Mayor Sullivan’s proposed 2012 budget focuses on public safety, efficiency
Despite reductions, budget will have little impact on citizens
Contact: Sarah Erkmann
ANCHORAGE- Mayor Sullivan released his proposed 2012 budget to the Anchorage Assembly today, as required by municipal code. The 2012 spending plan, which focuses heavily on public safety, maintains city services at current levels despite addressing a $15 million gap between revenues and expenses.
Mayor Sullivan expressed satisfaction with the 2012 proposed budget. “By putting every municipal department under the microscope to find areas where we could save money, we’ve achieved a budget that delivers essential services to citizens while keeping property tax increases relatively flat,” said Sullivan. “In this volatile economy where many people are still feeling the effects of salary freezes and reductions, it’s prudent to rein in government spending and let citizens keep more of their hard-earned money.”
The Mayor’s 2012 proposed budget is $451.8 million, a 1.9 percent increase above 2011. The largest cost is $247.2 million for employee salaries and benefits, which make up 55 percent of the city’s costs. This represents an average increase in property taxes of $7 for every $100,000 of home valuation.
In order to meet Sullivan’s goals of maintaining public safety levels and minimizing tax increases, he charged city department leadership with the task of finding additional efficiencies and reexamining their budgets for savings potential. The results, outlined below, allow the city to continue delivering services with little to no impact on citizens.
City officials achieved this by analyzing several areas of city finances, namely leave cash-out and spending on non-labor costs like travel. By conducting a thorough review of the numbers, it was found that savings could be realized in both 2011 and 2012, thus providing additional revenue for the 2012 budget year.
In 2010, a total of $10 million was budgeted for leave cash-out—but only $4.3 million was spent After a careful review, it became apparent that the same situation—departments coming in under-budget in leave cash-out accounts—had been ongoing for many years.
To correct this, a new formula is used in 2012 based on each department’s prior year actual experience. For 2012, this resulted in a $6.5 million savings—with no impact on services to citizens.
This lower rate of spending meant that leave cash-out was over-budgeted in 2011, too. Current year expenditures were analyzed and $4.1 million in savings for the current year was identified. As part of the 2012 proposed budget, this savings is pledged as revenue to support the 2012 budget.
Departments also closely examined historical spending in non-labor expenditures, such as utilities, travel, and contracts, to identify accounts that might historically be under-spent. This process resulted in a $1.2 million savings—with no impact on services to citizens.
While substantial savings were realized by adjusting leave cash-out and analyzing non-labor costs, more reductions were still necessary to balance the budget. As a result, some department programs will need to be realigned and staff reductions made, to the tune of $3.2 million. Every effort is being made to minimize the impact on the level of direct services to citizens.
Because of this careful analysis, Mayor Sullivan and MOA leadership are able to provide the following services:
- Enhanced public safety with 29 new fire fighters and 30 new police officers;
- Minimal, if any, impact on direct services delivered to citizens; and
- Property tax increase that is about half the rate of inflation.
Revenues for 2012 are also enhanced by $4.5 million from other sources, including:
- State and Federal revenue;
- Other non-property taxes and interest earnings; and
- Program-generated revenue such as user fees.
Revenue from other taxes that have substantively changed in 2012 includes:
- Automobile Registration Tax – A total of $8.8 million is expected for an additional $3.8 million due to an increase in rates approved by the Assembly in 2010.
- Tobacco Tax – A total of $20.95 million is expected, a decrease of $350,000 when compared with 2011;
- Motor Vehicle Rental Tax – A total of $5.2 million is expected, representing an increase of $420,600 in 2012;
- MUSA/MESA – This is a payment-in-lieu-of-(property)-taxes paid by municipal-owned utilities and enterprises. In 2012 these payments will total $21.1 million, which is $1.3 million higher than 2011;
- Hotel/Motel Room Tax – A total of $21.6 million from this 12% tax is expected in 2012 for a $1.8 million increase. Revenue from the tax is split three ways—4% to tourism marketing; 4% for Dena’ina Center debt; and 4% (or $600,000) to general government; and
- Investment Earnings – This category of revenue includes interest earnings on management of municipal cash pools and a dividend paid from MOA’s Trust Fund (created with the proceeds from the sale of the Anchorage Telephone Utility). A total of $4.1 million in revenue is expected in interest earnings, which is $854,400 less than 2011; the MOA Trust Fund dividend will be $4.9 million, which is $100,000 lower.
The Assembly now begins its review of the Mayor’s proposed budget. The budget will be introduced at the Oct. 11 Assembly meeting, and public hearings will be held on Oct. 25, and Nov. 8 and 22. Copies of the full budget document are available online at http://www.munibudget.org/.