‘Slow strangulation’: Alaska school districts face fiscal cliff with high inflation and flat funding

With one-time federal coronavirus funding set to end soon, school administrators across Alaska say they are facing a “slow strangulation” of their budgets by years of flat funding, high inflation and soaring energy costs.

The Legislature has increased the state’s per-pupil funding formula by just half a percent since 2017 while Alaska’s urban consumer price index has risen by 15.4% over the same period — meaning virtually the same level of funding is worth significantly less. Additional one-time school funding has been approved this year and administrators say that will help, but they also say it is difficult to plan for the long-term without consistency and predictability in funding.

Legislators had planned to fully fund schools one year ahead of time to give some certainty to districts and to avoid the potential for pink slips going out. That was contingent on North Slope oil staying over $102 per barrel. The oil price has dropped by roughly a third since the operating budget passed in June and it has been trending at a level that would all but eliminate that forward-funding plan.

“It’s looking pretty grim,” said Scott MacManus, superintendent of the Alaska Gateway School District, which is headquartered in Tok and educates just over 400 students. MacManus referred to the end of federal coronavirus funding as a “fiscal cliff” for administrators.

He said the funding had been used to pay for special education aides and mental health counseling, a first for the district, but that would likely now have to be scaled back.

Districts across Alaska still have access to some federal COVID-19 funding, but superintendents note that it is often limited to specific purposes, like coronavirus mitigation. Also, that funding is set to expire next year, or in some cases in 2024.

In Anchorage, the school district is debating how to resolve a projected $68 million deficit, including making difficult decisions like ending programs and closing schools.

The Bering Strait School District, which teaches roughly 2,000 students across 15 remote villages and the hub community of Unalakleet in Western Alaska, used the federal funding to backfill its budget due to years of flat state funding. Superintendent Susan Nedza said the real challenge is coming during the next budget cycle when that COVID-19 funding ends.

“At this same time we are receiving less, we are being asked to do more,” she said.

[Anchorage School Board allocates almost $60 million in one-time state funding]

The Denali Borough School District, based in Healy, is looking at trying to fill a roughly 5% deficit. Superintendent Dan Polta said administrators would need to find how to cut roughly $500,000 from the next fiscal year’s budget, which typically starts getting written in October or November.

Some districts facing similar shortfalls are in the middle of contract negotiations with teachers, which could further add to costs and strain budgets, said Lisa Parady, executive director of the Alaska Council of School Administrators.

On the Kenai Peninsula, Nathan Erfurth, president of the region’s teachers union, said 20 special education aide positions are unfilled and “quite frankly unlikely to go filled.” The district, based in Soldotna, educates roughly 8,500 students across 29 communities and had 75 certificated positions funded by grants, which are set to end soon.

Erfurth, a former history teacher, said he started teaching a decade ago and watched as five teachers from his department got cut down to two, one of whom was shared with another department. Arts programs have been slashed and so has career technical education.

”I described it as a very slow strangulation of education services,” Erfurth said.

In Western Alaska, bulk fuel purchases are made in spring for the upcoming winter so fuel can be barged in before freeze-up, which meant schools districts were forced to buy fuel at peak prices. Gene Stone, superintendent of the Lower Yukon School District, said the higher energy costs would likely add $1 million to the district’s budget for transportation and heating.

The district, which is based in Mountain Village and educates around 2,000 students across 11 schools, is looking to build teacher housing in the Yukon River village of Pilot Station. Stone said 40-year-high inflation has seen cost estimates for building materials jump up by 60% to 70%.

While Anchorage is looking at closing schools, the Western Alaska school district is not looking at anything that drastic. Instead, it has already been “streamlined”: Teachers are typically generalists, instructing in more than one subject. The district doesn’t have the “luxury” to hire them to teach solely in their specialty, Stone said.

While bigger school districts are looking to eliminate funding for school nurses, counselors and dedicated physical education teachers, the Lower Yukon School District already doesn’t fund positions like that, he said.

Terri Walker, superintendent of the Northwest Arctic Borough School District, wrote to legislators earlier in the year, urging them to increase school funding. The district, headquartered in Kotzebue, teaches around 2,000 students over nine remote communities.

Walker described how the school district had already cut its prekindergarten program, reduced its school counselors, career education programs and cut activities across all grade levels to reduce costs.

“It’s hard sitting in a meeting trying to balance the budget deciding whether we are going to feed or educate our children,” Walker said.

Legislative debates

Until this year, the Base Student Allocation had stayed unchanged since 2017. The per-pupil funding formula, currently at $5,960 per student, is used to determine how much funding each of the state’s 53 school districts receives per year.

The challenge with flat funding has been inflation, going back farther than 2017. From 2011 to 2021, Alaska’s urban consumer price index rose by 17.8% but the BSA increased by only 4.4%.

