Gov. Mike Dunleavy released his flat-funded 2021 budget last month, with the biggest threats to Haines being a prolonged hit to ferry service, a larger responsibility for school bond payments, and a one-third funding cut from the community assistance program that helps pay for areawide services.

The proposed budget totals $4.5 billion in state spending without any program cuts. If the Legislature approved the full Permanent Fund dividend as Dunleavy has proposed– estimated at $3,100 per person– it would put the state at a $1.6 billion deficit and require a dip into reserve funding.

Haines Borough manager Debra Schnabel said she is concerned about allocating state funding to individuals instead of state services.

“Using the reserves to pay for government but distributing money to individuals throughout the state does not ensure that the services that we need collectively are going to be provided,” Schnabel said. “I recognize that the proposed budget is flat-funded, but we have suffered the loss of state services including snowplowing, managing state forests, public health and broadcasting. At some point in our future, we the municipality will have to make that up.”

During a visit to Haines on Friday, Sen. Jesse Kiehl told residents that the governor’s proposed budget isn’t meeting the needs of Alaskans, and expects a state sales or income tax will be proposed to generate revenue.

“If we don’t put any revenue pieces in place, where do you go when the reserves are gone?” he said. “The current budget when it comes to the schools and the ferries isn’t meeting the needs,” he said. “But I don’t have a printing press for cash either.”

Dunleavy has proposed maintaining the same level of funding for both the Alaska Marine Highway System, cut by $43 million last year, and for the state program that allocates money annually for bond payments on the Haines School construction.

In 2005, to finance the $17 million Haines School construction, the borough entered into a bond agreement with the state in which the borough would cover 30 percent and the state would cover 70 percent of the building’s loan payments annually. Last year, the state covered only 35 percent, leaving the Haines Borough on the hook for $450,000.

Haines’ chief financial officer Jila Stuart called the proposed debt reimbursement formula “good news, bad news.”

“It’s not being cut more, but it’s only being funded at 50 percent of what it was,” she said.

Dunleavy has proposed flat-funding schools for the fifth consecutive year, but Kiehl said that with the cost of inflation (primarily for health care), schools actually stand to lose funding.

“It is a hit to the buying power of the school dollar and it’s been five years (that) schools are genuinely doing the same or more with less,” he said.

Haines Borough school board member Michael Wald was wary of a tendency to think flat funding is a good thing.

“Flat funding isn’t the goal here and we shouldn’t let the governor’s draconian budget efforts make us think that somehow we’ve won because we’re getting flat funding,” he said. “We can’t offer the same level of service with flat funding.”

Assembly member Paul Rogers said Tuesday it was premature to comment on how the state’s draft budget will inform the Haines Borough budget.

Assembly member Gabe Thomas said that, to compensate for the school debt reimbursement cost, the assembly will need to make distinctions between essential and non-essential services. He identified police and public safety as essential services in Haines, but said it was too early to identify non-essential services.

“Does the assembly need to cut its budget? That would be the question,” assembly member Stephanie Scott said. “My preference would be to reduce expenses not raise property taxes. I think it’s going to take some thought.”

Assembly member Brenda Josephson, who said she was disappointed at last year’s budget process that did not encourage any cuts, said now is the time to start planning for the next budget cycle, which will take effect June 2020.

“I want to try to protect the services we’re used to getting and put the brakes on expanding services,” she said. “Maybe we need to look at some smaller cuts to a variety of services, rather than cutting out any one of them. The biggest thing I’d like to focus on is…seeing if we can find some efficiencies where maybe we can join some services together.”

The Community Assistance Program, a state program which distributes revenue to local communities to offset property taxes, stands to lose a third of its funding if approved. In Haines, that means a reduction of $135,000 in the general fund, according to Stuart.

Other changes to the budget will shift funding away from the Department of Natural Resources and funnel it to increase spending on corrections, law, public safety and the court system.

Kiehl said he expects there to be some changes to the budget, but “it won’t go up much.”

Negotiations will begin Jan. 21, when the Legislature’s regular session starts.