Legislature(2023 - 2024)BELTZ 105 (TSBldg)
04/24/2023 03:30 PM Senate EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| SB56 | |
| Presentation(s): School District Fund Balances | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 56 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE EDUCATION STANDING COMMITTEE
April 24, 2023
3:31 p.m.
MEMBERS PRESENT
Senator Löki Tobin, Chair
Senator Jesse Bjorkman
Senator Jesse Kiehl
Senator Elvi Gray-Jackson
MEMBERS ABSENT
Senator Gary Stevens, Vice Chair
COMMITTEE CALENDAR
SENATE BILL NO. 56
"An Act relating to the Alaska performance scholarship program."
- HEARD & HELD
PRESENTATION(S): SCHOOL DISTRICT FUND BALANCES
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 56
SHORT TITLE: AK PERFORMANCE SCHOLARSHIP; ELIGIBILITY
SPONSOR(s): SENATOR(s) DUNBAR
02/06/23 (S) READ THE FIRST TIME - REFERRALS
02/06/23 (S) EDC, FIN
04/24/23 (S) EDC AT 3:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
SENATOR FORREST DUNBAR, District J
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as the sponsor of SB 56.
ALLIANA SALANGUIT, Staff
Senator Dunbar
Alaska State Legislature
Juneau Alaska
POSITION STATEMENT: Provided a sectional analysis for SB 56.
SANA EFIRD, Executive Director
Alaska Commission on Postsecondary Education
Juneau, Alaska
POSITION STATEMENT: Testified by invitation on SB 56.
SARA PERMAN, State Government Relations Manager
University of Alaska
Anchorage, Alaska
POSITION STATEMENT: Testified by invitation on SB 56.
ANDREAU DEGRAW, Chief Operations Officer
Fairbanks North Star Borough School District
Fairbanks, Alaska
POSITION STATEMENT: Co-presented a presentation, School District
Fund Balances.
LON GARRISON, Executive Director
Association of Alaska School Boards
Juneau, Alaska
POSITION STATEMENT: Co-presented a presentation, School District
Fund Balances.
BRIDGET WEISS, Superintendent
Juneau School District
Juneau, Alaska
POSITION STATEMENT: Co-presented a presentation, School District
Fund Balances.
BILL HILL, Superintendent
Bristol Bay Borough School District
Naknek, Alaska
POSITION STATEMENT: Co-presented a presentation, School District
Fund Balances.
ANDY RATLIFF, Chief Financial Officer
Anchorage School District
Anchorage, Alaska
POSITION STATEMENT: Co-presented a presentation, School District
Fund Balances.
ANDREW LEAVITT, Director of Budget and Finance
Lower Yukon School District
Bethel, Alaska
POSITION STATEMENT: Co-presented a presentation, School District
Fund Balances.
ACTION NARRATIVE
3:31:06 PM
CHAIR LÖKI TOBIN called the Senate Education Standing Committee
meeting to order at 3:31 p.m. Present at the call to order were
Senators Kiehl, Gray-Jackson, Bjorkman, and Chair Tobin.
SB 56-AK PERFORMANCE SCHOLARSHIP; ELIGIBILITY
3:32:22 PM
CHAIR TOBIN announced the consideration of SENATE BILL NO. 56
"An Act relating to the Alaska performance scholarship program."
CHAIR TOBIN stated there is a committee substitute for SB 56.
3:32:34 PM
CHAIR TOBIN solicited a motion.
3:32:36 PM
SENATOR GRAY-JACKSON moved to adopt the committee substitute
(CS) for SB 56, work order 33-LS0350\B, as the working document.
3:32:48 PM
CHAIR TOBIN objected for purposes of discussion.
3:33:08 PM
SENATOR FORREST DUNBAR, District J, Alaska State Legislature,
Juneau, Alaska, sponsor of SB 56, stated that the House made
substantial changes to HB 31, the companion bill to SB 56.
Therefore, he would present the underlying bill and the changes
the House made that he agrees with.
SENATOR DUNBAR stated that the Alaska Performance Scholarship
has been a key tool for keeping young, talented Alaskans living
in the state. According to an analysis by the Alaska Commission
on Postsecondary Education (ACPE), APS influenced 68 percent of
eligible students to attend school in the state. Two years after
graduation, 94 percent of APS recipients stayed in Alaska,
compared to 82 percent of non-recipients. Eight years after
graduation, 70 percent of APS recipients remained in the state,
compared to 63 percent of non-recipients.
SENATOR DUNBAR said SB 56 speaks directly to the problem of
working-age population decline in Alaska. Recent years have
shown a sharp decline in eligibility uptake of the scholarship.
A study by the McDowell Group identified barriers such as
logistical difficulty in taking college entrance exams in rural
areas, a lack of awareness of the program, and delayed
notification of the award to students. SB 56 addresses these
concerns and implements recommendations from ACPE. He said the
intended outcomes of SB 56 are to have more students using APS
to attend Alaskan schools and remain living in the state. SB 56
would:
Increase the award amount to keep it up to date with
inflation.
Allow a student's GPA or the score of a college entrance
exam to qualify, instead of requiring both.
Expand eligibility to include Career and Technology
Education (CTE) courses.
Extend the time to use the scholarship from six to eight
years after graduation.
Establish an earlier eligibility notification deadline so
students have more time to choose Alaska's schools.
