Borough, school district officials explore solutions for education funding woes

The Wrangell School District is running out of money — literally. If state and borough funding continue at the current levels, the schools will empty their reserves within two years.

To help counteract the funding woes, the school board and superintendent met with the borough manager, mayor and borough assembly to workshop potential solutions on Nov. 19. The conversation lasted nearly two hours and began with slide deck presentations from Borough Manager Mason Villarma and school district Business Manager Kristy Andrew.

Villarma was blunt.

“We’re in poor shape,” he said, referencing the school’s draining reserves balance. “What we’re doing isn’t sustainable.”

This year, the borough funded the school district at $1.3 million, about $300,000 less than the past two years. Though the state Legislature appropriated funds for a one-year boost in state aid to school districts this year — worth about $440,000 to Wrangell — the assembly reduced the borough contribution to the school budget by about the same amount. The result was no gain in funding for the schools, while the borough was able to avoid spending down its own reserves.

Villarma explained that the school district’s borough-based funding comes from two sources: The first is a percentage of annual sales tax revenue (currently 20%), and the second comes from a federal aid program called Secure Rural Schools.

The U.S. Forest Service program, subject to annual congressional appropriation, provides rural communities with money for roads and schools to help compensate for the fact that municipalities cannot collect property taxes on Forest Service land.

The borough allocated its entire SRS check toward the school district for the 2023-2024 school year.

With this year’s reduced borough contribution to the school district, the borough expects to end the fiscal year next June 30 with more than $1.4 million in its Secure Rural Schools reserve fund from prior federal payments, roughly $2 million less than the fund had in 2019.

The school district shows it started this school year with $1.377 million in its own reserves, but expects to draw down its savings by $727,000 to balance the budget, leaving an estimated $650,000 in reserves at the end of the school year.

Absent more local funding or state aid, the district could empty its reserves in a year without significant cuts to its budget.

Villarma wants to expand the list of possible solutions for the school’s financial stress, but he acknowledged that the extent of the problem lies at levels outside of local jurisdiction.

“Education funding is a state issue they haven’t taken ownership of in recent years,” he said. “It’s our obligation to work together (with the schools) and we want to do that. It’s no good to point fingers because its neither of our fault. We’re just inheriting circumstances from the state.”

The school district received over $3 million in state funding for the current school year, an amount that constitutes about two-thirds of the district’s general fund operating revenue, according to business manager Andrew. However, the state’s funding is tied to student enrollment, meaning the downward trend of students in the school system results in less funding from the state.

At the Nov. 19 work session, the assembly and school board tried to brainstorm solutions to bring more money into the school district. They discussed a “sin tax” — essentially a 2% or 3% tax on tobacco and alcohol products that would directly fund the schools. Villarma noted that Petersburg, Ketchikan and Sitka all do something similar.

He also suggested increasing the sales tax cap. Currently, Wrangell residents are only taxed on the first $3,000 of a purchase. Meaning, whether you buy something for $3,000 or $10,000, the borough will receive the same amount ($210) from sales tax. By increasing the cap, the school’s allotment of sales tax revenue would increase alongside it.

However, Villarma acknowledged that generating new taxes can only do so much, which is the reason he is such a strong proponent of a potential exchange student program. Marketing it as a Wrangell, Alaska exchange experience, Villarma said the program could help increase state funding.

“The exchange kids would count toward enrollment, so you go from 270 to 300 kids in the district, and you bring in close to $300,000 in funding from the state,” he said. “And you send some Wrangell kids down south too, just at a lesser ratio.”

He also said bringing in students from out of town would make for a better educational product.

“You’re introducing different perspectives and diversity and different kinds of kids that come from a different educational background into the system,” Villarma said.

Schools Superintendent Bill Burr said marketing the experience as a form of “student tourism” could increase interest from down south.

Burr and Villarma will continue to meet regularly. The borough’s finance committee will also explore the viability of proposed options at its meeting next month. Villarma hopes the schools will be proactive about finding solutions.

“We expect our partners at the school would do something either to increase their revenues” or reduce expenses, he said. “Whether that’s through grants, whether that’s through other ideas that me and Bill have talked about, or there’s cutting inefficiencies and operations, which we should all be doing anyway as stewards of the taxpayer dollar.”

 

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