Legislature(2025 - 2026)BELTZ 105 (TSBldg)
04/28/2025 03:30 PM Senate EDUCATION
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| Audio | Topic |
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| Start | |
| Presentation(s): an Overview of School District Fund Balances | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
SENATE EDUCATION STANDING COMMITTEE
April 28, 2025
3:31 p.m.
MEMBERS PRESENT
Senator Löki Tobin, Chair
Senator Jesse Bjorkman
Senator Jesse Kiehl
Senator Mike Cronk
MEMBERS ABSENT
Senator Gary Stevens, Vice Chair
COMMITTEE CALENDAR
PRESENTATION(S): AN OVERVIEW OF SCHOOL DISTRICT FUND BALANCES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
ANDY RATLIFF, Chief Financial Officer
Anchorage School District (ASD)
Anchorage, Alaska
POSITION STATEMENT: Presented An Overview of School District
Fund Balances - Anchorage School District
ANDY DEGRAW, Chief Financial Officer
Fairbanks North Star Borough School District (FNSBSD)
Fairbanks, Alaska
POSITION STATEMENT: Co-presented An Overview of School District
Fund Balances - Fairbanks North Star Borough School District.
FRANK HAUSER, Superintendent
Juneau School District (JSD)
Juneau, Alaska
POSITION STATEMENT: Presented An Overview of School District
Fund Balances -Juneau School District.
CLAYTON HOLLAND, Superintendent
Kenai Peninsula Borough School District (KPBSD)
Soldotna, Alaska
POSITION STATEMENT: Introduced himself and staff.
ELIZABETH HAYES, Director of Finance
Kenai Peninsula Borough School District
Soldotna, Alaska
POSITION STATEMENT: Presented An Overview of School District
Fund Balances Kenai Peninsula Borough School District.
KATHERINE GARDNER, Deputy Superintendent
Matanuska-Susitna Borough School District (MSBSD)
Wasilla, Alaska
POSITION STATEMENT: Co-presented An Overview of School District
Fund Balances - Matanuska Susitna Borough School District.
RANDY TRAINEE, Superintendent
Matanuska-Susitna Borough School District (MSBSD)
Wasilla, Alaska
POSITION STATEMENT: Co-presented An Overview of School District
Fund Balances - Matanuska Susitna Borough School District.
ACTION NARRATIVE
3:31:02 PM
CHAIR TOBIN called the Senate Education Standing Committee
meeting to order at 3:31 p.m. Present at the call to order were
Senators Cronk and Chair Tobin. Senators Bjorkman and Kiehl
arrived thereafter.
^PRESENTATION(S): AN OVERVIEW OF SCHOOL DISTRICT FUND BALANCES
PRESENTATION(S): AN OVERVIEW OF SCHOOL DISTRICT FUND BALANCES
3:31:52 PM
CHAIR TOBIN announced An Overview of School District Fund
Balances for Anchorage, Fairbanks, Juneau, Kenai, and Mat-Su.
Anchorage School District
3:33:25 PM
ANDY RATLIFF, Chief Financial Officer, Anchorage School District
(ASD), Anchorage, Alaska, presented An Overview of School
District Fund Balances - Anchorage School District Fund Balance
Categories, Accumulation, and Planned Uses. He said his
presentation would dispel misconceptions about ASD's finances.
3:33:56 PM
MR. RATLIFF moved to slide 2, Fund Balance Remaining, and
addressed the misconception regarding ASD's remaining fund
balance and how the funds were used:
[Original punctuation provided.]
Fund Balance Remaining
Misconception: ASD has $121 million in savings that
can be used.
Reality: The vast majority of those funds already have
a planned usage.
June 30, 2024 Ending
Unreserved Fund Balance $121.6 million
FY 2024-2025 Spending Plan $-37.2 million
FY 2025-2026 Spending Plan $-49.8 million
Bond Debt Rating Reserve $-26.7 million
Unreserved Fund Balance Remaining $ 7.9 million
3:34:53 PM
CHAIR TOBIN referred to the $7.9 million in ASD's Unreserved
Fund Balance and asked, "Of the $7.9 million, can you tell us
how much of the 10 percent does that equate to your budget in
terms of your fund balance?"
3:35:04 PM
MR. RATLIFF replied a little over 1 percent of ASD's
expenditures.
3:35:14 PM
MR. RATLIFF moved to slide 3, Anchorage School District for the
year ended June 30, 2024, Table AD - General Fund Unreserved
Fund Balance, taken from a state compliance report. He said the
report shows $121 million as the unreserved fund balance,
representing about 18 percent of ASD's expenditures. The report
also shows the categories of fund balance considered reserved
and not subject to the 10 percent limitation. This includes
funding for encumbrances, inventory, prepaid items, as well as
insurance, impact aid, and student allotments. He said he wanted
to focus on what is considered unreserved and spendable. The
total of all fund balance reserves creates the cash reserves
necessary to meet cash flow needs throughout the year, as some
payments are not consistent from month to month.
3:36:03 PM
MR. RATLIFF moved to slide 4, Crosswalk of SOA General Fund
Unreserved to GASB 54 Unrestricted Fund Balance Reconciliation
of SOA Supplemental to ACFR Expenditures Percent of
Unreserved/Unrestricted Fund Balance to Expenditures - Table AG.
He explained that the slide shows ASD creates a separate report,
which is also included in its audited financial statements, that
further breaks down the $121 million. The report includes $37
million to support the next year's budget (subsequent year
expenditures), $26 million in bond rating reserves, and $58
million that is unassigned.
MR. RATLIFF stated that the $50 million being used to support
the next fiscal year's budget is drawn from the $58 million in
unassigned funds. He added that the slide also includes a
comparison of reporting standards based on the State of Alaska
reporting model and the Governmental Accounting Standards Board
(GASB), highlighting the different reporting standards districts
must follow. He noted that a detailed explanation of the
crosswalk between the state and GASB definitions could be
discussed at another time.