SENATOR DUNBAR shared an anecdotal story illustrating how
earlier notification of the award would make it possible for
students to know they had received it before accepting offers
from out-of-state colleges. He stated that APS funding would
continue to come from the Alaska Higher Education Investment
Fund, not the Undesignated General Fund (UGF). APS recipients
are required to complete a rigorous high school curriculum,
attain a certain grade point average, and receive a minimum test
score on a qualifying exam. He opined that APS offers students a
reason to excel and ensures they are prepared for postsecondary
education. Once enrolled in a higher education program, students
must continue meeting eligibility requirements, further
incentivizing them to succeed in coursework.
3:36:25 PM
ALLIANA SALANGUIT, Staff, Senator Dunbar, Alaska State
Legislature, Juneau Alaska, provided the following sectional
analysis for SB 56:
[Original punctuation provided.]
SECTIONAL ANALYSIS
SB 56: AK PERFORMANCE SCHOLARSHIP; ELIGIBILITY
Version B
Updated 4.24.2023
Section 1: Amends AS 14.43.820(a)(2) Alaska
performance scholarship program; eligibility, by
allowing a student to qualify for the Alaska
Performance Scholarship (APS) 18 months prior to
graduating from an Alaska state high school instead of
6 months.
Amends AS 14.43.820(a) to allow Career and Technical
Education (CTE) courses to count towards APS
eligibility in three ways:
• AS 14.43.820 (a)(3)(A): Replace one year of social
studies with one year of CTE coursework (within
Math & Science Track)
• AS 14.43.820 (a)(3)(B)(ii): Replace two years of
world language with two years of CTE coursework,
one year of which is sequentially more rigorous,
within a career cluster.
• AS 14.43.820 (a)(3)(C): Replace one year of social
studies with one year of CTE coursework (within
Social Studies & Language Track)
Deletes AS 14.43.820 (a)(5), removing the college
entrance exam requirement from the Alaska Performance
Scholarship. Additional language in Section 4 allows
for a GPA or a college entrance examination to qualify
instead of requiring both.
Section 2: Adds language to AS 14.43.820(g) defining
"career cluster" as a group of jobs and industries
that are related by skills or products and renumbering
the subsection accordingly.
Section 3: Adds the following new subsections to AS
14.43.820:
• AS 14.43.820 (h) requiring districts to inform
students in 9th or 10th grade about the Alaska
Performance Scholarship.
• AS 14.43.820 (i)(j)(k) requiring students be
notified of their APS eligibility progress by
December 31st of their junior year. Award
recipients must be notified of their award and
level by August 15th of each year. Any
communications with students regarding the APS must
include information about the ability to increase
the scholarship amount outlined in AS 14.43.825(g)-
(i).
• AS 14.43.820 (l)(m) establishing that an applicant
must be enrolled in any remaining course
requirements, must have a qualifying GPA, and once
graduating from high school, be enrolled in a
qualifying postsecondary institution to receive the
award. The applicant's GPA upon graduation will be
used to conclude the final award amount. The award
would be revoked if requirements were ultimately
not met.
Section 4: Amends AS 14.43.25(a) by increasing all
award levels and allowing for a GPA or minimum score
on a college entrance examination to qualify. The
qualifying GPA or minimum score and new award level
are as follows:
• Level 1: 3.5 GPA or above or a very high minimum
score, $7,000 (increased from $4,755)
• Level 2: 3.0 GPA or above or a high minimum score,
$5,250 (increased from $3,566)
• Level 3: 2.5 GPA or above or a moderately high
score, $3,500 (increased from $2,378)
Section 5: Amends AS 14.43.25(b) by increasing the
number of years a student can use the scholarship
after graduating high school from six to eight years.
Section 6: Adds a new subsection to AS 14.43.825
requiring postsecondary institutions to review award
recipients' grade point averages each time they
complete two semesters. If a recipient's postsecondary
institution grade point average qualifies for a higher
level award as outlined in AS 14.43.25(a), their award
amount will be adjusted accordingly
3:41:16 PM
CHAIR TOBIN asked whether any schools in Alaska do not use grade
point average (GPA) to measure student achievement.
SENATOR DUNBAR responded that he was unsure and suggested that
someone from the Alaska Commission on Postsecondary Education or
the University of Alaska System might answer the question.
CHAIR TOBIN said Section 6 might need flexibility to provide for
schools that may use a different grading scale.
3:41:57 PM
CHAIR TOBIN removed her objection; finding no further objection
the CS for SB 56, work order 33-LS0350\B, was adopted.
CHAIR TOBIN announced the committee would hear invited
testimony.
3:42:37 PM
SANA EFIRD, Executive Director, Alaska Commission on
Postsecondary Education, Juneau, Alaska, expressed her belief
that certain homeschool programs in Alaska may not employ GPA
tracking for student achievement. Nevertheless, the department
has established a method to convert homeschool students'
achievements into a format that complies with APS regulations
when a GPA is not available.
MS. EFIRD said the mission of ACPE is to provide access and
success for Alaskan students and adults in their postsecondary
endeavors. APS plays a significant role in providing students
with financial access to post-secondary programs. In 2011, the
legislature enacted APS. Since its inception, almost 12,000
students have received $100 million in scholarships. The
legislature enacted the program to inspire and prepare high
school students for success. The four primary objectives of APS
when enacted were:
Incentivize Alaskan students to excel in high school.
Prepare Alaskan students for college and career training.
Help Alaskan students succeed and complete postsecondary
programs.
Keep high achieving Alaskan graduates in Alaska's
workforce.
