School districts statewide, including Wrangell, will be looking to the Legislature next year for an increase in state funding, but any boost in the state’s per-pupil formula likely will depend in large part on oil revenues and also Permanent Fund earnings.
And neither looks good this month, less than eight weeks before lawmakers are scheduled to convene in Juneau.
The state funding formula for K-12 education hadn’t moved in about five years before this year’s 0.5% mini-nudge upward. Meanwhile, districts statewide are facing budget deficits and program cutbacks, also blamed on the end of federal pandemic relief aid.
“I think it’s likely to be a big issue,” Ketchikan Rep. Dan Ortiz, who also represents Wrangell, said of school funding in the 2023 legislative session. He expects to see legislation proposed to increase the formula, just as in recent years when it failed to gain enough support for passage.
The state was rich with revenues this past spring from near-record oil prices, but supporters still were unable to win enough votes to raise the school funding formula. The next legislative session could be harder, Ortiz said. “The problem is that revenue looks like it will be down compared to last year.”
Oil prices, which generate a large piece of state revenues, started this week at about $90 a barrel, down from almost $120 when the Legislature adjourned in May.
And the Permanent Fund, which provides the single largest deposit into the state general fund each year, is down in value almost $12 billion between Dec. 31, 2021, and Sept. 30 of this year, reducing the projected draw on the account to help pay for public services — and education — next year. The Permanent Fund Corp.’s Sept. 30 projection of the annual draw from earnings shows $75 million less next year and almost $145 million less the following year than had been forecast in January.
One problem is that as the state budget gets tight, education and other public services have to compete for limited funds with the annual Permanent Fund dividend. “The PFD proponent … he’s going to bang that drum,” Ortiz said of Gov. Mike Dunleavy, who successfully campaigned for re-election on the position of paying out large dividends.
In addition, opponents of boosting state funding for schools seem to always bring up low student tests scores as a reason to deny more money until they see better results, said the representative, who taught for 32 years before retiring. “You’re not going to solve that problem by cutting education,” Ortiz answered.
“Flat funding really is education cuts, year after year after year after year,” Jim Anderson, chief financial officer of the Anchorage School District, said in an interview with the Alaska Beacon news website last month.
It’s not just school districts that will be asking lawmakers for more money next year, said Sitka Sen. Bert Stedman, who also represents Wrangell. High inflation is driving up budgets for a lot of public services, including schools.
Stedman, who served last session as co-chair of the Senate Finance Committee, said legislators can expect to see flat state revenue and strong upward pressure on spending when they convene in January.
Although a bill to increase the state funding formula for schools would be a relatively simple math exercise, Stedman worries that some lawmakers would seize it as an opportunity to rewrite major pieces of the program, transferring education dollars from rural areas of the state to urban centers. The senator commented last year that urban legislators are gaining influence as they hold more seats in the House and Senate.
“That doesn’t excite much of us in rural Alaska at all,” he said of risking a rewrite of the funding formula rather than merely boosting the per-student dollar number.
And though school districts around the state are lamenting the end of federal pandemic relief aid that helped cover budget holes the past few years, Stedman said there will not be much sympathy among some legislators for that plea. Districts knew the pandemic money was ending, he said, and were warned not to assume the state would step in and replace the federal aid when it is exhausted.
Wrangell, which lost significant enrollment in the first year of the pandemic, has been helped by a state program to assist districts adjust to less funding. But the end of those state payments to help shield Wrangell from the revenue loss of declining enrollment will mean $100,000 less in state funding for the 2023-2024 school year, Tammy Stromberg, school district business manager, said last week. The final year of federal pandemic money will help for 2023-2024, she said, but after that the budget gap gets wider. “Then, things have got to change,” she said.
The district is using about $300,000 in federal aid to help balance the budget this year.
Anchorage is among the most financially stressed school districts in the state, with planning underway to close as many as six schools next year due to funding gaps and declining enrollment.
“We’ve been able to stave off what Anchorage has been going through,” Stromberg said, but the Wrangell district still needs a long-term plan that balances the budget.
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