On Tuesday, the Haines Borough Assembly’s finance committee gave chair Brenda Josephson the authority to work with staff to draft language for a ballot measure asking voters to approve a draw from the borough’s permanent fund.

Assembly member Zephyr Sincerny, who proposed the measure, said the intent is to ask voters to approve a $450,000 draw, roughly 5% of the permanent fund’s total value, to cover unexpected costs associated with school bond debt this year.

In past years, the state typically paid for 70% of municipal school bond debt with the municipality responsible for the other 30%. Last year, Gov. Mike Dunleavy reduced the state’s share of school bond debt payments to 35%. When drafting this year’s budget, borough staff had anticipated a repeat. The complete loss of state support for school bond debt left the borough with a roughly $450,000 deficit.

At last week’s assembly meeting, the ballot measure ordinance was introduced in a 3-3 assembly vote with Mayor Jan Hill as the tiebreaker, supporting the motion. Josephson, Rogers and Lapp opposed the ordinance.

At the same meeting, members voted unanimously to refer the ordinance to the finance committee to resolve wording problems. The original version said the purpose of withdrawing money from the permanent fund is to pay for school bond debt.

Borough chief fiscal officer Jila Stuart said the phrasing needs work since that technically can’t happen.

The proposition, if approved by voters in October, will pass after the FY21 budget is finalized and after the borough sets its property tax mill rate to cover school bond debt, assembly member Josephson said.

At present, this year’s roughly $1.3 million school bond debt payment is covered through approximately $320,000 in repurposed capital improvement project funds. The rest is covered through property taxes.

Stuart proposed language that would make it clear the purpose of the ballot measure is to reimburse the borough’s areawide services fund for lost school bond debt funding from the state.

Josephson offered to work with borough staff to come up with a new draft of the ordinance in time for next week’s assembly meeting. The other finance members, Scott and Rogers, gave their consent.

Sincerny requested that language in the ordinance be as specific as possible about what the funds will be used for.

At the time the ordinance was introduced, Sincerny said a draw from the permanent fund would allow the assembly to reverse some of the cuts it has introduced to operating and capital funds this year to cover unanticipated costs associated with school bond debt and COVID-19.

Josephson expressed doubt that it would be possible to be more specific than “areawide services.” The areawide services fund is used to pay for most services within the borough, including budget items under scrutiny like the library, museum, Chilkat Center, Mosquito Lake Community Center and pool.

For some assembly members, the concern is that a one-time permanent fund draw to cover school bond debt could turn into an annual event until the debt is fully paid in FY26.

“How much longer can this go on?” assembly member Stephanie Scott asked.

Assembly member Paul Rogers said he worries a one-time draw from the permanent fund will normalize the process, and it could become a go-to solution if the state fails to fund school bond debt in future years.

If the borough draws from the permanent fund at a rate of roughly $500,000 a year until the school bond debt is paid, this would translate to roughly $5 million, more than half the value of the permanent fund.

Others were more optimistic that the draw would be a one-time solution to an unprecedented problem.

Stuart said she is encouraged by the fact that the governor’s proposed budget at the beginning of the year included half the school bond debt funding, the same as FY20, and the legislature approved this amount. She said this suggests the state intends to maintain the level of funding into the future.

At the time the governor vetoed the state’s portion of school bond debt payments for FY21, he said he did it with the hope that municipalities would be able to use federal CARES Act funds to replace the loss of revenue. However, this didn’t pan out.

Assembly members at the finance meeting said there is value in letting voters determine the merit of a permanent fund draw this year.

The first public hearing for the ballot measure will take place at the June 9 assembly meeting.