Alaska school needs require collaboration

Over the past decade, Alaskans across the state voted for new or improved schools with the expectation that the state would pick up 60%-70% of the cost. Residents of 15 boroughs and six cities made these investments, believing the state would abide by its statutory commitment to contribute substantially to construction costs. The state did so for many years, consistent with its constitutional responsibility to “establish and maintain a system of public schools.” Unfortunately, 50% of the state’s share was vetoed for fiscal year 2020, passing that cost to local governments — and ultimately to local taxpayers.

A bill — House Bill 106 — is also being considered by the Legislature that would extend the existing five-year moratorium on new school bond debt for another five years. If it passes, an effective option for school construction and major maintenance will be taken off the table. If it doesn’t pass, there is little likelihood that program would be used, since there isn’t the trust in place that the state would fund its portion.

Local governments recognize that school bond debt reimbursement is “subject to appropriation,” but also agreed to these investments in good faith. To maintain trust in government, that commitment should not be abrogated. And we can all agree that the state shouldn’t balance its budget on the backs of local governments.

Twenty-one cities and boroughs currently have school bond debt, with payments of almost $100 million this year. Their ability to take on half of the state’s share of school bond debt is limited by a variety of factors, including local tax caps, limited tax bases, insufficient cash reserves, etc. Where taxes can be raised, local taxpayers are less likely to approve increases for bond debt than they are for new and improved schools. To complicate matters, this unanticipated cost comes at a time when other support for local governments, such as Community Assistance and capital project funding, are being reduced.

There are 1,008 school buildings in Alaska, 429 of which are older than 40 years, the average age at which schools need major maintenance or replacement. More than 75% of all schools are owned by local governments. These 757 municipally owned or maintained schools need a state partner in place that will contribute its share to school construction and major maintenance.

The need for funding for school maintenance and construction funding in FY 2021 alone is $292 million, according to six-year capital improvement plans schools are required to submit to the Department of Education and Early Development. School bond debt reimbursement has been the most cost-effective program the state has for ensuring schools are safe and structurally sound. A historic review shows that the per student cost of this program is far lower than state grant programs, because it is better able to leverage the local contribution.

Without the School Bond Debt Reimbursement Program, municipal school districts will compete with school districts in the Unorganized Borough for limited state grants, potentially displacing rural needs. Available funding for grant programs is already woefully inadequate to meet current and future demand. Historically, about 11% of grant applications are successful. From FY 2011-2019, 1,047 projects were requested through the grant program. Only 114 were funded.

Extending the moratorium will result in minimal investment into major maintenance, as districts wait another five years before addressing building needs. Deferred maintenance is already a huge challenge in Alaska; extending the moratorium compounds it and risks vastly increasing costs. Just this past year, the Department of Education redefined “major maintenance” as costs above $50,000, instead of $25,000. Instead of addressing problems early, this increases the likelihood that a low-budget fix will become a larger expense and a drain on limited state and local funds.

The Alaska Municipal League hopes to work with the Legislature to develop a realistic statewide school construction and maintenance project prioritization plan and matching program. We hope the state will partner with municipalities to incur debt at the local level where ratings and tax base permit, but recognize and accommodate the differences between local governments, including different rates of a local share. For bond projects, the state can take on debt separately from local bonding to avoid cost-shifting in the future. There are solutions to this challenge, but it will take us working together to get there.

Nils Andreassen is the executive director of the Alaska Municipal League. AML responds to the needs of Alaska’s 165 incorporated cities and boroughs and provides a range of services to its members.

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