Anchorage city funds carry $45 million in deficits — biggest two still growing

Five Anchorage city funds are now carrying a combined deficit of roughly $45 million, the Assembly's Budget and Finance Committee heard Thursday. The two biggest gaps — workers' compensation and IT — kept growing while the city skipped some of its annual accounting reviews.

The Workers' Compensation and Liability Fund (the money set aside to pay employees injured on the job and cover liability claims) is $16.6 million in the red. The gap used to be $3 to $5 million. It climbed steadily after 2020: $6.5 million, then $9.4 million, then $13.7 million, and now $16.6 million. The administration says the city can still pay current claims; the gap is on paper.

Ona Brouse, the city's budget director, explained how it got this big. The city is supposed to review the fund every year and adjust. "There were a few years where that was not occurring, and during that time frame, the costs of the claims also increased," Brouse said. Skipping the annual review while costs rose ballooned the deficit.

The IT fund — which pays for the city's computer systems — is $14.7 million in the red. Other city departments are supposed to pay it back, but depreciation on the city's main software system is moving faster than those repayments. The administration calls this a paper problem too, and expects it to fix itself by 2034.

The other three funds add up to the rest. The Downtown Improvement District is over half a million dollars short. The Federal Grants Fund is $1.1 million short, tied to unresolved FEMA earthquake recovery. And the Building Safety Service Area — the fund that pays for building inspections and code enforcement — is $12.8 million short, a problem dating to a 2010 decision to make the fund entirely fee-supported. That structure proved insufficient by 2013, and the gap has compounded since.

The administration plans to start clearing the Building Safety deficit in the 2027 budget — the same cycle where the Assembly is asking whether it can fully fund schools and general government at the same time. "It's the intention to clear all of it," Brouse said, though she said exactly how much will be addressed in 2027 is still being worked out.

A service area presentation is planned for the July committee meeting.