Confronting Rising Bills & Flat State Funding, Alaska Schools at a Fiscal Cliff

The problem has been developing for years, but the end of COVID financial aid has triggered a crisis

The front of Abbott Loop Elementary School in Anchorage is seen on Wednesday. The school is one of several being considered for closure in Anchorage because of a large budget gap. (Yereth Rosen/Alaska Beacon)

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This week, the Anchorage School District announced that it is considering the closure of six elementary schools amid a projected $68 million budget shortfall.

Anchorage isn’t the only district facing a major fiscal problem. At the end of the last school year, Fairbanks closed three schools. In Juneau, the school board is considering whether to fire specialists intended to help students recover reading skills lost during the COVID-19 pandemic. In rural Alaska, districts are trying to balance their books while dealing with high transportation and heating costs.

Local and statewide officials say these decisions are rooted in the same Alaska-wide problem: Most school funding is delivered by the state, and the state’s per-student funding formula has failed to keep pace with inflation.

“Everything costs more. It costs a tremendous amount to heat our buildings, provide electricity, provide transportation. Everything has gone up. Liability insurance, health care insurance have been huge drivers, and we haven’t kept up with it,” Kenai Peninsula Borough School District Superintendent Clayton Holland said.

“We are definitely having the same budget problems that others are around the state, trying to do just the same amount with deflated dollars,” said Brian Holst, a member of the Juneau school board.

Federal relief funding forestalled the need for major action during the COVID-19 pandemic, but most districts have exhausted that aid or will by next year. Meanwhile, school enrollment is less than what it was before the pandemic, exacerbating a problem created by a funding formula that pays districts per student.

“I think a lot of school districts in the state found the (federal relief) money to be basically the only thing that’s stopping the absolute bleeding of our school districts,” said Wrangell Public Schools Superintendent Bill Burr. “We’re facing a squeeze point.”

School districts have incrementally cut staff and services to keep pace with inflation, but in many cases, those cuts have reached a limit, and the issue is coming to a head as districts prepare their budgets for the next fiscal year.

“Districts are planning their budgets for fiscal year ’24, and they’re just projecting huge deficits, and school board members have to make decisions based on the future projection,” said Rep. Andi Story, D-Juneau.

“School board members have to have a balanced budget, and they have to start working on it now,” said Story, who served on the Juneau school board before joining the Legislature.

Persistent problems with funding

Even before the COVID-19 pandemic, the state was spending less than the national average per pupil, once Alaska’s cost of living is included in the calculation. (In unadjusted dollars, the state spent the sixth-most per student in 2019.)

“I hear a lot of people say Alaska spends more per pupil than any other state, and if you just look at straight dollars, it’s not true,” said Dayna Defeo, director of the Center for Alaska Education Policy Research.

“When you adjust for (cost of living), our per pupil spending is less than the national average, and we’ve been kind of falling,” she said.

This year, state legislators and Gov. Mike Dunleavy approved a sweeping education reform bill known as the Alaska Reads Act. That bill includes a small increase – half of 1% – in the amount the state pays districts per student, a figure known as the base student allocation, or BSA.

Until that adjustment, the state hadn’t changed the BSA in six years, allowing inflation to eat away at its value.

“Flat funding really is education cuts, year after year after year after year,” said Jim Anderson, chief financial officer of the Anchorage School District.

Story proposed legislation this year to increase the BSA and a separate bill to tie it to inflation. Neither bill passed the Legislature.

“Having good schools for our children is just so important to families. It’s so important to the business world. I just can’t say that enough. It’s so important to our economy,” Story said.

She said she wanted to increase the BSA by 8%, the amount of inflation between 2017 and spring 2022, but she halved that figure to 4% in order to get more support. It didn’t help.

In the Legislature, conservative Republicans said they first wanted to see improved performance from public schools before increasing spending. Alaska schools perform at or near the bottom of the nation in standardized math and reading tests.

That meant there was support for the Alaska Reads Act, which imposes new reading standards, but not for Story’s funding increase.

“Yes, that was important,” Story said of the reading bill, “but we also need to take care of these base costs for districts.”

The student-funding increase in the reading bill worked out to $30 per student.

“I was so discouraged about that,” Story said.

Enrollment woes exacerbate the problem

Alaska’s public-school enrollment peaked in the 2016-2017 school year, with 130,295 students enrolled, according to state statistics.

Since then, enrollment has declined, bottoming out in the pandemic-affected 2020-2021 school year at just over 127,000 students. Enrollment rose slightly last school year, and figures for the current year are not yet available, but administrators say the preliminary figures are mixed.

Some districts have had more severe drops than others. In Anchorage, enrollment is down by almost 10%, from almost 48,000 students in 2016 to less than 43,000 last school year.

Wrangell, a small island community in Southeast Alaska, faced the largest percentage drop in the state between anticipated and actual enrollment in fall 2020. Instead of 308 students, the district’s three schools had only 178. It’s since risen – to 257 last fall and about 263 this fall. But that’s close to 50 students that are no longer in the system.

“A 50-student drop is pretty significant, even if it’s spaced out over over three years, because they just aren’t here,” Wrangell Superintendent Burr said.

Some of the changes appear driven by demographic trends: Alaska’s population is aging, more people are moving out than moving in, and adults are having fewer children per couple.

Enrollment at correspondence schools and in homeschool programs is also down, ruling that out as a possible reason for the decline.

Laurel Shoop, a special assistant at the Alaska Department of Education and Early Development, said the state hasn’t analyzed the causes of the enrollment decline and isn’t aware of any third-party research on the issue.