3:36:57 PM
MR. RATLIFF moved to slide 5, FY 25 One-time Funding:
[Original punctuation provided.]
FY 25 One-time Funding
Misconception: ASD did not spend any of the onetime
funds for FY 2024-2025.
Reality: ASD fully incorporated the $49 million, $680
BSA equivalent into its FY 2024-2025 budget, in
addition to spending $37 million in fund balance.
MR. RATLIFF addressed misconceptions that ASD did not spend the
$49 million in one-time funds it received for the current year.
He stated that ASD fully incorporated the $49 million into the
FY25 budget and also spent down $37 million in fund balance. He
explained that two factors may have caused confusion. First was
timing. The district's budget report to the state was due July
15. The district did not know the final amount of funding until
June 28, leaving little time to complete a full budget revision
and obtain school board approval before the state's deadline,
particularly since the board is not in session during the
summer.
3:37:33 PM
MR. RATLIFF said the school board subsequently approved the
adopted budget in August, which included the $49 million in one-
time funds. Second, he noted that the amount of fund balance
remaining or being used for the next year is roughly the same as
the one-time funding amount. Because the figures are
coincidentally in the same range, some may assume the district
saved the one-time funding. He clarified that the funds being
referenced were carried over from prior years.
3:38:08 PM
CHAIR TOBIN recognized Senator Bjorkman joined the meeting.
MR. RATLIFF moved to slide 6, Revenue Summary, and explained the
slide shows ASD's general fund revenue summary for the adopted
FY25 budget. He stated that the district used both the $49
million in one-time funds and $37 million in fund balance to
prevent cuts during the current fiscal year. He noted that this
budget was approved in August after the district had already
been required to submit its report to the state.
3:38:47 PM
MR. RATLIFF moved to slide 7, Attrition, and addressed a final
misconception that the district has an extra $41 million in HR
accounts that could be used to prevent teacher reductions. He
explained that ASD incorporates an estimate of unspent funds
into its budget to reduce the likelihood of ending the year with
excessive fund balance.
MR. RATLIFF described the budgeting concept using an example: if
an entity has $100 in revenue but knows that some funds
historically go unspent, it may budget $105 in expenditures,
taking the calculated risk that $5 will remain unspent. The risk
is that if all $105 were spent, the budget would end in a
deficit.
MR. RATLIFF stated that ASD uses this same concept in its
budgeting process by estimating that approximately $41 million
will go unspent. This estimate allows those funds to be
reinvested in the current budget. He noted that savings from
attrition have grown over the years, largely due to increased
turnover and vacancies amid funding uncertainty and expanding
job requirements. As a result, the district has seen substantial
savings in some years. The estimated attrition amount has also
increased over time as it has tracked higher actual attrition
rates.
3:40:03 PM
MR. RATLIFF cautioned that as the attrition estimate increases,
the district assumes greater financial risk. Taking on
additional risk while simultaneously spending down fund balance
reserves could place the district in a precarious position in
the event of an emergency, such as a fire, earthquake, or
unexpected enrollment decline. He stated that for the current
year and the upcoming year, the district has again budgeted
approximately $41 million in expected attrition savings from
vacancies and turnover.
[Original punctuation provided.]
Attrition
Misconception: ASD has $41 million in funds from
overestimating salaries.
Reality: ASD has estimated that $41 million will go
unspent due to vacancies and turnover and has budgeted
that money to prevent more reduction
______________________________________________________
Simple example of attrition budgeting:
*You expect $100 in revenue, however, not everyone has
historically spent all of their budgeted funds.
Revenue = $100
Expense = $100 $105 Budgeted Accounts
$-5 attrition
3:40:33 PM
MR. RATLIFF moved to slide 8, a table titled: Anchorage School
District General Fund Budget Variance For the Year Ending June
30, 2025 Data as of 4/15/2025, and explained that next three
slides show projections for the district's year-end fund
balance. He said the first slide reflects revenue estimates. The
district is projecting a negative variance of approximately $37
million in revenue. He clarified that this amount is separate
from the $37 million in fund balance the district projected it
would spend.
3:41:07 PM
MR. RATLIFF moved to slide 9, a table titled: Anchorage School
District General Fund Budget Variance for the Year Ending June
30, 2025 Data as of 4/15/2025, and said the slide shows the
expenditure side of the budget. The slide includes estimated
attrition in two accounts: salaries and benefits. He noted that
the benefits attrition is higher than salaries, largely because
some employees waive medical insurance, which results in
savings. He explained that these attrition amounts appear as
negative figures in the budget so the district can allocate
additional funding to other areas while attempting to recapture
savings during the year. He said the district is currently
projecting about $8.4 million as a positive variance in
expenditures. Of that amount, the district plans to transfer
approximately $7 million to cover higher transportation costs
and potentially fund capital repairs that are needed.
3:41:52 PM
MR. RATLIFF moved to slide 10, a table titled: Summary of GAAP
Basis Projected Revenues, Expenditures, Undesignated Fund
Balance and Allowable State Carryover (in millions $) For the
Year Ending June 30, 2025 Data as of 4/15/2025, and explained
that the summary shows expenditures are expected to exceed
revenues by approximately $36 million. He stated that the
district's ending unreserved fund balance for the year is
projected to be about $84 million. Of that amount, approximately
$27 million is restricted for bond rating requirements and $50
million is planned to be incorporated into the next year's
budget. This would leave roughly $7.5 million as truly
unassigned spending. He noted that state reporting may indicate
the district has about $84 million available once the audit is
completed for the following year. However, based on how those
funds are categorized, the amount actually available for
discretionary spending is closer to $7.5 million.
