA did not make it out of the House committee. But it may be on the table for the Senate Finance Committee, which is developing its budget amendment proposals this week.