Finance committee previews FY26 budget; members debate budgetary reserve practice and revenue outlook

The Denali Borough Finance Committee heard a condensed presentation of the proposed fiscal year 2026 budget and asked staff to clarify several long-standing budget practices, notably the repeated practice of including a budgetary reserve in the proposed budget and then reducing it during the amended budget process.

Treasurer Allison Johnson presented highlights: projected FY26 revenues increase roughly 1% over FY25, overnight accommodations remain the single largest revenue source, and the proposed budget includes full funding of the school district's request. Johnson summarized major line items: education funding at about $2.9 million (35% of the budget), community nonprofit grants approaching 9% (about $740,000), and a budgetary reserve set at 15%, equal to $1.2 million in the draft.

Johnson explained the borough follows a forward-funding rule that limits proposed expenditures to available reserves and unspent revenues; committee discussion focused on whether to continue the past practice of zeroing out the budgetary reserve in the amended budget. "It has been past practice to, zero out the budgetary reserve with the budget amendment," Johnson said, noting that accessing reserve funds would still require ordinance action and that both approaches (leaving it in place or zeroing it out) would take two meetings to activate spending. "In this situation in which we do zero out the budgetary reserve, it would still take 2 meetings to pass an ordinance," she said.

Committee members asked for the historical record on whether and when the reserve has been tapped. One member said he had not seen the reserve accessed during his four-and-a-half years on the assembly and noted emergency funds had come from federal relief during the COVID era.

Johnson also described that, under a hypothetical balanced-budget view (rather than the borough's forward-funding calculation), removing the budgetary reserve would produce a modest projected surplus (about $200,000) whereas leaving it in yields a larger budgetary reserve figure. The draft total general-fund revenues were presented at roughly $7.2 million and total proposed expenditures near $8.2 million, with the $1.2 million reserve accounting for most of the difference between that total and a balanced-budget scenario.

Other highlights in the presentation included a proposed addition of a part-time administrative position to support increased grant activity and project management, a 3% base wage increase and a 10% projected rise in employer-paid health premiums in the FY26 draft, and planned capital transfers to enterprise accounts. Johnson said the borough is projecting a 4% increase in certain tax revenues and cautioned that state community assistance funding is estimated to decline by about 31% from the prior year in the draft figures.

Committee members thanked staff for the presentation and asked for additional documentation and historical context on budgetary-reserve practice for the full assembly meeting.