MS. EFIRD said ACPE, by statute, must provide the legislature
with an outcomes report. The report for 2022 contains a summary
showing APS is delivering on its objectives and goals:
The APS offers an incentive for Alaska students to excel in
high school. Over 70 percent of students that take the APS
curriculum and meet eligibility receive better grades, 60
percent take challenging courses, and 57 percent seek
academic advising, a key factor for success in post-
secondary education.
The APS curriculum prepares students for college and career
training. Only 5 percent of APS recipients require
developmental coursework as they enter postsecondary
education programs, compared to over 30 percent of non-
recipients.
The APS helps students persist and complete college. APS
students succeed at higher rates than non-recipients at the
University of Alaska.
The APS retains skilled Alaskans in Alaska. APS recipients
have higher Alaska residency rates than non-residency
rates, and after several years, they continue to remain in
Alaska at higher rates.
3:47:45 PM
MS. EFIRD stated that through surveys and data ACPE could show
that APS delivers on its objectives. However, there has been a
decline in usage of APS since 2016. Therefore, in 2020 ACPE
commissioned McKinely Research Group (formerly known as
McDowell) to perform an evaluation and review of the scholarship
program. The ten-year lookback made several recommendations to
improve the usage of the program. At 17 percent, the Class of
2022 has the lowest number of students eligible for the award
and use of the award. Therefore, ACPE has been working with
legislators to enact recommendations made in the review report
to expand eligibility to a wider range of students. SB 56
includes recommendations from the McKinley report to open APS to
more students.
3:50:32 PM
SARA PERMAN, State Government Relations Manager, University of
Alaska System, Anchorage, Alaska, said the university supports
the Alaska Performance Scholarship created in 2011 with the
intention of combating "brain drain," from the state. The Alaska
Commission on Postsecondary Education implemented the
scholarship program and Alaska experienced an increase in the
number of students that utilized the scholarship, went to
postsecondary education schools in Alaska, and joined Alaska's
workforce. Approximately 80 percent of University of Alaska
graduates join Alaska's workforce. While the University approves
of all measures in SB 56, it is particularly supportive of
earlier award notice, as it allows students to know of the award
before their senior year begins, giving them time to assess the
offer against other offers. It also supports the removal of the
standardized testing requirement that disproportionately affects
students from rural Alaska. In 2021 when schools temporarily
lifted the requirement, eligibility increased from 23 percent in
2019 to 37 percent in 2021. The university also favors allowing
career and technology credit use of the scholarship, which
expands eligibility. Adjusting the award amount to account for
inflation also makes postsecondary education more accessible for
students.
3:53:50 PM
CHAIR TOBIN held SB 56 in committee.
^PRESENTATION(S): SCHOOL DISTRICT FUND BALANCES
PRESENTATION(S): SCHOOL DISTRICT FUND BALANCES
3:54:03 PM
CHAIR TOBIN announced the consideration of presentations from
School Districts across Alaska on School District Fund Balances.
3:54:58 PM
ANDREAU DEGRAW, Chief Operations Officer, Fairbanks North Star
Borough School District, Fairbanks, Alaska, acknowledged that
schools in Alaska are facing difficult budget situations. Each
faces challenging circumstances with no easy answers.
3:55:44 PM
MR. DEGRAW turned to slide 2 and stated he would speak to the
April 17, 2023, DEED Fund Balance Report and the Fairbanks
School District financial position and outlook.
3:56:14 PM
MR. DEGRAW turned to slide 3 and stated, "Fund balance is to
school districts as the Constitutional Budget Reserve CBR is to
the state. The CBR plays a crucial role in the state's budget
process. He explained that accessing CBR funds was challenging
for the state, as it should be.
MR. DEGRAW said the CBR ensures the state's financial stability
in tough times and helps manage unexpected situations and
financial crises. Similarly, school districts in Alaska rely on
healthy fund balances, especially during the challenges posed by
the Covid pandemic in recent years. He stated he is not
advocating for change to how the state or districts hold fund
balances, but said balances are often viewed negatively. The
state views the balance fund as a pot of money that school
districts should tap into regularly to fund ongoing school
district operations. He countered that school districts need the
fund to confront financial challenges when they arise. He noted
that the state can increase revenue, school districts cannot.
Fairbanks depends solely on outside sources for revenue.
3:57:34 PM
MR. DEGRAW turned to slide 4 and expressed his appreciation for
DEED but said he would like to present a counter narrative to
the DEED Fund Balance Report. He opined that some of the
information in the report is accurate, some needs explaining,
and some is inaccurate.
3:58:47 PM
MR. DEGRAW turned to slide 5 and said audited financial
statements are available to confirm the information he provides.
The operating fund's unreserved balance for the Fairbanks North
Star Borough School District (FNSBSD) is $0. He said the dollars
that appear in the audit are either restricted or identified to
a future point in time. He said non-spendable monies refer to
inventories, and restricted monies are home school students
allotted. He mentioned that a few areas received impact aid
dollars. As of June 30, 2022, the date of the report, those
dollars are for a future point in time. He reiterated that while
the operating fund's unreserved balance has money, the amount
that school district could spend on the FY 2024 budget is $0.
4:00:13 PM
MR. DEGRAW turned to slide 6 and said the DEED report shows $4.7
million dollars for pupil transportation. He stated it is
bewildering to him that the amount includes $1 million (22
percent) of funds officially restricted, by the State of Alaska,
to transportation purposes. Technically, $3.7 million of the
pupil transportation funds are available to the school district.