3:42:43 PM
MR. RATLIFF moved to slide 11, Revenue Summary, a table showing
the total General Fund revenues and explained how approximately
$50 million, was incorporated into the district's FY26 budget to
date. He stated that this reflects the budget approved by the
school board and submitted to the municipality. He noted that
once the district receives any adjustments to state funding, the
budget will be revised as needed. He explained that, depending
on timing, the school board may or may not be able to approve
revisions before the state reporting deadline, similar to what
occurred the previous year.
MR. RATLIFF stated that the $50 million in fund balance,
combined with more than $60 million in reductions, allowed the
district to balance its preliminary budget based on current
statutory funding levels. He emphasized that there is no
additional or hidden source of funding that could be used to
offset the significant reductions included in the current
budget, as some have suggested. He thanked those who had reached
out to verify the information they were receiving.
3:43:58 PM
SENATOR BJORKMAN referred to slide 11 and asked if the
subsequent year expenditure of $49.8 million was for FY26 or FY
27.
MR. RATLIFF replied it is for FY 26.
SENATOR BJORKMAN sought confirmation that the $49.8 million was
included in the budget that ASD built for the next school year,
which is the year the legislature is currently funding.
MR. RATLIFF replied correct.
Fairbanks North Star Borough School District
3:45:08 PM
ANDY DEGRAW, Chief Financial Officer, Fairbanks North Star
Borough School District (FNSBSD), Fairbanks, Alaska, Co-
presented An Overview of School District Fund Balances -
Fairbanks North Star Borough School District.
3:45:23 PM
MR. DEGRAW moved to slide 2, General Fund (FY24), and explained
that Fairbanks has several different fund balance categories and
that he would summarize them, beginning with the largest fund:
[Original punctuation provided.]
General Fund (FY24)
Unrestricted/Unassigned $13.5 M (This is available)
Nonspendable/Restricted $1.2 M
Impact Aid $16.1 M
Outstanding POs $ 2.1 M
TOTAL General Fund $32.9 M
MR. DEGRAW noted that the figures shown are audited FY24 numbers
from the district's audited financial statements. He added that
the financial statements themselves were not included in the
presentation but could be provided if requested. Beginning with
the general fund, he stated that the bottom figure represents
the total general fund balance with all components included,
which is just under $33 million. He explained that the top line
reflects the unrestricted and unassigned amount available for
spending, approximately $13.5 million. For context, he said the
$13.5 million represents roughly three weeks of expenditures for
the Fairbanks School District.
3:46:19 PM
MR. DEGRAW explained that the other components listed,
nonspendable and restricted, primarily include inventory and
correspondence program allotments owed to homeschool families.
He added that the district had a little over $16 million in
Impact Aid funds at the end of FY24. Those funds are received in
advance and are assigned to the FY25 budget. He further noted
that the district had just over $2 million in outstanding
purchase orders at the end of the fiscal year, representing
purchases already initiated but not yet completed. He summarized
that while the total general fund balance is about $33 million,
approximately $13.5 million is actually available for the
district to spend.
3:47:25 PM
MR. DEGRAW moved to slide 3, Transportation & Nutrition Services
and shared the following information:
[Original punctuation provided.]
Transportation & Nutrition Services
Transportation $2.1 M Nutrition Services $1.9 M
(Restricted)
General Fund subsidizes transportation services (~$2.5
M)
General Fund subsidizes NS (~$500K)
Will be $0.0 M by end of FY25
MR. DEGRAW stated that the transportation fund has a balance of
a little over $2 million, which is assigned specifically to
transportation expenditures within the district. He noted that
the district faces a significant shortfall between
transportation costs and the state transportation grant. While
the presentation lists the shortfall at about $2.5 million, he
recently confirmed with the transportation director that the gap
is now closer to $3 million. He explained that the district must
subsidize transportation each year using general fund dollars
that would otherwise support classroom instruction. As a result,
he said the transportation fund is expected to be depleted by
the end of the current school year and may even be in a negative
position.
MR. DEGRAW then discussed the nutrition services fund, which
contains a little under $2 million in restricted funds dedicated
to food service operations. He added that the district typically
supplements the nutrition services program with approximately
$500,000 annually from the general fund.
3:48:47 PM
MR. DEGRAW moved to slide 4, Other Funds, which outlines
additional FNSBSD funds:
[Original punctuation provided.]
Other Funds
Capital Projects $1.0 M Equipment Rep $(-0.3M)
Risk $3.0 M Activities $1.6 M
MR. DEGRAW stated that the capital projects fund has a balance
of about $1 million. These funds are restricted for specific
capital projects within the district. He explained that the risk
fund has a balance of approximately $3 million. The primary
expenditures from the risk fund include districtwide health
insurance costs, as well as unemployment insurance, workers'
compensation, liability coverage, and similar expenses. For
context, he noted that roughly $35 million to $40 million flows
through the risk fund annually, meaning the current balance
represents less than 10 percent of annual expenditures.
3:49:39 PM
MR. DEGRAW stated that the equipment replacement fund is
dedicated to replacing technology devices for staff and students
across the district. He noted that the school board has had to
reduce contributions to that fund, and it is currently operating
in a negative position. The funds in that account are committed
to replacing devices for staff and students. He explained that
the activities funds consist of money raised by students across
the district through classes, programs, clubs, and other
activities. Those funds are restricted and must be used only for
the activities for which they were raised.
3:50:13 PM
MR. DEGRAW moved to slide 5, All Funds Summary, and summarized
that the total of the previously discussed fund balances is
approximately $42.2 million.
[Original punctuation provided.]
