‘Far from complete’ initial CBJ budget for coming year has no service cuts, $10.4M deficit
- Mark Sabbatini
- 35 minutes ago
- 4 min read
Assembly set to spend next two months considering spending reductions to help narrow gap resulting largely from voter-approved tax cuts
By Mark Sabbatini
Juneau Independent
A relatively status quo proposed city budget — in the wake of tax cuts approved by local voters — released Wednesday trims about $1.8 million from this year’s roughly $504 million total spending plan, contains no service reductions and has a deficit of $10.4 million.
But the initial proposal, which also sets a rate of 9.92 mills (0.32 mills lower than the current rate) for the fiscal year starting July 1, will almost certainly see significant changes before it is passed by the Juneau Assembly, City Manager Katie Koester wrote in an overview of the draft budget.
"The work on the FY 2027 budget is far from complete, as the Assembly will have many decisions to make with service reductions," she wrote.
Also, while current service levels are the same, there are $4.6 million in cuts "through tightening budget assumptions" and $2.5M in additional revenue anticipated from user fees, according to Koester. She notes that at an Assembly retreat in December the goal was for the city manager’s office to propose up to $4 million in cuts, the Assembly would subsequently impose up to $4 million in service reductions, and city leaders would see ways to generate an additional $2 million in revenue.
Assembly members have said during preliminary budget hearings in recent months that priority will be given to critical needs such as emergency services and public infrastructure, while cuts may occur in areas such as recreational programs and community grants. Specific discussions will occur in upcoming Finance Committee meetings, plus special Assembly meetings where public input will be accepted on April 15 and 29, with the Assembly required to adopt a final budget by June 15.
Koester estimates the city will have $12 million less revenue during the coming year due to voters approving a lower property tax cap, and exempting food and utilities from sales taxes. There are numerous other factors with varying degrees of uncertainty that will add or subtract to the city’s bottom line such as new employee contracts, state and federal grants, and the coming tourism season.
"While the FY 2026 budget development process was overshadowed by the administration change at the Federal level and a swirl of uncertainty in grants, federal funding and tariffs; the FY 2027 budget is influenced more by local issues," she wrote. "Juneau is experiencing depressed sales tax revenue outside of the newly approved exemptions across all varieties (hotel, liquor, tobacco, etc.). The summer 2026 tourist season was strong, but spending by tourists seems lower than in previous years. The major revenue projections have built in a continued pessimism based on current performance, coupled with the anticipated voter-approved sales tax revenue reductions."
The initial bottom line is the city’s unrestricted general fund would drop from a projected $20.7 million on June 30 to $10.4 million a year later, while a restricted account would stay nearly level at $17.3 million this June and $17.2 million next June. Koester notes $7.7 million of the $10.3 million unrestricted budget deficit is recurring spending — and "it is anticipated that this amount will be reduced as the Assembly engages in their service reduction decisions" — while $2.6 million is for one-time allocations.
The lower mill rate is due in part to a voter-approved cap of nine mills, down from 12 previously, with an exemption for debt service. This year’s 10.24 mill rate includes three non-debt categories (areawide at 6.4, roaded service area at 2.45 and fire service area: 0.31) that total 9.16 mills — so the areawide category is reduced 0.16 mills next year to meet the cap. Also, the city’s project debt service rate of 0.92 mills next year is 0.16 mills lower than this year.
The total estimated loss to the city from the lower cap is about $1 million, according to Koester. However, she projects "a nearly neutral impact of the ballot initiative" due to a 2.1% increase in overall assessed property values for 2026.
A press release issued by the City and Borough of Juneau on Wednesday outlines the following major spending categories for the budget:
• $96.7 million for the Juneau School District: A $1.7 million (1.8%) increase over FY26, primarily for commodities and services increases.
• $233.6 million for Enterprise Funds (hospital, airport, water and wastewater utilities, docks, and harbors): A $20.4 million (9.5%) increase, primarily reflecting expanded services at Bartlett Regional Hospital.
• $149.7 million for General Government: A $4.6 million (3.0%) decrease through tightening of budget assumptions in response to voter-approved ballot initiatives.
• $58.7 million for Capital Improvement Projects: A $17 million (22.5%) decrease, due to large one-time appropriations in FY26 for public safety communication infrastructure bonds, Marine Park, airport infrastructure projects, and in response to the voter-approved ballot initiatives.
• $8.8 million for Debt Service: An $810K (8.4%) decrease in required debt service payments from FY26.
• Contact Mark Sabbatini at editor@juneauindependent.com or (907) 957-2306.