4:00:41 PM
MR. DEGRAW turned to slide 7 and said school transportation
funding has not been adjusted for eight consecutive years. He
explained that the blue line represents the budgeted full-
service transportation costs, and the orange bar represents
state transportation grant revenue. At full service, FNSBSD
would run a $3.5 million deficit. Historically, FNSBSD often
covered student transportation costs with funds from its general
budget. He explained that during the pandemic, FNSBSD did not
need to subsidize transportation from the general fund due to
school closures and a nationwide driver shortage. He estimated
that within two-years of returning to full service, the district
would exhaust the fund and cuts to service would occur. If the
district depletes the fund now and transportation services are
reinstated, the district will need to reduce transportation
services next year.
4:01:59 PM
MR. DEGRAW turned to slide 8 and said there is about $2.3
million in capital construction. Most of the funds are in
cooperation with Fairbanks North Star Borough for roofing
projects. One was completed, and the other is ongoing. A smaller
portion of the amount is federal impact aid specifically
identified for construction. In theory, the district could move
from this category to the general fund, but it would take a
significant amount of time and effort to undo the memorandum of
understanding (MOU) with the Fairbanks Borough.
4:02:54 PM
MR. DEGRAW moved to slide 9 and discussed a category in DEED's
report titled Other Governmental Funds. In the column for
Fairbanks, DEED lists the fund's amount as $13,030,039. However,
the total value of all remaining funds based on FNSBSD audited
financial report was $10,670,181, resulting in a discrepancy of
$2,389,858.
4:03:32 PM
MR. DEGRAW turned to slide 10 and said there are four main funds
in the Other Governmental Funds category of the report. He
explained the value and purpose of the funding:
Nutrition Services $2.4 million government restricted for
FNSBSD nutrition services operations.
Student Activities $1.6 million funds raised by students
and community for specific sports and activities.
Insurance $3.7 million - FNSBSD is self-insured and pays
ongoing health, property, and casualty liability claims.
Approximately $35 40 million is ran through the fund
annually.
Student/Staff Devices $2.9 million FNSBSD operates a one-
to-one student device program. Teacher and student devices
are replaced on a four-year cycle.
4:06:08 PM
MR. DEGRAW turned to slide 11 and noted that the DEED report
shows FNSBSD with a Covid Federal Relief Grant balance of
$16,128,905 as of April 15, 2023. He stated that FNSBSD is
unable to reconcile DEED's amount. According to its state-
approved grant report, as of December 31, 2022, the available
amount was $14,023,107, resulting in an unidentified difference
of $2,105,798.
4:06:47 PM
MR. DEGRAW turned to slide 12 and expressed that the intent of
the report is to provide school districts with the information
they need about their budget amount for FY 2024. He mentioned
that Fairbanks had received approximately $33 million in total
funds and, by the end of FY 2023, would have about $4.9 million
earmarked for FY 2024, which has already been budgeted.
4:07:33 PM
MR. DEGRAW skipped to slide 14 and stated that school districts
and boards across the state are facing difficult decisions. Over
the last 3-4 years, FNSBSD has cut 180 positions, closed three
schools, and in 2024, hopes to limit high school class sizes to
32 students but will likely have classes of 35-40 students."
4:08:32 PM
MR. DEGRAW turned to slide 15 and said the starting deficit for
FY 2024 is $17 million.
4:08:47 PM
MR. DEGRAW turned to slide 16 and expressed his appreciation for
Chair Tobin's efforts to provide relief to school districts. On
behalf of FNSBSD, he officially requests a permanent statutory
increase to the base student allocation of $1,000 to help
restore the FY 2024 cuts, address the unfunded mandates of the
READS Act, and potentially restore previous cuts made in FY 2023
4:09:48 PM
SENATOR BJORKMAN asked whether the Fairbanks North Star Borough
School District (FNSBSD) provides its school board with
quarterly financial reports that explain expenditures, balances,
and money transfers.
4:10:17 PM
MR. DEGRAW responded that FNSBSD provides monthly financial
updates to the school.
SENATOR BJORKMAN asked if it is possible for DEED to assess the
real-time financial data of FNSBSD in relation to previous year
financials and approved budget.
4:10:55 PM
MR. DEGRAW responded that it would be possible for DEED, but
conducting such an assessment would be time-consuming. He
mentioned that he could not speak to DEED's availability. While
he acknowledged that the information in DEED's report was
technically correct, he highlighted two main issues. First, DEED
identified $36 million as available funds, but in reality,
Fairbanks would not have $36 million available in FY 2024
because the majority of the money is restricted. The second
issue was related to timing, especially concerning Covid
dollars. Many school districts submit financial statements on a
quarterly basis. School districts spend funds in advance and the
state reimburses them later. Numbers are outdated by the time
they appear in the system. FNSBSD's accounting office projects
that $5 million in Covid dollars will remain at the start of FY
2024, whereas the report indicates $16 million. He stated his
belief that this accounting time lag is a common issue for most
school districts in Alaska.
4:13:18 PM
SENATOR BJORKMAN stated that he appreciates knowing that school
districts provide monthly financial reports to school boards and
the public.
4:13:38 PM
SENATOR KIEHL asked if the online grant management system (GMS)
provides up to date information on Covid funding and spending.
4:14:06 PM
MR. DEGRAW replied that the numbers in the GMS are not up to
date because school districts request reimbursement either
monthly or quarterly. For instance, Fairbanks spends $1-1.5
million monthly, but its reimbursement request to the state is
on a quarterly basis. Therefore, as of April 24, 2023, FNSBSD's
had not yet requested expenditures from January 1 to March 31.