All Funds Summary
General $32.9 M
Transportation $ 2.1 M
Nutrition Services $ 1.9 M
Capital Projects $ 1.0 M
Risk $ 3.0 M
Equipment Rep $ (.3 M)
Activities $ 1.6 M
Available Fund Balance
$13.5 M
Estimated at end of FY 25
$10.0 M
MR. DEGRAW noted that while the total may appear large, only
about $13.5 million is actually available for the district to
spend. He stated that the district anticipates the $13.5 million
will decline by approximately $3 million to $5 million, leaving
an estimated balance of about $10 million by the end of FY25. He
explained that this projected reduction is largely due to a
significant enrollment decline in the Fairbanks School District,
which will result in lower state revenue than originally
anticipated. He added that the district expects to use
approximately $3 million to $4 million of the FY24 fund balance
by the end of FY25.
3:51:18 PM
MR. DEGRAW moved to slide 6, Final Thoughts, and noted that
discussions about school district fund balances occur annually,
involve large figures, and the topic is complex. He said this
can lead to confusion and misinformation. FNSBSD is willing to
provide clarification regarding fund balances, their use and
best practices. He then outlined appropriate and inappropriate
uses:
[Original punctuation provided.]
Final Thoughts
Appropriate Uses
Emergencies
Opportunities
Unanticipated revenue declines
Inappropriate Uses
Regular/Ongoing Operations
Important to Preserve FB
School Districts can't raise additional revenue
MR. DEGRAW said appropriate uses of fund balance, include
emergencies, opportunities, and unexpected revenue declines. As
an example of an emergency, he referenced the COVID-19 pandemic,
when districts were required to respond quickly over a one- to
two-year period. In Fairbanks, he said the district's spendable
fund balance was reduced to zero and was technically negative
from an auditing perspective.
MR. DEGRAW provided an example of an opportunity, explaining
that the district previously used fund balance to help launch a
one-to-one device initiative, ensuring each student had access
to a device. He also noted that fund balance can help address
unexpected revenue declines. He cited the district's recent
enrollment drop, which will reduce state funding, and explained
that approximately 89 percent of the district's revenue comes
from federal Impact Aid, which can fluctuate significantly from
year to year. He stated that a generally accepted best practice
is to avoid using one-time cash reserves to support ongoing
operating costs. However, he acknowledged that districts
sometimes rely on fund balance to maintain operations during
periods of constrained revenue. He emphasized that preserving
fund balance is important because Alaska school districts rely
entirely on three revenue sources, local, state, and federal
funding, and do not have the authority to generate their own
revenue.
3:54:34 PM
SENATOR BJORKMAN asked Mr. DeGraw, of the approximately $10
million the district expects to have remaining after FY25, how
much the school board anticipates using to support the FY26
budget.
MR. DEGRAW replied that the district currently anticipates using
some of those funds, particularly to cover the transportation
funding shortfall. He explained that the FY26 budget currently
sets aside about $2 million to address an anticipated $3 million
gap between transportation costs and the state transportation
grant. He stated that he generally encourages the school board
to minimize the use of fund balance whenever possible. However,
based on current projections, he expects the district may need
to budget at least $1 million to $2 million of the remaining $10
million, and possibly more depending on the outcome of the
current legislative session.
SENATOR BJORKMAN asked whether part of the $10 million would
therefore be used to cover the transportation shortfall in FY25.
MR. DEGRAW replied that the district has historically used fund
balance to subsidize transportation costs. He noted that the
district had about $2 million remaining in its transportation
fund at the end of FY24, though the balance had been $4 million
to $5 million several years earlier. He explained that
transportation costs increased significantly during the COVID-19
period. As those reserves are depleted, the district will likely
need to cover the full shortfall from the general fund beginning
next year.
SENATOR BJORKMAN asked whether it was the district's intention
to not use any additional fund balance from the $8 million to
support the FY26 budget.
3:57:22 PM
MR. DEGRAW responded that if the district receives no additional
transportation funding during the current legislative cycle, it
will likely need to use approximately $3 million of the
anticipated $10 million balance to cover transportation costs.
He added that any increase in state transportation funding would
reduce the amount the district would need to draw from fund
balance.
3:58:19 PM
At ease.
Juneau School District
3:58:55 PM
CHAIR TOBIN reconvened the meeting and introduced the presenter
for the Juneau School District.
3:59:11 PM
FRANK HAUSER, Superintendent, Juneau School District (JSD),
Juneau, Alaska, presented An Overview of School District Fund
Balances -Juneau School District. He moved to slide 2, an image
from the Juneau Empire with the headline, "Dunleavy's veto of
education funding bill puts pressure on lawmakers during final
month of session. It also had the following quote:
[Original punctuation provided.]
"An errant characterization of Juneau's budget was mad
during Dunleavy's press conference by state Education
Commissioner Deena Bishop, who said, 'At the $680, the
Juneau School District came out with a balanced
budget. A few weeks later, their board voted on a $0
input, and now they do have a deficit as well as
others."
MR. HAUSER stated that he had experienced an unusual couple of
weeks following a press conference by the governor in which the
Commissioner of Education made what he described as an erroneous
statement about the Juneau School District. According to Mr.
Hauser, the commissioner stated that when the BSA was at $680,
the Juneau School District had produced a balanced budget, but
that the school board later voted for zero additional funding
and the district subsequently had a deficit. He said that
statement was incorrect. He explained that the Juneau School
District assumed a $400 increase to the Base Student Allocation
(BSA), or an equivalent amount in one-time funding, during its
FY26 budget planning process. He emphasized that at no point
during the FY26 budget process did the school board consider
adopting a deficit budget.
3:59:56 PM
MR. HAUSER moved to slide 3, an image of a KTOO headline,
"Proposed Juneau School District budget assumes $400 increase to
per-student state funding." He stated that, after difficult but
necessary consolidation work in the previous year, the district
was able to maintain operations, avoid layoffs, and ultimately
adopt a balanced budget. He noted that the district issued a
public statement to clarify the situation after the remarks were
made during the press conference.
