Southeast communities prepare for sharp drop in SRS funding

The loss of millions in federal assistance could leave Southeast Alaska communities in a major financial bind.

The U.S. Forest Service’s Secure Rural Schools, or SRS, program, which paid Alaska communities $14.3 million in April 2014, went the way of the wooly mammoth this year when Congress quit funding the program.

Since federal fiscal year 2010, the payments to Alaska have fallen steadily from $18.8 million. In 2001, the state received about $9.1 million from the SRS program.

Nationwide, the SRS program has paid out between $298 million and $415 million in recent years.

The program was devised in 2000 as a way to boost dwindling revenue from Forest Service timber sale receipts for local communities. Before 2000, cities and towns surrounded by national forest lands were paid 25 percent of local timber receipts — an offset for the property tax revenue the local governments could not generate from federal land.

Alaska is set to receive about $535,000 this year with the Forest Service being forced to go back to the timber receipt formula.

In a release from her office, Sen. Lisa Murkowski placed the blame for the funding cuts on the Forest Service for not maintaining a viable timber industry in Alaska and other states. She said the program was originally set up as a “temporary bridge for timber-dependent economies” that has been extended over the years.

“The reversion to the old system of paying communities 25 percent of local timber receipts would be OK if the Forest Service followed prudent management practices and actually allowed trees to be harvested, but that hasn’t been the case for decades,” Murkowski said. “This is, unfortunately, a rude awakening for those communities who have been forced to rely on alternative assistance from the federal government to fund local services.”

The House of Representatives passed a two-year reauthorization of the Secure Rural Schools and Community Self-Determination Act March 26; it is attached to Medicare legislation.

Murkowski spokesman Robert Dillon said the Senate would likely take up the bill this spring. Congress is on recess until April 12 and the annual SRS payments are issued this month.

As the name of the program implies, the funds are intended for school and road upkeep along with other maintenance needs. Unincorporated communities must budget 93 percent of their SRS receipts to schools and 7 percent to roads, while more established local governments have more discretion over how the money is spent.

In the realm of the federal budget the SRS figures for Alaska are small, but they carry a lot of weight in Southeast towns in the midst of 17 million acres of Tongass National Forest.

In federal fiscal year 2013 the Petersburg Borough received $1.47 million in SRS funds and the City and Borough of Wrangell tallied $1.31 million. The neighboring communities got the largest chunks of funding for Alaska; the Ketchikan Gateway Borough was next on the list with $1.23 million.

In fiscal year 2013, 11 local governments in the state received SRS payments; eight were in the Tongass. The Chugach National Forest does not have a significant timber sale program.

Payments to numerous unincorporated communities totaled $6.92 million.

With populations of less than 3,000 residents and annual budgets in the $10 million to $15 million range, the federal contributions are significant in Petersburg and Wrangell.

Jeff Jabusch, Wrangell borough manager, said his community has kept the 93-7 funding allocation since it incorporated in 2008 and has managed to bank some of the SRS money.

Wrangell’s current budget shows more than $3.9 million in a Secure Schools Fund, with about $850,000 going to the school district this fiscal year. That money will be divvied up for operations and capital expenses, Jabusch said.

The borough took about $900,000 from the SRS pot and about $650,000 from city taxes for its share of the district budget in fiscal year 2014.

“We certainly rely on (SRS funding),” he said.

Wrangell generates about $1.6 million in property taxes annually, according to Jabusch.

Saving as much of the money as possible will help the borough “ease into the transition” of no SRS funding if that is ultimately the future, he said.

Petersburg has had similar foresight.

“Kind of like (Wrangell’s) situation, we’ve got anywhere from three to four years if the school doesn’t use any of the money for capital projects to fund it fully on the operating side,” Petersburg Borough Manager Stephen Giesbrecht said.

Regardless of whether the program is extended this year, the future of SRS money is tenuous at best, he said.

“I’ve spoken to our delegation in (Washington, D.C.) and I think the across the board feeling is that this program is on its last leg,” Giesbrecht said.

He hopes to a budget plan for cutting costs generating new local revenue in front of the public by June 2016 so Petersburg can be prepared to pick up the school’s tab itself before its reserves run out.

Any tax changes would have to go to the public for a vote, which could then be done during local elections in October, he said. Petersburg has a sales tax with numerous exemptions that could be on the negotiating table, according to Giesbrecht.

The community budget discussion is about coming up with options and letting the public decide what’s important, he said.

Jabusch said he would prefer to have a restored timber industry in Southeast, but it’s hard to see that happening with timber sales tied to the whims of changing presidential administrations, he said.

“Who knows long-term where the (SRS) program will go but short-term the Southeast communities would be hit pretty hard if they just did away with the program altogether,” he said.

Giesbrecht said he talked with leaders of small communities across the country that while on a recent trip to Washington, D.C. who said they would be in even a bigger bind than Petersburg or Wrangell if SRS funding goes away.

“You’ve got places in the Lower 48 that went so far as borrowing against future receipts to fund their schools, so it’s not just an Alaska issue,” Giesbrecht said.

Elwood Brehmer can be reached at [email protected].

11/19/2016 - 6:58pm