The most recent entry in the GMS for Fairbanks is from December
31, rendering the GMS system inaccurate by several million
dollars.
4:15:42 PM
SENATOR BJORKMAN inquired about how much additional money FNSBSD
needed to cover its FY 2024 budget.
4:16:01 PM
MR. DEGRAW responded that he predicts FNSBSD will have a deficit
of $5 - $10 million depending on how various factors, such as
local contribution, shake out. Ultimately, what the state
decides will impact the decision of boroughs.
4:17:56 PM
LON GARRISON, Executive Director, Association of Alaska School
Boards, Juneau, Alaska, addressed the committee, speaking from
the perspective of school boards and their governance
obligations regarding financial oversight and budget spending
approval. He referred to a claim made by the administration last
week, asserting that Alaska school districts had adequate fund
balances and unspent Covid funds that could be used instead of
increasing the BSA. Mr. Garrison emphasized that this claim was
untrue.
Local school boards operate under board policies that implement
state and federal laws and regulations related to public school
system operation. Model policies, provided by the Association of
Alaska School Boards, are adopted or modified by most districts
in the state.
4:19:12 PM
MR. GARRISON cited several relevant model policies specifically:
• Board Policy 3000, which discusses board responsibilities
vs. administration.
• Board policy 3100, which addresses budget requirements and
the need for a balanced budget. (Enables the implementation
of AS.14.17.900)
• Board Policy 3300, covering expenditures and expending
authority.
• Board Policy 3400, which deals with the management of
district assets and compliance with state reporting
guidelines and financial audits. (Complies with 4 AAC
06.120 and AS.14.14.050)
• Board Policy 3460, regarding periodic financial reports to
keep school boards informed about the district's financial
condition.
• Board Policy 3470, emphasizing fund balance classification
and the importance of understanding whether funds are
reserved, dedicated, or assigned. These distinctions are
crucial, especially concerning specific federal funds,
state funding, and private foundation grants.
4:21:45 PM
MR. GARRISON highlighted that maintaining an unreserved fund
balance was essential to ensure cash flow and align with best
practices. The Government Finance Officers Association
recommends holding a minimum of two months' operating funds in
reserve, and AS 14.17.505 stipulates that districts may not
maintain an unreserved fund balance greater than 10 percent of
their general fund budget (waived until FY 2025).
MR. GARRISON emphasized that most school districts in Alaska
accepted federal grant programs and Covid relief funds, using
them to counteract the pandemic's adverse effects on learning
and student welfare. He said school boards had to accept legal
authority and responsibility for grant use and reporting.
Although the funds may have appeared as revenue, they were
reimbursable grants. Districts had to expend effort, document
expenses, and then apply for reimbursement. This was another
critically important role in maintaining a healthy fund balance.
4:23:15 PM
He noted that one of the caveats of accepting Covid relief funds
was that each state would not supplant its support of education
funding. The funds were solely intended to alleviate the effects
of the pandemic on student learning and safety. He opined that
it is improper for the administration to suggest that districts
use unspent Covid relief funds to support the state's
constitutional requirement to maintain its public education
system.
MR. GARRISON concluded by urging the legislature to focus on
adequately funding Alaska's schools rather than being distracted
by the administration's suggestions regarding unspent funds. He
mentioned that school district budget reports are available to
the public and SB 52 could address current education funding
challenges.
4:23:46 PM
MR. GARRISON asked why districts were laying off staff, reducing
programs, increasing class sizes, closing schools, and facing
difficulties in negotiations with bargaining units in response
to the argument if they had substantial reserves. He stressed
that school boards would spend the necessary funds to support
staff, reduce class sizes, and maintain programs if they had
vast reserves. He expressed his belief that suggesting districts
were sitting on unspent millions of dollars was disingenuous.
MR. GARRISON closed by highlighting the need for the legislature
to work toward sufficiently funding Alaska's schools to provide
every student with an excellent education. In the current
funding environment, boards had to budget based on what they
thought they could obtain, leading to budgeting driven by
available funds and minimal operational effort rather than
outcome-driven decisions.
4:26:16 PM
BRIDGET WEISS, Superintendent, Juneau School District, Juneau,
Alaska, stated that she was testifying in support of an increase
to the base student allocation (BSA). She also aimed to provide
specific information about fund balances and Covid funding.
4:23:50 PM
MS. WEISS turned to slide 2 and explained that Juneau School
District (JSD) policy mandates a 1.5 percent unassigned fund
balance. The majority of the Juneau School District Board is
required to vote on any reduction to the undesignated fund
balance. In recent years, board members have chosen to lower the
balance to ensure adequate budgeting for the school year.
4:27:47 PM
MS. WEISS turned to slide 3 and explained that each year when
JSD creates a budget, it anticipates the fund balance because
the budget is prepared before June 30. In March of FY 2020, JSD
projected a $574,400 fund balance. However, the unassigned fund
balance at the end of FY 2020 was -$30,603. In FY 2021, the
school board voted to reduce the fund balance to assist with
Covid planning, resulting in a fund balance of $213,700. The
fund balance at the end of FY 2021 was $0. In FY 2022, the board
determined that the needs were so significant that it voted to
use the entire projected fund balance in the FY 2022 budget,
leading to a deficit of $1,806,204 at the end of FY 2022. In FY
2023, JSD retained $272,335 in the balance fund.
