Rae C. Stedman Elementary School in Petersburg (Photo by Angela Denning/KFSK)

Governor Mike Dunleavy has vetoed half of the state’s contribution towards debt service for school projects. Local governments will likely dip into reserves, or raise taxes, to make up for the nearly $49 million shortfall.

The state has been covering majority of costs for school projects approved by local voters as recently as five years ago. There’s a moratorium in place for new projects but the state has been continuing payments for older ones.

Gov. Mike Dunleavy’s original budget proposed eliminating the state assistance entirely. On Friday, he went with half — and justified it as necessary to pay out a full permanent dividend fund check to Alaskans.

“There’s no easy way out of this,” Dunleavy said, “whether the PFD is taken and the impacts that will have on 680,000 individuals and families statewide, whether it’s taxes, whether it’s reductions. I think everyone realizes that there’s no easy way out of this or we would have found the easy way. But I believe that the communities are going to have to make the decision on how they’re going to deal with that.”

The largest impacts will be in Anchorage, with a $20 million reduction and the Matanuska-Susitna Borough with a $9 million cut.

School administrators say individual Alaskans will end up making up the difference.

“Well a tax is a tax, I don’t care who’s paying it and this is a transference of taxable responsibilities to municipalities and to boroughs across the state,” said Norm Wooten, executive director of the Association of Alaska School Boards in Juneau. He said local governments across the state were counting on these reimbursements when they set their budgets.

“Now the only recourse that they have of course is to either raise taxes or cut services within their municipalities,” Wooten said.

In Petersburg, elected officials have delayed filling public safety jobs in police and fire until the state finalized its budget. Property tax bills were due to go out in the mail around July 1, with a tax rate similar to last year because the borough hoped this funding would continue.

Petersburg Borough Manager Steve Giesbrecht expected to revisit the borough budget after the final word on this reimbursement.

“Kind of the concept has been if we have to get to that point, maybe we wait ‘til the fall when all of the assembly’s back from fishing and the office and we sit down and go kind of through a whole brand new budget process in a sense on how do we address major changes in funding,” Giesbrecht said earlier this week.

Before Friday’s announcement, the assembly had considered a property tax hike as high as 15 percent to cover the potential loss of Petersburg’s full annual payment of around $460,000. That repays debt on a community swimming pool and maintenance on school buildings. A smaller tax hike may be one solution, or dipping into reserves or making cuts. It’s a choice municipalities across Alaska will be facing following the governor’s veto.

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