The money local governments spend on their school districts falls in an interesting spot in the maelstrom of Alaska education funding. Under state law, municipalities are limited in how much money they can give school districts annually. It’s called a local contribution.
In Juneau, the local contribution makes up close to half of the school district’s operating budget. Municipalities can also fund specific, non-instructional services outside of the operating budget – and that doesn’t count towards the limit, or “cap.”
“We’re talking about things like extracurricular sports and activities, community schools programs, after school programs, student nutrition, student transportation and pre-K and early education programs,” Juneau School District Superintendent Frank Hauser said at a recent House Education Committee meeting.
He said districts like his stand to lose millions of dollars in local funding if a proposed regulation change from the Department of Education and Early Development, or DEED, goes through. It would further limit the money local governments can give to school districts.
Last month, Rep. Andi Story, D-Juneau, introduced House Bill 212. It would allow local funding for those non-instructional services to continue as it has – outside of the local contribution limit.
A letter from DEED says the state needs to crack down on local spending because it doesn’t want to lose access to millions of federal dollars called federal impact aid.
The state gets to put that money towards its obligation to schools. The money counts toward its contribution as long as the state can prove that it’s funding education equitably between districts. State officials are worried that the federal government may start looking more closely at the local money that goes beyond the limit when it’s deciding if things are equitable.
The federal government hasn’t done that yet, but the state’s gone after the Juneau School District over local contributions in the past.
DEED Commissioner Deena Bishop said her agency is trying to make the change before anything happens.
“The initiative to pursue regulatory clarification is solely on DEED driven by our obligation to ensure compliance with federal law and Alaska law, which includes impact aid as a critical component of the state’s school funding framework,” Bishop said.
Using federal money to reduce state spending
Alaska receives the federal aid to make up for money lost from land that can’t be taxed, like Alaska Native-owned land or military land. That’s the money the state can use toward funding districts if it’s fair by federal standards.
There’s more than $80.8 million at stake this year.
That money is what the state contributes to districts that qualify for the aid, but that’s only if it passes the disparity test.
Alaska is the only remaining state in the country that uses the disparity test. It looks at how much school districts spend per student and takes out the top and bottom 5% of districts, and then sees how big a difference in spending there is between districts. The state passes if there is less than a 25% difference in spending between the remaining districts.
Federal regulation says the disparity test uses current expenditures in the calculations. That’s money that goes toward providing free public education.
This includes “administration, instruction, attendance and health services, pupil transportation services, operation and maintenance of plant, fixed charges, and net expenditures to cover deficits for food services and student body activities.”
Right now, the limited local contributions are counted in the calculations, but not the additional non-instructional spending. Still, Hauser said during his testimony that analysis from the Alaska Council of School Administrators showed that the regulation wouldn’t make a significant difference — including those non-instructional funds is unlikely to influence the results of the disparity test.
Alaska doesn’t need to include state transportation funding in the disparity test after initially failing and then receiving an exemption in fiscal year 2022.
Creating “clear definitions” with House Bill 212
The bill that Story proposed would make it state law that local funding for non-instructional services doesn’t count when the state calculates local contributions to school districts.
Time is running out for the bill to become law this year, but lawmakers could take it up again next year. In addition to passing out of two committees and the House, it still needs to make its way through the Alaska Senate.
But Story said districts have a lot to lose if DEED approves the regulation change between sessions.
“My hope with this bill is again drawing awareness to the issues, trying to make sure we have clear definitions, obviously, hoping it moves along the process,” she said. “And I think it will be a – very much a loss to services and educational opportunities to children across the state if the regulation goes into effect.”
Hauser said in an April interview with KTOO that school districts will have difficult decisions to make if DEED’s regulation change goes through.
“Are we going to provide extracurricular activities, or are we going to have another two or three teachers in the classroom to reduce the class sizes?” Hauser said. “So those are the decisions that boards have to make. How to make up for those funds that really are for non-instructional purposes.”
An administrative order from Gov. Mike Dunleavy froze any new state regulations coming forward. But Bishop said during a Senate Education Committee meeting Wednesday the department will request an exemption with an aim to put the regulation up for public comment at the July state Board of Education meeting.
If approved, it would go into effect for fiscal year 2027 beginning next July.