4:30:15 PM
MS. WEISS turned to slide 4 and explained that transportation
costs were a significant reason for the budget shortfall. The
chart illustrates that transportation had received the same
level of funding since 2015. Consequently, when Covid occurred,
revenue did not cover expenses. JSD was under a committed
contract and used buses and drivers to deliver food to families.
As a result, the 2020-2021 school year ended with a
transportation deficit of $374,939. Over the next two years,
operating costs continued to rise, while transportation funding
remained stagnant, leading to a transportation deficit of
$800,853 at the start of the 2022-2023 school year. She
mentioned that JSD sought assistance from the Juneau Assembly.
She also noted that in previous fiscal years, other assigned
funds had residual balances that masked JSD's deficit. However,
in FY 2022, the debt was no longer concealed by the balances of
these other funds. JSD's audit from June 2022 revealed a total
deficit of $63,000.
4:32:57 PM
MS. WEISS moved to slide 5 and provided property liability
insurance as an example of rising line-item costs:
[Original punctuation provided.]
Property liability insurance:
FY20: $256,200
FY21: $315,500
FY22: $445,000
FY23: $1,237,500
FY24: $1,291,700
MS. WEISS said JSD collaborates with the borough to minimize
insurance costs. She stated that increases in costs for the
school district are staggering, especially when a budget does
not carry a surplus.
4:33:51 PM
MS. WEISS turned to slide 6 and spoke about the following points
on Covid funding:
[Original punctuation provided.]
COVID Fund Quarterly reimbursements are due April 30
and July 31.
JSD is currently budgeted at $1,600,000 to remain and
fully expended in FY24. (not $3,331,997)
4:34:50 PM
MS. WEISS turned to slide 7 and spoke about Juneau School
Board's decision process when making a budget for FY 2024:
[Original punctuation provided.]
FY24 Landscape
? JSD Board budgeted on a $430 BSA increase from $5930
? $3.3 million dollars to be removed from JSD budget if
there is no increase to BSA beyond $30.
? With the $430 BSA assumption, JSD built the budget by
removing two special education positions and $235,000
of classified support at the elementary level.
4:36:51 PM
SENATOR KIEHL sought clarification about the $1.7 million
difference between DEED's determination of a $3.3 million FY
2024 Covid balance and JSD's determination of $1.6 million. He
asked if draws in April and July would account for the $1.7
million difference.
4:37:36 PM
MS. WEISS replied that following the final FY 2023
reimbursements in April and July, JSD's residual balance would
be $1.6 million at the beginning of FY 2024.
4:38:04 PM
SENATOR KIEHL asked whether JSD anticipates the April and July
draws equaling $1.7 million.
4:38:24 PM
MS. WEISS replied yes.
4:38:33 PM
SENATOR BJORKMAN asked for the annual total of JSD's general
fund budget so he could have perspective on JSD's ongoing
deficits.
4:38:48 PM
MS. WEISS replied that JSD's operating budget is approximately
$77 million. Including grants and Covid funding, the total
amount is approximately $90 million.
4:39:52 PM
BILL HILL, Superintendent, Bristol Bay Borough School District,
Naknek, Alaska, expressed gratitude for the opportunity to
testify in support of a substantial increase in the BSA and to
offer clarification on some fund balance-related inquiries.
He stated that in general, funding balances experienced growth
during the Covid pandemic. However, the increased spending
following the pandemic, driven by inflationary costs and
addressing learning loss, has adversely impacted fund balances.
By the end of FY 2024, BBBSD anticipates having a minimal
general fund balance of approximately $74,000, and it has yet to
define all the costs associated with the READS Act. He opined
that this approach to managing district finances is suboptimal.
Districts budgets should always maintain room for emergencies
and unexpected expenditures.
4:41:02 PM
MR. HILL said that BBBSD's fund balance for pupil transportation
increased during Covid but is now decreasing. The school
district is in negotiations with its contracted bus provider due
to increased operational costs resulting from inflation and the
challenges of hiring local staff. The contractor had to fly a
bus driver into Bristol Bay, offering a salary of $70,000 a year
to maintain the service. He opined that unforeseen changes are
precisely why school districts need a fund balance.
4:41:38 PM
MR. HILL stated BBBSD school district has pressing capital
project needs, such as new cafeteria tables, which they removed
from the project to prioritize the building envelope and
energy infrastructure. Capital funds consistently assist BBBSD
in addressing project needs.
He said BBBSD projected its food service fund would not have a
fund balance at the end of FY 23, necessitating a transfer from
its general fund. He noted that Lincoln School District in
Pennsylvania is considering discontinuing its food service
program due to inadequate funding and severe financial
difficulties.
As of the end of 2022, BBBSD's student activities fund had a
balance of $206,000. The community sourced this funding through
fundraising and money is dedicated to student activities, not
for district operations. BBBSD receives some reimbursable
federal funds that are expended on an annual basis.
MR. HILL said BBBSD allocated its Covid funding for its stated
purposes: addressing direct pandemic-related costs and
supporting learning loss. The funds were not used to replace
expenses within the district's regular budget, as it would be
fiscally irresponsible. He said the district intends to fully
expend all Covid funds by the end of FY 2023.
4:43:30 PM
He stated his belief that BBBSD is in relatively good shape
compared to many districts in Alaska because of substantial
support from the Bristol Bay Borough, which funds the school
district to the statutory limit. He stated rhetoric surrounding
fund balances, timeliness of access to district information and
allegations of hiding information were unfounded. He asserted
that processes like requests for proposals (RFPs), contract
development, invoicing, billing, and payment receipts are time
consuming. To provide actionable information, it is essential
for districts to ensure that budgeting, adjustments to the
budget, and addressing emergency or unexpected findings are
complete before reporting to the state. He noted that grant
reporting is a quarterly task that demands time from both the
district and DEED, emphasizing that it is not a quick or
straightforward process.