And that was before inflation soared to a 40-year high this year, meaning flat funding has resulted in significantly less money available for districts to pay for fixed costs like rising insurance premiums and automatic salary increases.

The Legislature debated a bill this year that would have increased the BSA over two years, first by roughly $222 per student in the first year at a cost of $57 million, and then $55 per student in the second year at a cost of $14 million.

The measure failed to pass, and so did a separate bill that would have automatically inflation-proofed the BSA in the future, meaning the funding amount would have risen or fallen annually depending on inflation.

Conservative legislators at the time of those debates said there was not “much appetite” to permanently increase the BSA unless there could be a measurable improvement in Alaska’s poor education outcomes and test scores.

Instead, the Legislature narrowly passed the Alaska Reads Act on the final hectic day of the legislative session, which included reading intervention programs and funding to launch pre-kindergarten programs. The measure included a permanent $30 boost to the BSA — which equated to an increase of roughly 0.5% — leading some left-leaning legislators to call it an “insult” and a “joke.”

“I guess it’s better than nothing, but only just,” MacManus said.

Anchorage Democratic state Sen. Tom Begich, who is not running for reelection, was one of the leading authors of the Alaska Reads Act. He called the $30 formula funding increase “very modest,” but said it was only approved because of a last-minute closed-door agreement he had with Gov. Mike Dunleavy, who supported the reading intervention programs.

That agreement also included a pledge by the governor to not veto a separate $57 million in one-time school funding, partly to help districts with high inflation and high energy costs.

Lon Garrison, president of the Alaska Association of School Boards, said he understands that the state’s fiscal situation has been strained over the past decade, but that one-time funding has been a common tactic used by the Legislature to avoid the difficult decisions of making permanent increases for schools. He said the system is in “crisis.”

“It’ll help here and there a little bit,” he said of the one-time funding. “But we need to do better than that. We need to take a longer-term look, and try to figure out exactly how we can make this thing work, which is going to take additional funding. There’s just no way around it.”

Future funding debates

Legislators across the political spectrum agree that school funding will be a major topic of debate when the Legislature reconvenes in Juneau in January.

“No two ways about it,” said conservative North Pole Republican Rep. Mike Prax, a member of the House Education Committee. He is a supporter of voucher-style school funding and has been skeptical about the level of funding that districts currently receive, citing shrinking enrollment and the addition of programs he says are outside the core function of public schools, like early childhood education and some sports.

“We’re going to have to take a real thorough look at how we’re providing education services going forward,” Prax said.

Fairbanks closed three elementary schools and eliminated 121 positions earlier in the year, largely because the district has 2,000 fewer students but also as a way to save money. Anchorage is poised to make similar decisions.

State demographers note that Alaska’s population has been aging and Anchorage and Fairbanks’ populations have notably shrunk over the past decade, but that hasn’t been consistent statewide, with a younger population in northern and southwest Alaska and an increase in school-age kids.

[Alaska Supreme Court rules against forward funding for education, confirms limit on legislative power]

The COVID-19 pandemic saw homeschooling numbers jump and fewer students in brick-and-mortar schools. Current enrollment numbers won’t be known until November, but projections from last year suggest they will stay largely flat statewide from pre-pandemic levels.

Anchorage Democratic Rep. Harriet Drummond, co-chair of the House Education Committee, said the first priority for legislators who return to Juneau should be looking at reimplementing a defined benefits scheme for teachers and other public sector workers, “because it’s impacting every area of state employment, and local government employment and school district employment.”

In 2006, a more generous teacher retirement program ended for new employees with a multibillion-dollar unfunded liability and concerns over rising costs. The lack of a defined benefit scheme has been cited as a leading reason for continuing recruitment and retention challenges of teachers across Alaska.

Begich said it would be critical for legislative leaders, and whoever sits in the governor’s office next year, to hammer out a plan and decide that they want to move a substantial school funding policy forward together.

“If they want to make it a political game, the only people that are going to lose are the kids in Alaska,” he said. “And that’s a fact.”

Democratic former state legislator Les Gara has said that improving public education is a priority for him if he’s elected governor, as has former independent Gov. Bill Walker. When asked how Dunleavy would address the funding crunch if he’s reelected, a spokesperson for his office said the governor’s budget proposal for the next fiscal year is still being prepared, but that it “will contain funding for public safety, education and other essential public services.”

For public education advocates, the fiscal cliff approaching for school districts was seen a long time ago. Programs have been cut, and positions like mental health counselors have been eliminated or shared across schools.

“This isn’t anything new,” said Tom Klaameyer, president of the National Education Association of Alaska. “This is something we’ve been talking about for years. It’s worse now. It needs to be addressed, more than ever.”