Feds plan to withhold $17.5 million in pandemic era aid for Alaska schools due to ongoing equity dispute

The U.S. Department of Education intends to withhold $17.5 million in COVID-19 aid to Alaska schools because it asserts the state failed to adequately fund its highest-need schools during the pandemic.

Federal education officials informed the Alaska Department of Education on Friday about its decision to withhold $5.6 million of federal aid from a 2022 shortfall. An appeal must be submitted by mid-October or the withholding decision will become final, the letter said. In July, the federal government told state education officials it would withhold $11.9 million in federal assistance for a 2021 shortfall related to the same equity concerns.

For over a year, the U.S. Department of Education has said Alaska failed to meet a first-of-its-kind equity provision in the 2021 American Rescue Plan Act that provided more than $125 billion to the nation’s schools. As a result, Alaska was designated as “a high-risk grantee” in March, which risked consequences like federal school grants being denied to the state.

As a condition of receiving $359 million in federal aid in 2021, Alaska agreed not to cut state funding to its highest-need schools in excess of school reductions made statewide. The U.S. Department of Education has said that impermissible cuts were made to four of Alaska’s highest-need school districts.

For months, state education officials have consistently said that Alaska’s school funding formula remained equitable during the pandemic, and that no such cuts were made.

“Instead, Alaska continued to fund education according to its statutory per-pupil formula and there were no school districts in which per-pupil funding from the state was reduced,” Education Commissioner Deena Bishop said in a May 9 letter to federal education officials.

Missing $17.5 million

The funding said to be owed to Alaska school districts is over two fiscal years. The U.S. Department of Education has said it would withhold $17.5 million in federal aid, which equates to Alaska’s 2021 and 2022 shortfall. Kenai Peninsula School District is said to be owed more than $8 million. Anchorage schools would get just over $6.6 million, Fairbanks schools would receive almost $2.8 million, and Juneau School District would get $90,000.

Anchorage Democratic Sen. Löki Tobin, chair of the Senate Education Committee, said part of the challenge for Alaska school administrators was rapidly changing enrollment patterns during the pandemic. Many students left public schools, at least temporarily, which saw enrollment drop and some districts’ per-pupil funding reduced, she said.

Around 41 states struggled to meet the federal equity requirements for the 2021 funding. Every state but Alaska has since resolved those concerns. Alaska and one other state are still negotiating issues related to spending in 2022, the U.S. Department of Education said in its Sept. 13 letter.

“It’s immeasurably frustrating,” Tobin said about the equity dispute. “And then to again see this escalation continue, and now to the point where there’s severe consequences being applied to the state — it’s just really frustrating.”

In May, the Alaska Department of Education offered to pay $327,015 to the Fairbanks North Star Borough School District to resolve the 2022 funding dispute. But the state’s offer was not accepted.

In July, Adam Schott, principal deputy assistant secretary at the federal Office of Elementary and Secondary Education, told state education officials that they needed to submit a plan to resolve the latest $5.6 million funding shortfall by Aug. 15. The Alaska Department of Education has not submitted a plan since then, he said.

As of Friday, Schott said that Alaska still had $31.9 million available from the American Rescue Plan Act for schools.

”With less than one month remaining in the ARP Act’s fund period, the Department must now take additional steps to ensure the State’s compliance,” Schott said in his Sept. 13 letter.

Tobin said her understanding is that the federal funding must be obligated this month. She was not certain how the remaining COVID-19 funds could be used, or if they would simply reimburse school districts for money that had already been spent. Tobin noted that was $700,000 in unspent pandemic era funds for unhoused Alaska students in August.

Part of the challenge, Tobin said, has been the “lean” communication from the Alaska Department of Education. A spokesperson for the state education department did not respond to a request for comment Monday before publication from the Daily News. Neither did Schott.

Legislature funds, Dunleavy vetoes

The long-running and escalating dispute between federal and state education officials has frustrated many in the Alaska Legislature. Legislators appropriated $11.9 million in this year’s budget to resolve the 2021 shortfall. Gov. Mike Dunleavy vetoed that funding in June.

”Need for funding indeterminate at this time as underlying funding request remains unresolved,” the governor’s office said in an online statement explaining the veto in June.

Schott, in his Friday letter to Commissioner Deena Bishop, said that the U.S. Department of Education had provided “nearly two years of extensive technical assistance” to the state to help address the equity issue. The federal education department approved three separate state requests to recalculate the shortfall for Alaska’s smallest school districts, he added.

Tobin said the U.S. Department of Education’s Friday letter showed it appears to have exhausted every avenue. Alaska had gotten its shortfall recalculated three separate times, she said.

“This idea of a fourth, fifth and sixth chance is not within the purview,” she said.

In the last five months, Schott said that “intermediary steps” have been taken against the state of Alaska. State education officials were told in June that they must get federal approval before spending nearly $1 million in school grants, the Alaska Beacon reported. But the state has still remained out of compliance with the federal equity requirements, which led to the withholding of an additional $5.6 million in federal school aid on Friday, Schott said.

State education officials must now file an administrative appeal by Oct. 15, or the latest withholding action “will become final,” he said. Alaska could voluntarily “terminate” the $5.6 million in assistance, but that would not prevent the U.S. Department of Education “from taking other appropriate enforcement actions” related to pandemic-era aid, he said.