Gov. Mike Dunleavy’s administration began distributing federal CARES Act funds to communities, small businesses and nonprofits on Tuesday. And while Alaska municipalities have said they’re eager for the money, many are concerned there won’t be enough. Cities and towns are facing hundreds of millions of dollars in extra spending and lost revenue due to the pandemic.
In the lead-up to the Legislative Budget and Audit Committee’s approval of more than $1 billion in CARES Act relief, lawmakers heard from Alaska’s mayors and local leaders. Each had unique news to share. And a lot of what they had to share was stark.
“I’m afraid we’re going to be facing closing up businesses and outmigration of people and just kind of a collapse in the social systems here,” Gustavus Mayor Calvin Casipit said.
Casipit and others spoke to the House Community and Regional Affairs Committee on May 6.
Gustavus, in southeast Alaska, city depends on tourists for its revenue. He’s concerned that the federal restrictions on the $630,000 the city is set to receive through the CARES Act means the money won’t meet Gustavus’s needs.
“The impact has been on our revenues, and since we can’t use the CARE Act for replacement of revenues, we’re in a tough situation right now,” he said.
One of the stipulations from the U.S. Treasury is that the money can’t be spent for most programs that were already budgeted. But it can be spent on public safety and public health. And for many Alaska boroughs and cities, spending on police in the biggest item.
The strings attached to the CARES Act money may not be the biggest problem municipalities are facing. For a lot of places, the funds won’t be enough to cover total unanticipated spending and lost revenue. The Alaska Municipal League estimates the gap at roughly $500 million through the end of 2020.
Communities don’t know now what they’re going to need to spend later.
Dillingham faces a particularly extreme situation, outlined by City Manager Tod Larson.
“We’re extremely concerned about our health care capacity and our capabilities,” Larson said. “Our residents here are very anxious.”
Dillingham is facing a surge in population for the commercial salmon fishery. And Larson says city leaders don’t know how much money the city will have to spend to prevent or respond to a COVID-19 outbreak.
“It’s been extremely challenging already and, you know, we’ve been through about a month and I’m looking at three more months, so I’m only a quarter done,” he said. “I’m exhausted already.”
The practical problems raised by the epidemic are raising the urgency for infrastructure projects in some communities.
Bethel City Manager Vincenzo “Vinny” Corazza said local residents depend on water being hauled to them. And the truck drivers could become sick if there’s an outbreak.
“So having a pipe system — water system — is the answer,” he said. “You don’t need to rely on drivers: It’s piped to people’s homes, and I think we would use our CARES funding to start converting our hauled areas to a piped system.”
That’s the plan, but there are still questions.
Alaska Municipal League Executive Director Nils Andreassen said Bethel is not the only community considering water infrastructure upgrades.
It’s great the health mandate says we should wash our hands more. We don’t have running water,” he said. “Is that an allowable expenditure? I hope so. I hope that we can see improvements in our water, wastewater sanitation.”
Alaska Municipal League estimates that municipalities will have $300 million to $500 million in extra spending this year, and will lose $650 million to 900 million in revenue. So while Andreassen said the $586.6 million in CARES Act community relief is essential, the total costs of more than $1 billion will pressure municipalities, leaving something like a statewide half-billion-dollar budget gap.
“Municipalities are approaching it, whether spending from savings; some have furloughs that are implemented,” Andreassen said. “You have this reallocation of staff time. You’ve got closed facilities that were revenue-generating that aren’t now. Plus the lost tax revenue from economic constriction.”
And this is happening as local elected officials are writing budgets. Andreassen said he hopes the Legislature and Dunleavy can agree on additional state aid for municipalities, but he acknowledged that the state has its own budget problems. Congress is another potential source for help, but the outcome there is uncertain.