Power Cost Equalization Fund could pay for community assistance

Correction: Originally, we mistakenly said Anchorage would receive $2 million in the fiscal year starting in July, under bills the Legislature is considering. It would receive $5.7 million starting in July and up to $2.3 million in future years. We apologize for the error.

The Senate Finance Committee is looking to re-route money from a fund to offset the high cost of electricity in rural areas. Some Power Cost Equalization money would replace the Community Revenue Sharing program that the state government started when oil prices were higher.

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Sen. Mike Dunleavy, R- Wasilla, in the Alaska Senate, April 7, 2016. (Photo by Skip Gray,360 North).
Sen. Mike Dunleavy, R- Wasilla, in the Alaska Senate, April 7, 2016. (Photo by Skip Gray,360 North).

Senators may link two changes they’ve been considering this legislative session.

Senate Bill 210, would reduce the amount that municipalities receive in revenue sharing. But there was a problem with this idea. Without a source of revenue other than the state’s annual budget, this program – which legislators want to rename community assistance – would disappear.

That’s where the second change comes in. Senate Bill 196 would use money from the Power Cost Equalization Endowment Fund to offset some of the state budget. But under a new version, this money would instead go to assist communities.

Wasilla Republican Senator Mike Dunleavy asked why the PCE fund isn’t being used to close the budget gap.

“We’re experiencing a four billion dollar hole,” Dunleavy said. “There’s a billion dollars in this fund.  And – just a thought as to, why wouldn’t we use this fund to at least backfill some of the deficit. And I certainly understand the assistance that it gives to many of our communities.”

Under the latest versions of both bills, the 900 million dollar PCE fund would continue to be used primarily for a program to help rural electric ratepayers. But in years when the fund earns more than is needed for that program, up to 30 million dollars would go to community assistance.  And up to 25 million would go to rural, bulk fuel, and renewable energy programs.

Bethel Democratic Senator Lyman Hoffman supports both bills. He doesn’t want to spend the PCE money all at once, like Dunleavy suggested.

Hoffman says the fund could provide a lasting source for both power cost equalization and community assistance. As long as the main PCE fund remains intact.

That will help communities that have come to rely on revenue sharing, while taking pressure off of the state budget.

“If the dollars were taken, there would be a one-time use, and people in rural Alaska would end up paying substantially more in electric costs,” Hoffman said.

But not all municipalities are happy about the change. Anchorage would receive $5.7 million, and up to $2.3 million in future years.

Anchorage Mayor Ethan Berkowitz’s chief of staff Suzanne Fleek-Green says it will cost residents more in taxes or reduced services. The municipal government had budgeted for a five million reduction, and must make up the gap.

“To counteract the effects of this legislation, the municipality will have to add to the additional burden being felt by property owners in the municipality,” said Fleek-Green. “This bill effectively is shifting an additional $4 million to property taxpayers in Anchorage, Eagle River, Chugiak, Girdwood, and all other parts of the municipality.”

Under the latest changes, municipalities would receive $30 million in community assistance, compared with $50 million in Governor Bill Walker’s budget.

Rural communities are largely protected from community assistance cuts. An extreme example is Aleutians East Borough, which receives nearly $10,000 for every resident who lives in unincorporated areas.

Every community with fewer than 500 residents would receive at least $400 per resident in state assistance.

Alaska Municipal League Executive Director Kathie Wasserman says she’s can support using the Power Cost Equalization Fund for community assistance. But the reduced amount of aid – combined with a formula that benefits some place more than others – puts her in a difficult position.

“I’ve just had trouble with the formula that’s presently in place,” Wasserman said. “No matter which direction the Alaska Municipal League goes, whether to support the formula or not support, I throw a number of my municipalities under the bus, so that’s why we’re just not taking a position on the formula at this point.”

Both houses have until Sunday to act on the bills.