The decline exacerbates school districts’ problem: Not only have per-student payments failed to keep pace with inflation, districts are getting fewer of those per-student payments because there are fewer students.

“You certainly are getting less money because you have less students, but the buying power of that less money is even smaller per student,” Anderson said of declining enrollment and lack of inflation proofing. “It’s just complicated by both of them at the same time running together and colliding.”

District effects across the state

School districts received millions in federal relief funding during the pandemic, which offset the fiscal cliff many districts are facing or will soon face. Anderson said COVID funding insulated the problem and budget holes got hidden with one-time funding.

“It makes it invisible, especially the last two and a half years with the federal funding that we used in lieu of an inflation-improve fix at state level; it really just hid that gap,” he said.

Anderson said the state has prioritized other requirements over education.
“If we had not had the federal dollars, what we’re going through this year, we would have gone through two or three years ago,” Anderson said.

Aside from using one-time state or federal funding, the district has taken other measures to manage the budget gaps, like merging programs and reducing staff. The district closed two schools in recent years – Mount Iliamna Elementary School in 2016 and Mount Spurr Elementary in 2018.

Potentially closing six additional elementary schools at the end of this school year could save the district $3 million to $4 million. The district still needs to find savings elsewhere. The school board has options to choose from, including dipping into savings and making more cuts. Staff make up 88% of the district’s budget, Anderson said.

If the state “would have inflation-proofed the BSA, the district would not be in this situation,” he said.

Karen Melin is chief school administrator for the Fairbanks North Star Borough School District, which closed three schools at the end of last school year, partly due to a tightening budget.

Melin said the district examined how they were using facilities, some decades old and not at capacity.

“We took a pretty comprehensive look at it and said, ‘Okay, this isn’t an efficient use of square footage in dollars.’ So we made that shift. And I think we’ll see more of that happening across the state,” Melin said.

Melin said pandemic relief funding bought them time but it’s not a way to fund a budget. The state had cautioned districts against using the money for operating funds, she said.
“But in reality, it was the money we had and so it was the money we had to use. So, it just kicked the can down the road. And now that the CARES funding is coming to an end, we’ve kicked the can all the way down the road to where, now, we’re out of road.”

Melin said the district has already trimmed “to lean,” made efficiencies in many areas and will look to identify more.

“There’s just no way to balance a $14 million deficit in a budget that has 86% personnel without it dipping into personnel. So how that’s going to look, I don’t know yet,” she said. “We can have a lot of really expensive staff, or more less-expensive staff, and that’s kind of the balance that we have to look at.”

The Kenai Peninsula Borough School District will likely be considering cuts when its federal funding runs out next year.

“We’re going to be facing this fiscal cliff. For us, that means that we’re really looking at the possibility of laying off or not filling 65 to 70 positions with the Kenai Peninsula Borough School District, teaching positions,” district superintendent Holland said.

Terri Walker is superintendent of the Northwest Arctic Borough School District, which has schools in 11 communities not connected by roads spread out over 39,000 square miles. The district serves about 1,900 students.

Walker said the district has made many cuts over the past several years – to positions in the district office, to programs like Career-Technical Education, and to pre-kindergarten.

“And we cut counselors so then sites had to share counselors. Some of our villages are close to each other, close meaning between 10 to 70 miles apart. The local airline here flies to a couple of the villages and then returns, and so we just had them share counselors so the counselor would spend time at one site and then spend some time at the other site,” Walker said.

Many of the cuts have been restored due to one-time federal funding or funding from NANA Regional Corporation and the borough. Funding for pre-K, CTE teachers and counselors are not coming from the district’s general fund, Walker said.

“We do need the state to step up,” she said.

The district is also dealing with rising freight costs. All the schools in the district qualify for free meals from the federal government, so the district gets fully reimbursed for the cost of the food. But it costs an additional $1.2 million to ship the food, Walker said. Right now, those freight costs are being paid with federal school emergency relief. When that funding stops, she said the district will have to pay those shipping costs.

“We’re gonna have to figure out something because we cannot not feed kids,” Walker said. “So we’re gonna have to put that money back into our general fund.”

Issue reaches the governor’s race

The school funding issue has become a major issue in this year’s governor elections. In a televised debate Wednesday night, Democratic candidate Les Gara called the situation “the worst crisis in public education in state history.”

“Education in Alaska, as far as I’m concerned, is swirling the drain,” said independent candidate Bill Walker. “That’s how bad it’s gotten.”

He said a reliable state fiscal plan would help the state “fully fund” education.

Gara has advocated automatic inflation adjustments for the base-student formula and said he is the only candidate to do so.

He and Walker criticized incumbent Dunleavy, a Republican, for not acting on the problem.

In the debate, Dunleavy responded by saying that this year’s state budget contains funding for education a year ahead of time. That money is dependent upon the price of oil staying high.

He also said that districts have benefited from federal relief money and the reading bill.

“I’d be more than happy to sit down with a number of the school districts and have a discussion as to why they are short on their budgets,” Dunleavy said. “Do they have a school district that was geared for thousands of more students? There’s a number of things we can take a look at — plenty — and money is certainly something that they’ve gotten this year.”

Republican candidate Charlie Pierce, who also participated in the debate, said he doesn’t support raising the base-student formula.

“I think it’s really more of a school board issue,” he said.

Alaska Beacon is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Alaska Beacon maintains editorial independence. Contact Editor Andrew Kitchenman for questions: info@alaskabeacon.com. Follow Alaska Beacon on Facebook and Twitter.

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