4:44:32 PM
He stated BBBSD has pursued and managed several grants with
strict spending requirements. Among these, the preschool program
was noted as one of the most significant, supported through
state and Arts and Education (A&E) grants exclusively allocated
to pre-K. These grants were ineligible for offsetting K-12
expenses. He stressed the pressing need for a substantial and
sustained increase in the BSA to stabilize education and secure
the necessary resources for a quality education. He pointed out
that deficits in education spending had persisted for years,
affecting programs and staffing, even though the deficits were
not evident on BBBSD balance sheet.
4:45:09 PM
MR. HILL stated BBBSD does not have art, music, and physical
education instructors. It has combined elementary classrooms,
downsized secondary staff, and made it necessary for secondary
staff to serve students in grades 7 - 12. It has also made
efficiencies in operations and maintenance, established
partnerships, and consolidated grants to maximize resources for
its students. He opined that Alaska's education system would
soon face real deficits to core programs. He urged the committee
to support a significant increase in the BSA and incorporate it
into the funding formula. He asked that the committee not
believe rhetoric that paints a picture of districts flush with
cash and concluded that legislative support is essential for the
well-being of Alaska's students.
4:46:18 PM
ANDY RATLIFF, Chief Financial Officer of the Anchorage School
District in Anchorage, Alaska, noted that while all Alaska
school districts were funded through the same formula, their
financial balances differ significantly. He referenced DEED's
April 18, 2023, School Districts Fund Balances report and
expressed his desire to discuss the fund balances by category,
as the total balance for Anchorage was reported as $351 million.
He explained that the unreserved ending fund balance of $71.7
million consisted of two categories. One portion, $25.7 million,
was earmarked to preserve the Municipality of Anchorage's bond
rating, equivalent to 10 percent of tax withholdings. This
measure was taken to secure better interest rates on bonds and
save taxpayers money. The remaining $45.7 million was
undesignated, representing less than one month of general fund
expenditures for Anchorage.
MR. HILL said the transportation fund of $3.1 million was
dedicated to the transportation program. Approximately $2.5
million was allocated to bolster the budget for FY 2024. The
state used to fund 100 percent of transportation, but now it
only covers about 73 percent. Anchorage finances the remaining
27 percent through general fund contributions, local tax levies,
and fund balances. An increase in drivers' wages necessitated an
addition to the transportation fund.
The capital projects fund had $16 million remaining, which had
been generated through voter-approved bonds and could not be
redirected to other instructional uses. The other governmental
funds balance totaled $167.7 million. It comprised a $90.5
million debt service fund, $4.1 million in local truck tax
collections restricted for debt payment, and $86.4 million in
school bond debt reimbursement payments from 2017 to 2021, which
the state repaid to ASD. The school board approved the transfer
of these funds to the capital projects fund. The funds are
dedicated to health and safety projects and security vestibules
at elementary schools. Forty million dollars remain as "project
not identified." He noted that Anchorage has a unique setup
where the state pays the funds to the school district, unlike
other areas where the municipality receives the funds.
4:49:35 PM
Mr. RATLIFF explained that $9.1 million was federally restricted
for food service and could not be transferred. The student
activities fund held $5.8 million generated from fundraising,
and it was deemed unjustifiable to transfer this amount to the
general fund. Additionally, there was $62.2 million in the other
general fund, which exceeded the 10 percent cap. Within this
category, ASD had reserved $11.3 million for federal impact aid,
$18 million for self-insurance, and worker's compensation
claims. These reserves were necessary to cover potential claims
if ASD were to discontinue being self-insured. Another $28.6
million was encumbered for ongoing projects, with $17.9 million
reserved for charter school encumbrances, and the remainder
allocated for ASD encumbrances. Additionally, ASD had fund
balance reservations for prepaid items and inventory, amounting
to $2.8 million and $1.4 million, respectively. In summary,
excluding Covid-related funds, ASD had approximately $46 million
in truly undesignated funds.
4:51:42 PM
Mr. RATLIFF explained that, according to DEED's report, ASD had
$92.7 million in remaining federal Covid relief funds. However,
ASD had not yet submitted third and fourth-quarter expenditures.
He mentioned that fourth-quarter expenditures would likely be
higher due to the structure of teacher contracts, where teachers
receive twelve equal payments from September to June and two
additional payments in May. ASD anticipated that about $20
million would be retained in Covid funds, which had been
budgeted for class size retention. He also noted that ASD had
increased class sizes by one as part of its budget-balancing
measures, which amounted to a $7.4 million line item.
4:52:38 PM
MR. RATLIFF said ASD needs to carry a fund balance for cash
flow. Fund balance translates to cash on hand to pay bills.
Covid relief funding must be spent before it is received so cash
on hand is needed for spending. The timing of property tax is
another reason ASD should have a fund balance. A third reason is
emergencies. In 2018 Anchorage experienced an earthquake and in
2020 a school fire. Having a fund balance allowed the school
board to allocate funds for repairs immediately so students
could return to school. A fourth reason is unanticipated
enrollment losses.
