Skagway budget would move $2 million in clinic costs to cruise tax fund

Skagway Borough Manager Emily Deach has proposed paying $2 million of the clinic's local funding from the town's cruise tax fund instead of sales tax. The Skagway Assembly takes up the revised 2027 budget at first reading Thursday at 7 pm.

The change was not in the October draft that an Oct. 22 story described, which paid the clinic's full local share from sales tax.

Reserve Projections

The two reserves move in opposite directions from the October draft, though both still fall during 2027. The sales tax reserve would end near $8.9 million, up from about $6.8 million. The cruise tax reserve would fall to about $1.4 million, from about $3.4 million. The budget still draws about $5.8 million from sales tax reserves that start near $14.7 million.

Clinic Funding Breakdown

The clinic still gets about $4.3 million, more than double the 2026 budget's roughly $2 million. The new version takes about $2.3 million from sales tax, up 16.5% from this year, and $2 million from the Commercial Passenger Vessel fund, the state-shared cruise passenger tax.

Deach's Oct. 29 memo sets a $7.4 million minimum for sales tax reserves and describes it as required by municipal code. An Alaska News review of the borough code's finance chapters did not find such a rule. At an Oct. 22 work session, Deach said the figure is half of general fund expenses and that the treasurer advises staying between 50% and 75%. By that line, the October draft ran about $550,000 short, and the revision runs about $1.46 million above it.

A Shift Proposed in a Work Session

Deach raised the shift at an Oct. 21 work session, according to a recording. She said most increased summer clinic costs come from urgent care traffic and that cruise tax money would ease pressure on sales tax. Assemblymember Dan Henry called cruise tax carryover "really just float money." She presented the $2 million figure the next day. The Assembly has taken no vote.

What State Law Requires

State law says the cruise tax money "shall" go to "port facilities, harbor infrastructure, and other services provided to the commercial passenger vessels and the passengers on board those vessels."

Skagway hired McKinley Research Group to update the study it uses to apply that rule. The August 2025 report put 2024 cruise-related clinic costs at about $1.25 million, 19% of expenses, excluding passenger payments. The Assembly rejected the report 0-5 on Dec. 4, 2025. Mayor Orion Hanson said the percentages did not align with perceived impacts, according to meeting minutes.

The minutes cite a 68% figure from a 2008 report by James Van Altvorst, updated in 2017 and 2019. A 2016 state audit called that study an objective basis for using cruise money on general operations but said it needed updating, according to a 2025 resolution. Deach cited it as what the town's study allows. When Henry asked whether the state set it, the reply on the recording was "No, no, that's us." Henry said the 68% figure and the 50% reserve target can be adjusted by the Assembly.

The $2 million is about 27% of the clinic's $7.5 million budget, above McKinley's 19% and well below 68%. Deach said she was "just throwing around a number," and that 68% of the clinic budget would be more than the town has in reserves. Clinic Executive Director Albert Wall reported a 195% rise in patients needing emergency services from 2024 to 2025, with a significant portion coming from tour boat and seasonal walk-ins.

Sales Tax and Capital Projects

Sales tax would pay about $8.1 million for capital projects. The sales tax transfer that holds down property taxes falls 24.5%, to about $2.5 million. The budget assumes an 11% drop in cruise passengers, but Deach raised projected sales tax returns to $13 million from the staff estimate of about $12.4 million, saying the fund ran about 10% ahead after two quarters. About $3.7 million in listed clinic grants is not counted in the budget; if received, the grants could reduce the draw on reserves.

Separate Resolution on Nonprofit Transfer

A separate resolution up for public hearing Thursday would state the town's intent to move health care to the clinic's nonprofit, as reported Oct. 30.

Deach said the budget's second reading and public hearing, where residents can testify, come at the Assembly's second November meeting, set for Nov. 19. A third reading is set for Dec. 3. Deach said the budget must be adopted by Dec. 31.