4:00:21 PM
MR. HAUSER moved to slide 4, District Statement on Governor's
Press Conference, with a highlighted quote:
[Original punctuation provided.]
"The facts, as evidenced by the approved budget documents, are
that the board passed a balanced budget, which included an
anticipated $400 BSA increase or equivalent one-time funds."
MR. HAUSER stated that the situation had been unusual for the
district. He noted that the district had first been accused of
operating with a deficit and was now being asked to address its
fund balance, which he described as the latest topic of
discussion regarding school district finances.
4:00:29 PM
MR. HAUSE moved to slide 5, an image of a cat relaxing in a box,
and said JSD is like Schrödinger's cat, accused at the same time
of having both a deficient and a fund balance.
4:00:42 PM
CHAIR TOBIN asked how much of his time is taken by navigating
erroneous information about Juneau School District's finances.
MR. HAUSER replied that he had not yet quantified the time spent
addressing the issue. He stated that a significant portion of
his time involved responding to it. Mr. Hauser reported that
from last year into this year the Juneau School District began
emphasizing the phrase "spreading the facts." He indicated that
widespread misinformation continues to circulate and require
response.
4:01:17 PM
MR. HAUSER moved to slide 6, Spread the Facts, and stated that
the accusations directed at school districts had become absurd.
He said misinformation spread quickly but emphasized that people
could choose to intentionally share accurate information
instead. He stressed that objective facts existed, particularly
regarding numbers, math, public budgets, public budget meetings,
public reports, and the results of annual independent public
audits. He shared the following.
[Original punctuation provided.]
"Spread the Facts"
• FY2024 JSD audit identified $1.89M available fund
balance.
• FY2025 JSD realized savings with consolidation
plus vacancies and one-time funds. Fund balance
is balancing the FY2026 budget.
• FY2026 JSD Board of Education adopted a balanced
budget, based on an anticipated increase to state
funding in the amount of $400 through the Base
Student Allocation (BSA) or one-time equivalent.
• FY2026 projected available fund balance is
$1,411,858, just over Board-policy required
minimum 1.5 percent.
4:02:02 PM
MR. HAUSER moved to slide 7, FY 2024 JSD Audit Identified
$1.89 M Available Fund Balance, a bar graph showing the
available fund balances for JSD from FY 2020 to FY 2024. He
stated he would review the facts using several charts. He said
it is misinformation that school districts do not have audits.
The district undergoes an independent outside audit every year.
He explained that in FY 2024 the Juneau School District had a
$1.8 million deficit. He said the chart also shows several years
in which the district experienced approximately $1 million
deficits, which contributed to the financial crisis the district
faced. He stated the district addressed the situation by making
difficult decisions, including consolidation and school closures
last year, as well as closing the district office building. He
said the chart shows the beginning of the district's financial
recovery following those actions.
4:02:50 PM
MR. HAUSER moved to slide 8, a pie chart showing the following
information:
[Original punctuation provided.]
FY2025 JSD realized savings with consolidation plus
vacancies and one-time funds. Fund balance is
balancing the FY2026 budget.
FY 2026 Estimated Revenue by Source
Operating Fund
Fund Balance Use 7.79 percent
(OTF, Hold Harmless, and Vacancies)
State Revenue 47.39 percent
Federal Revenue 0.41 percent
Local Revenue 44.41 percent
MR. HAUSER stated that in FY 2025 the Juneau School District
realized savings through consolidation, staff vacancies, and
remaining one-time funds. He explained that the district is
using fund balance to balance the FY 2026 budget. He emphasized
that if claims are made that the district has both a deficit and
a fund balance, the committee should understand that the FY 2026
budget is balanced because fund balance is being used to achieve
that balance. He reiterated that the available fund balance
followed the district's consolidation efforts, staff vacancies,
and remaining one-time funds.
MR. HAUSER stated the district is also facing the national
educator shortage, noting that Alaska is already at a
disadvantage because it does not have a defined benefit
retirement plan. He recalled that when he began teaching, the
Alaska Teacher Placement Fair attracted thousands of applicants
from across the country and Alaska was considered a desirable
teaching location. He said that over time Alaska became less
competitive, attendance declined, and the in-person placement
fair has since been discontinued.
MR. HAUSER explained that by the time Alaska school districts
know their state funding levels, other states have already
completed most of their hiring, leaving very few applicants
available for some positions. He noted that while current
vacancies are helping balance the next year's budget, they are
also a symptom of a larger statewide workforce shortage.
4:04:18 PM
MR. HAUSER moved to slide 9, which provided the following
information:
[Original punctuation provided.]
FY2026 projected available fund balance is $1,411,858,
just over Board policy-required minimum 1.5 percent.
BP 3470 FUND BALANCE
Fund Balance Range - Operating Fund
The District should maintain a minimum unassigned fund
balance in its Operating Fund of 1.5 percent of the
subsequent year's budgeted expenditures and outgoing
transfers.
Official Board approval by majority vote is required
to go below 1.5 percent.
4:04:49 PM
MR. HAUSER moved to slide 9, GFOA Recommendation and State
Limits, and elaborated on the following points:
[Original punctuation provided.]
GFOA Recommendation and State Limits:
• The Government Finance Officers Association
(GFOA) recommends that general-purpose
governments, regardless of size, maintain an
unrestricted budgetary fund balance in their
general fund of no less than two months of
regular general fund operating revenues or
expenditures.
• Based on our FY2025 revised budget of
$70,176,780, the state limits districts to
holding a maximum of 10 percent of that amount in
the unreserved fund balance, which would be
$7,017,678 for JSD.
• If districts follow the GFOA's recommendation of
maintaining two months of operating expenses,
this would amount to approximately $11,696,130
(calculated by dividing the total budget by 12
months, then multiplying by two months).
• This means that the state's 10 percent limit is
roughly $4.7 million less than the amount
recommended by GFOA to maintain fiscal stability.
