The myth about Juneau’s ‘slush fund’

By Bruce Botelho

One former politician recently asserted that “Juneau has collected unprecedented property tax and sales tax revenue in the last few years and keeps rolling those millions into a slush fund,” and implied that the money is being squirreled away to be used for wasteful projects.  Another pundit referred to “over-inflated reserve accounts.”

The attacks appear to be focused on Juneau’s restricted budget reserve, the so-called “rainy day account.”

The account was an outgrowth of recommendations from the mayor’s task force on fiscal policy issued in April 1990 and was initiated because of serious concern over the possibility of major reductions in state financial aid to local governments in the 1990s.

In the case of the CBJ, 37% of the FY90 operating budget (almost $34 million) was based on State support. In turn, because 85% of the revenue used to support state government flowed from the oil industry, a significant decline in oil revenue would have a major and very serious impact on services provided by local government. Having a reserve to make possible a scheduled reduction in services was viewed as far more tolerable than the shockwave that could occur with last-minute, wholesale eliminations of local government services, programs, and employees.

In an era characterized by financial uncertainty and unpredictable events, the importance of maintaining a financial cushion cannot be overstated. It’s for this reason that financial experts often advise households to sustain an emergency fund equivalent to three or more months of living expenses.

In Juneau’s case the task force recommended that the city build and maintain at least $10 million for unanticipated precipitous drops in revenue. The wisdom of having such a reserve has proven itself on several occasions: the loss of power at Snettisham for Juneau in 2008 that crippled businesses and families faced with massive increases in electricity costs, the pandemic that shut Juneau’s tourism sector down through two seasons, and the Mendenhall River floods, to name but three examples.

Thirty-five years later the restricted budget reserve stands at slightly less than $20 million, far short of the Government Finance Officers Association's recommended reserve target of not less than two months (16.7%) of annual operating revenues.  Nevertheless, it has repeatedly demonstrated its value. The restricted budget reserve is not a “slush fund”, but one used sparingly and in urgent circumstances. Few of us decry having to buy insurance even though we hope never to use it.

• Bruce Botelho is a former Juneau mayor and Alaska attorney general.