Anchorage’s local government has a cash flow problem, limiting its ability to deal with unexpected expenses or to spend potential windfalls.
When the city caught up on some of its overdue financial reporting requirements last month, it included a reckoning of the city’s spendable fund balance, that is, the money the city has on hand that isn’t otherwise committed.
Anchorage Chief Fiscal Officer Alden Thern boiled it down for an Assembly committee.
“The question I always get asked: How much fund balance do we have so we can spend?” he said. “We are negative. So, there is no fund balance to spend, and it’s not going to be anywhere in the near-term future, until we are able to reimburse the fund balance for multiple areas.”
This isn’t a true deficit. The city’s most recent, audited financial statements say the city had $52.8 million on hand at the end of 2022. But it was supposed to have millions of dollars more as reserves under an Assembly policy.
The low reserves played a role in a city’s recent bond rating downgrade, which means taxpayers will pay slightly more in interest on $147 million the city recently borrowed.
Those reserves are spendable in emergencies. But if non-emergency, one-off funding requests come up, the city can’t pay for them from the fund balance.
The constraint is another consequence of city bookkeepers’ delayed, but inevitable corrections to tangled and inconsistent financial recordkeeping that cropped up amid extreme staff turnover. Untimely financial reporting obscured and compounded the cash flow situation.
A finance official from the last administration who worked on the overdue financial report called some of the looming issues accounting “time bombs.” Strange accounting decisions going back to the Berkowitz administration for a major municipal software upgrade, delayed reimbursements from the federal government for emergency spending related to the 2018 earthquake and COVID-19 pandemic, and new accounting standards have all contributed.
Chief Administrative Officer Bill Falsey said the cash flow issue is a problem, though there are other ways to pay for unbudgeted, one-time expenses.
“The ability to use fund balance, which does not even exist every year, is a single digit, fractional percent of the overall municipal budget,” he said. “It is not a thing that is actually critical to the municipality’s annual budgeting process or operations.”
However, as Anchorage officials begin putting together the city’s annual budget for the 2025 calendar year, pressure to rebuild the fund balance reserves will compete with more tangible priorities, like pushes for pay raises for city workers or to improve snow removal.
Some relief will come with time, simply as the bookkeeping catches up to federal reimbursements for emergency expenses that flowed to the city in 2023. But other, idiosyncratic deficits – specifically, in the funds for the IT Department, Anchorage Building Safety Service Area, and workers compensation – will continue to count against the city’s overall fund balance, likely for years, without service cuts or new taxes.
Jeremy Hsieh covers Anchorage with an emphasis on housing, homelessness, infrastructure and development. Reach him atjhsieh@alaskapublic.orgor 907-550-8428. Read more about Jeremyhere.