• The district is effectively limited from holding
the recommended amount to ensure long-term
stability and flexibility.
4:06:08 PM
MR. HAUSER moved to slide 10, January 2024, from the desk of
Superintendent Hauser, and shared the following message he
penned:
[Original punctuation provided.]
January 2024, from the desk of Superintendent Hauser
I am in the unenviable position of being new to
Juneau, uncovering a difficult situation that may
challenge assumptions, and delivering unwelcome news.
But my job is not to tell you what you want to hear.
It's to tell you the truth.
The truth is that this district must make both
immediate and long-term financial changes.
All of our jobs, together, will be to look at that
truth, without blinking, and with the courage and
resolution to address it.
MR. HAUSER stated the committee has heard from other testifiers
about best business practices. He posed a rhetorical question,
asking whether a CEO of one of the largest employers in a city
or region would be advised to keep no reserves in the bank,
suggesting that doing so would not be sound financial practice.
He said he was uniquely qualified to speak about the
consequences of spending down a district's fund balance, noting
that when he assumed his position the district had depleted its
reserves. He stated that the district subsequently faced what
has been described as the worst financial crisis in its history.
He referenced an email he sent to the community in January 2024,
explaining that as a new superintendent he had uncovered a
difficult financial situation and needed to communicate that the
district would have to make both immediate and long-term
financial changes. He said his responsibility was to tell the
truth about the district's financial condition, even when the
message was difficult.
4:07:10 PM
MR. HAUSER stated the Juneau School District addressed the
situation by making significant changes, including school
consolidations and the closure of the district office building.
He said the district's most recent audit showed that all fund
balances had returned to positive levels. He concluded that
JSD's experience demonstrates what happens when a district
operates without adequate fund balance.
4:07:32 PM
MR. HAUSER moved to slide 11, Historic Trend of Audited Fund
Balance in the Juneau School District, a bar graph showing the
audited fund balance of the Juneau School District from FY 2020
to FY 2024. The fund balance amounts were:
FY 2020 - 4,020,295
FY 2021 - 650,372
FY 2022 - (1,787,639)
FY 2023 - (2,582,919)
FY 2024 - 1,895,914
MR. HAUSER directed attention to the zero line on the chart,
noting it illustrates the district's financial crisis
approaching. He explained that in order to maintain school
programming without a meaningful increase in the Base Student
Allocation (BSA), districts such as JSD were forced to spend
down their fund balance to maintain operations. He pointed out
that the chart shows this occurring in 2021, after which the
district reached a breaking point and entered a deficit.
MR. HAUSER stated that deficits tend to grow each year once they
occur, noting the chart shows the situation worsening in 2023.
He said it required a significant effort to reverse the trend
and return the district to a positive position. He concluded
that many districts have already reached a financial breaking
point.
4:08:10 PM
SENATOR KIEHL arrived at the meeting.
4:08:15 PM
MR. HAUSER moved to slides 12-13, pictures of repairs to Juneau
schools and flooding. He stated that fund balance is often
referred to as a district's savings account, but the Government
Finance Officers Association (GFOA) suggests it should instead
be viewed as an insurance policy. He explained that this
perspective connects fund balance or reserves to their role in
managing financial risk, noting that districts cannot predict
when unexpected events affecting schools or the broader
community may occur.
4:08:55 PM
MR. HAUSER moved to slide 15, a headline from Alaska Public
Media that reads, "Education bill veto leaves Alaska school
leaders disappointed, frustrated and confused." He stated that
part of the district's financial recovery has included
rebuilding its fund balance, which he described as a savings
account or insurance policy used to help districts weather
unexpected events and fiscal uncertainty while protecting
student programs and opportunities.
4:09:14 PM
MR. HAUSER moved to slide 16, DEED Proposed Regulation Change to
Local Contribution, and cautioned that pressure to spend down
fund balance would undermine a district's financial stability.
He noted that by state statute districts may not have two months
of operating expenses in reserve. He further stated that a
proposed Department of Education and Early Development (DEED)
regulation expected in June could further destabilize districts.
He explained the proposal could reduce local funding for items
not included in the disparity test, which he said would further
weaken an already limited financial safety net for school
districts:
[Original punctuation provided.]
DEED Proposed Regulation Change to
Local Contribution
4 AAC 09.990(b) is amended to read:
(b) In the definition of "local contribution" in
AS 14.17.990,
(1) "appropriations" means money
appropriated to a district [DISTRICTS SCHOOL OPERATING
FUND] by the city or borough, but does not include
money appropriated for community services, capital
outlay, or debt service;
(2) "value of in-kind services" means the
documented fair market value of insurance, utilities,
energy, audits, and maintenance of facilities provided
at no charge to a district by the city or borough, but
does not include value of in-kind services for
community services or teacher housing [AS REPORTED IN
THE DISTRICT'S SCHOOL OPERATING FUND].
4:10:08 PM
At ease.
4:10:42 PM
CHAIR TOBIN reconvened the meeting and asked about the flood at
Auke Bay. She said repairs are ongoing and asked about cost of
construction materials increasing due to federal tariffs.
4:11:08 PM
MR. HAUSER replied that with the Auke Bay Elementary repair, the
district was fortunate to make many of the purchases and
planning decisions in January and February before certain
tariffs went into effect. As a result, the district is not
currently anticipating major cost increases. He explained that
the flooring in the commons area still needs replacing over the
summer, and the district is uncertain whether tariffs could
affect those costs. He added that the district is also
_
finalizing insurance payments related to a flood at Kaxdigoowu
_
Héen Elementary School several years ago, which flooded the
school library. He stated the district is concerned about
potential tariff impacts on construction and repair costs. If
additional costs arise that are not covered by insurance or
other funding sources, the district may need to use available
funds, including fund balance, to address them. He said the
potential impact of tariffs on costs remains an ongoing concern
for the district.