4:54:30 PM
MR. RATLIFF said that by the end of FY 2022, ASD had over $72
million in undesignated fund balance, with $26 million reserved
for its bond rating. ASD also received $16.2 million in one-time
funding out of the $57 million allocated for FY 2023. The school
board decided to save this money to boost ASD's fund balance.
However, the absence of a consistent BSA increase led to a
decision to defer spending it. He said the real challenge for
ASD is projected for FY 2025. The next year was planned with a
balanced budget that included a $45 million in fund balance
reduction. Together with $20 million in remaining Covid relief
funds and programmatic changes, including an increase in the
pupil-teacher ratio (PTR), ASD expected to have approximately
$21 million in undesignated fund balance by the end of FY 2024,
which equates to one to two weeks of expenditures.
MR. RATLIFF said ASD could navigate through FY 2024, but
stressed the urgency of securing a BSA increase, especially for
other districts without significant fund balances. He noted that
timing was crucial, as ASD passes its budget early but doesn't
know actual funding until May or June. This uncertainty causes
disruptions for teachers and staff positions, potentially
leading to retention issues. If ASD received a BSA increase, its
$45 million fund balance could address urgent capital needs,
including a $900 million backlog in maintenance.
4:57:16 PM
SENATOR GRAY-JACKSON inquired about the number of bonds
authorized but not sold by ASD.
4:57:45 PM
MR. RATLIFF replied he would provide the information to the
committee.
4:57:56 PM
CHAIR TOBIN stated that the superintendent of the Lower Yukon
School District received an email that provided illuminative
information.
4:58:13 PM
ANDREW LEAVITT, Director, Budget and Finance, Lower Yukon School
District, Bethel, Alaska, said the Lower Yukon School District
(LYSD) operates 10 schools, including a 4th 8th grade charter
school, a Yupik immersion school serving grades K 3 in Hooper
Bay, and the Kusilvak Career Academy in Anchorage. LYSD is a
Regional Education Attendance Area (REAA) and, as such, does not
possess taxing or auditing authority, relying entirely on state
and federal aid for funding.
He stated that for FY 2017, the Base Student Allocation (BSA)
was set at $5,930, and this amount has remained unchanged for
seven years. While the BSA has remained flat, the district's
costs have continued to rise annually. To illustrate these cost
increases, he provided expenditure comparisons:
• In FY 2017, LYSD's electricity bill for the year amounted
to $1.6 million. By FY 2023, this cost had risen to $2.1
million.
• Heating oil expenses in FY 2017 were $1.1 million, but grew
to $2.45 million by FY 2023.
• Property insurance costs increased from $484,000 in FY 2017
to $872,000.
• General liability insurance expenses also saw a significant
rise, going from $165,000 to $511,000.
• The food subsidy budget increased from $980,000 to
approximately $1.5 million.
• The general fund teacher headcount was 150 in FY 2017 and
decreased to 137 in FY 2023.
• Student enrollment stood at 1,993 in FY 2017 but declined
to 1,920 by FY 2023.
MR. LEAVITT said these figures reflect the financial challenges
LYSD faces with flat funding in the face of rising operational
costs over the years.
5:00:05 PM
MR. LEAVITT pointed out that due to increasing costs and
stagnant revenue, the only viable approach for LYSD to balance
its budget was through reductions in positions. He expressed
concerns about the Legislature's reliance on one-time funding to
bridge the funding gap, emphasizing that this method lacks
stability and creates uncertainty when planning for the upcoming
year.
He highlighted that school districts typically initiate teacher
contract issuance in March across the country. However, in
Alaska, the unpredictable nature of one-time funding approvals,
which often come as late as June, puts Alaska schools at a
significant disadvantage. This delay in funding decisions
negatively impacts the recruitment and retention of highly
qualified teachers.
5:00:29 PM
MR. LEAVITT suggested that increasing the base student
allocation (BSA) and moving away from one-time funding would
greatly benefit all school districts in the state by providing
more financial predictability and facilitating better budget
planning. He discussed the financial challenges the Lower Yukon
School District (LYSD) faces due to its unique status as a
Regional Education Attendance Area (REAA). He stated that unlike
borough school districts, LYSD could not tax or bond and must
cover major facilities expenses upfront. It then must request
state reimbursement through the annual construction application.
Not all requests are funded, and reimbursement often takes
years, which makes it difficult to proactively address issues as
the fund balance diminishes. He shared details of fuel tank
replacement projects, their impact on the fund balance and the
dangers of not having funds to complete them.
5:01:35 PM
MR. LEAVITT mentioned that LYSD had received federal Covid
funding but clarified that it could not alleviate rising general
fund costs, as Covid money was meant for specific purposes and
could not be used for salaries, utilities, or insurance. LYSD
had an unspent Covid funding balance of $12,632,000 (ESSER II
and ESSER III), primarily allocated to a construction project
aimed at upgrading school air handlers for better indoor air
quality.
He highlighted the seven-year stagnation of the base student
allocation (BSA) and the Legislature's imposition of new
mandates without additional funding. He explained how LYSD's
efforts to implement the Alaska READS Act required a $600,000
curriculum purchase, further straining the general fund.
MR. LEAVITT respectfully requested the advancement of SB 52,
which would help school districts maintain teacher headcounts,
address rising general fund costs, and enhance the budgeting
process by moving away from the unpredictable one-time funding
allocation approach.
5:03:08 PM
CHAIR TOBIN thanked the presenters for explaining the
complexities surrounding school fund balances.
5:04:17 PM
There being no further business to come before the committee,
Chair Tobin adjourned the Senate Education Standing Committee
meeting at 5:04 p.m.