The school board is scheduled for three meetings next week as it works to address a $636,000 gap between revenue and expenses in its draft 2026-2027 school year budget, which will include drawing on declining reserve funds.

The board’s budget and finance committee is set to meet at 4:30 p.m. Tuesday, March 3, at Evergreen Elementary School, with the full board to hold a public hearing on the budget at 6:30 p.m. Wednesday, March 4, also at Evergreen.

Then the board and borough assembly will hold a joint work session to review the school district budget at 6 p.m. Thursday, March 5, at City Hall. The borough provides about 30% of the district’s operating funds. The state is the largest contributor to the budget.

Schools Superintendent Joshua Garrett said state law is behind some of the push to reduce the district’s operating funds reserve.

Under the draft budget, which is subject to change, the gap between the district’s $6.1 million in projected expenses and $5.5 million in revenue for next year would be covered by drawing from reserves.

The operating reserves were a healthy $1.38 million in June 2024, declining as the district has withdrawn from the account to cover its budget. The district anticipates the balance will be at $839,000 on June 30, falling to $203,000 on June 30, 2027, under the draft budget.

Pre-COVID pandemic, districts were limited by state law to maintaining an operating reserve at no more than 10% of their budget. During the pandemic and amid an influx of significant federal aid, the Alaska Department of Education gave school districts a break, allowing them to keep higher balances in their general funds to deal with the uncertainty of COVID-19.

That flexibility expired last year, and districts across the state are once again required to stick to a 10% limit on their reserves.

This means Wrangell must “spend down” its savings to meet the state’s requirements, which would put its reserves at just over $600,000, Garrett said. The drawdown to balance next year’s budget, however, would bring the account far below that level.

The district has another reserve account for major maintenance work which it also could draw on to balance its budget.

Garrett noted that the state’s return to setting a maximum for holding money in reserves reflects an important principle in how public education is funded. He said the resources given to schools are meant to support the students who are sitting in the classrooms right now.

“This year’s money is supposed to be spent on this year’s kids,” Garrett said in a Feb. 17 interview. “And next year’s money will be spent on next year’s kids.”

The district is navigating this transition while facing several other financial pressures. Enrollment is down from pre-pandemic numbers, which reduces the amount of funding provided by the state, and the federal aid that supported schools during the pandemic is no longer available.

In addition, the district is planning for a possible 10% increase in health insurance costs and standard salary increases for staff.

Despite the $636,000 draw from savings, Garrett remains comfortable with the early version of the budget. He characterized the deficit as a normal part of the starting process and pointed out that the revenue estimates are conservative assumptions.

During the Feb. 16 school board meeting, Board Member Dan Powers said he is optimistic about the next budget. “I hope we have reasons to move money around in the budget, instead of having to beg for more,” he said.

As the budget process moves forward and official revenue numbers become clearer, the district expects those figures to shift.