4:12:03 PM
CHAIR TOBIN commented that she worries about Alaska's
communities as the effects of climate change continue to be
observed.
Kenai Peninsula Borough School District
4:12:28 PM
CHAIR TOBIN introduced the presenter for the Kenai Peninsula
School District.
4:12:40 PM
CLAYTON HOLLAND, Superintendent, Kenai Peninsula Borough School
District (KPBSD), Soldotna, Alaska, Introduced himself and
staff.
4:12:58 PM
ELIZABETH HAYES, Director of Finance, Kenai Peninsula Borough
School District, Soldotna, Alaska, presented An Overview of
School District Fund Balances Kenai Peninsula Borough School
District. She moved to slide 1, FY 24 Audited Fund Balance, and
said it is in Governmental Accounting Standards Board (GASB)
format:
[Original punctuation provided.]
Kenai Peninsula Borough School District
FY24 Audited Fund Balance
Non-Spendable: $1,892,866
Restricted For: $3,779,620
Committed: $4,434,649
Assigned to: $5,844,123
Unassigned: $1,794,375
Total: $18,576,237
MS. HAYES stated that in the assigned category the district has
$4.6 million assigned for the subsequent year, which is the
current year, for use this year to balance the budget for FY 25.
After the FY 25 budget was passed, the district had to allocate
an additional $1.5 million of fund balance to meet the needs of
rising costs in the current fiscal year, leaving the district
with an unassigned fund balance of approximately $285,000 going
into FY 26. She said in the FY 26 budget the district is not
using any fund balance because $285,000 is insufficiently low.
She said the district has a $17 million deficit that it is
working on resolving through cuts, anticipated revenue from the
state, and possibly closure of some schools.
4:14:23 PM
MS. HAYES moved to slide 2, Total FY 24 Fund Balance - School
Operating Fund. She said this slide is from a compliance report
that is required by the state. It shows that the district's non-
exempt, or unreserved, fund balance is $13.6 million, which is
9.9 percent of district expenditures for FY 24:
[Original punctuation provided.]
Total FY24 Fund Balance
School Operating Fund $18,576,237
less exemptions per 4 ACC 09.160(a)
Encumbrances $1,166,140
Home School allotment $1,833,789
Inventory $878,448
Prepaid Items $1,014,419
Total Exemptions $4,892,796
Fund Balance subject to the
10 percent limitation $13,683,441
Non-Exempt fund balance as a percentage of FY24
expenditures = 9.90 percent
MS. HAYES said included in the non-exempt fund balance is the
unassigned fund balance, the subsequent operations allocated for
FY 25, which will not be available for FY 26. She said the
district does have a committed fund balance that the board has
set aside for emergencies. It rests within the [$13.6 million].
She said $1.9 million is fund balance for facility maintenance,
which the district cannot access unless the borough releases the
funds. She noted that transportation is a concern. The district
is transferring $550,000 annually to support the student
transportation department, which had an ending fund balance in
FY 24 of $34,000 that will be gone at the end of this year. The
transportation department is looking at cutting eight routes.
This means many students will have to get from arterial streets
to the main highway, which is concerning to a district 26,000
square miles in size.
4:16:20 PM
CHAIR TOBIN asked what percentage does $550,000 represented of
total expenditure for student transportation.
MS. HAYES replied that the total transportation expenditures for
FY 24 was $8.3 million.
4:16:57 PM
SENATOR BJORKMAN said it is important for the public to review
the most recent numbers available. He asked what KPBSD expects
its fund balance to be at the end of FY 2025.
MS. HAYES replied that it is difficult to quantify that number
this early in the process, but she does not anticipate it
increasing. She said the total fund balance for FY 24 was $18.5
million. She said the district is currently slated to use a
little over $5 million of that fund balance in the current
fiscal year.
SENATOR BJORKMAN restated the question and asked for the
district's anticipated unassigned fund balance, the spendable
portion that KPBSD could potentially use to build its FY26
budget.
4:18:10 PM
MS. HAYES replied the sure amount is $285,000.
4:18:27 PM
CHAIR TOBIN thanked KPBSD and said the committee would hear from
the Matanuska-Susitna Borough School District.
Matanuska-Susitna Borough School District
4:18:39 PM
KATHERINE GARDNER, Deputy Superintendent, Matanuska-Susitna
Borough School District (MSBSD), Wasilla, Alaska, co-presented
An Overview of School District Fund Balances - Matanuska Susitna
Borough School District. She introduced herself.
4:18:58 PM
RANDY TRAINEE, Superintendent, Matanuska-Susitna Borough School
District (MSBSD), Wasilla, Alaska, co-presented An Overview of
School District Fund Balances - Matanuska Susitna Borough School
District. He said budgeting in a K12 environment involves
significant uncertainty and explained that districts use ending
fund balance as a tool to manage that uncertainty. He thanked
the Senate for its work on HB 57, stating that if it passes the
House and receives the governor's support, it will provide
districts with greater certainty moving forward. He highlighted
slide three of the presentation, noting that the lower right
corner shows the projected general fund balance at the start of
the next year, excluding charter school funds. He said the
district expects about $5 million out of approximately $235
million, or a little more than 2 percent. He stated that a 2
percent fund balance is a modest tool for managing uncertainty
and may fall below what board code requires.
4:20:42 PM
MS. GARDNER moved to slide 2, MSBSD Available Fund Balance, as
of June 30, 2024, defining nonspendable, restricted, committed,
assigned, and unassigned fund balances and showing the amounts
in each fund in millions of dollars:
NONSPENDABLE:
The portion of the fund balance that includes inventories and
prepaid expenditures to be converted to cash.
General Operating Fund $7.92
Other Governmental Funds $1.47
RESTRICTED:
The portion of fund balance that includes resources that are
subject to external constraints due to state or federal laws or
externally imposed by grantors or creditors. This section is
primarily student allotment carryovers.
General Operating Fund $3.39
COMMITTED:
The portion of fund balance that has constraints on use imposed
by the Board of Education.
These include CIP Funds & Student Activity Funds.
Renewal and Replacement Fund $12.57
CP Fund $5.15
Other Governmental Funds $5.13
ASSIGNED: These are balance in the General Fund that do not meet
the requirements of restricted or committed fund balance, but
that are intended to be used for a specific purpose. These
include Food Service Funds.
General Operating Fund $0.75
Other Governmental Funds $3.28
UNASSIGNED:
The portion of fund balance in the General Fund that is
available for any purpose.
General Operating Fund $21.18
MS. GARDNER explained that the district tracks four primary
funds, one of which is a grouping of several smaller funds. She
said that, except for the general fund, the funds generally have
dedicated purposes, which is why most of the balances fall
within committed, restricted, or nonspendable categories.
4:21:23 PM
MS. GARDNER said the general fund includes approximately $7.92
million classified as nonspendable, $3.39 million restricted,
and $21.18 million unassigned and available for use. She added
that she would discuss the unassigned portion further later in
the presentation.
MS. GARDNER explained that the district also maintains a renewal
and replacement fund, similar to the fund used by the Fairbanks
School District. She said the fund supports small capital
projects such as carpet replacement, school upgrades that are
not capitalized assets, the district's one-to-one student device
initiative, and staff technology refreshes. She noted the
district has largely stopped replenishing this fund due to
budget shortfalls in recent years, but the remaining balance
should support those initiatives for about five more years.
MS. GARDNER added that the district has about $5 million in its
Capital Improvement Program (CIP) fund, all of which is
designated for specific projects. She stated that the district
also tracks a combination of other governmental funds, including
food services, student activities, and several smaller funds.
4:22:45 PM
MS. GARDNER moved to slide 3, Availability of Fund Balance, a
bar graph comparing district unassigned and charter fund balance
in millions of dollars for the years 2015 - 2024. She said the
graph shows the district's fund balance over the past ten years.
She said that at the end of FY 24 the Mat-Su School District had
about $21 million in unassigned fund balance. She said the
district reserves a portion of that balance for charter schools;
approximately $3.5 million represents charter school unassigned
fund balance, leaving about $17.5 million available for the
district's general fund.
MS. GARDNER said the district budgeted about $11.8 million of
that amount for use in FY 25 and anticipates using most, if not
all, of those funds. She said that would leave roughly $5
million available for FY 26. She stated that the
superintendent's proposed budget, approved by the board,
includes the use of about $2.5 million of that balance in FY 26,
which could reduce the unassigned fund balance to approximately
$2.5 million by the end of FY 26. She noted the district hopes
it will not need to use the entire amount but said that level
would be very low for a district with a general operating budget
of about $270 million.
4:24:16 PM
MS. GARDNER moved to slide 4, Importance of Fund Balance, a
graphic showing what fund balance supports and explained that it
illustrates how the district manages its fund balance. She said,
as other districts noted, fund balance helps address unexpected
fluctuations in revenue. She added that the district experienced
a reduction in student enrollment during the current year and
used fund balance to help cover costs that had already been
incurred.
MS. GARDNER said fund balance also allows the district to
respond to emergent situations. She noted that a boiler failed
at one of the district's schools the previous year and required
an unanticipated replacement.
MS. GARDNER stated that maintaining fund balance also allows the
district to budget more precisely. She explained that the
district can budget for vacancy factors and attrition with
greater confidence, knowing that fund balance is available if
those assumptions prove inaccurate.
MS. GARDNER added that the Mat-Su School District also faces
challenges with pupil transportation and does not maintain a
fund balance for pupil transportation. She said the district's
pupil transportation system costs about $20 million annually,
while the state grant provides about $15 million. She said the
district uses about $5 million from the general operating fund
to subsidize pupil transportation each year, depending on the
rate set for the upcoming year.
4:26:12 PM
SENATOR KIEHL asked on what BSA amount did the district
determine its upcoming use of the fund balance.
MS. GARDNER replied that the school board approved a FY 26
budget assuming a $1,000 BSA increase. She said the district
still budgeted the use of about $2.5 million in fund balance
under that assumption. She added that if the final BSA increase
is lower, the district does not anticipate increasing the use of
fund balance because the remaining balance is already very
limited. She said the district would instead identify reductions
in personnel and non-personnel areas once the state funding
decision is finalized.
4:27:10 PM
CHAIR TOBIN noted that BASIS includes a letter from Anchorage
School District Superintendent Bryant explaining the district's
fund balance. She added that a document dated December 2023 is
also available that explains fund balance terminology, including
information about the Government Finance Officers Association
(GFOA) and the Governmental Accounting Standards Board (GASB).
She stated the document provides additional context for the
financial terms used during the presentation.
4:28:48 PM
There being no further business to come before the committee,
Chair Tobin adjourned the Senate Education Standing Committee
meeting at 4:28 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Fund Balance Meeting - ASD Fund Balance Review 04.23.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |
| Fund Balance Meeting - FNSBSD Fund Balance Review 04.23.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |
| Fund Balance Meeting - JSD Fund Balance Review 04.23.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |
| Fund Balance Meeting - KPBSD Fund Balance Review 04.23.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |
| Fund Balance Meeting - MSBSD Fund Balance Review 04.23.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |
| Fund Balance Meeting - ASD Letter to the Alaska Legislature 04.21.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |
| Fund Balance Meeting - Explainer 04.22.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |
| Fund Balance Meeting - Understanding Fund Balance Reporting 04.22.2025.pdf |
SEDC 4/28/2025 3:30:00 PM |
Education |