School budgets being cut statewide

School districts statewide are expecting to continue slashing their budgets heading into the next school year.


Barring a funding increase from the Legislature when it convenes next month, five of the state’s largest school districts are anticipating cuts between 2 and 5 percent in 2014, most of which will come at the expense of staff and, in all likelihood, classroom teachers.

According to district officials, they simply don’t have much of a choice.

An evaluation of the Juneau, Ketchikan, Kenai, Anchorage and Fairbanks school districts’ budgets reveals that each district allocates more than 80 percent of its operating or general fund to employee salaries and benefits. Juneau dedicates the highest percentage out of the five with 90 percent of its $77.8 million budget going to personnel costs.

“That’s going to inch up every year,” Kenai Peninsula Borough School District superintendent Steve Atwater said of personnel costs. “You have to have an increase in revenue to match that, or you make cuts. Your balloon blows up every year.”

While Gov. Sean Parnell included $25 million in one-time funding for public education, he did not recommend increasing the Base Student Allocation, which is the primary revenue stream for Alaska’s public schools.

Pairing the current BSA from the state with soaring health care costs and employee raises each year means the only choice school districts have is deciding what to cut, said Mark Foster, chief financial officer with the Anchorage School District.

“It’s been cut, cut, cut, so now we’re in the spot where every cut is really going to hurt because we’re not going to be able to offer something,” Foster said. “We just can’t keep it up.”

Increased funding from the state or, in some cases the school district’s local government, could dramatically alter a district’s financial picture.

“We could have a shortfall of a million or surplus of a million for the next school year,” said Matthew Groves, the business manager at the Ketchikan Borough School District. “It really depends what the state and (Ketchikan Gateway Borough) do.”

The five districts are facing cuts to operating funds ranging from 2.38 percent in Kenai to 5.36 percent in Fairbanks. Juneau is preparing for a cut around 3.2 percent currently, but that number is subject to change depending on the ongoing labor dispute with the Juneau Education Association.

The Anchorage School District cut 214 support positions last year due to budget constraints, and officials are expecting to do away with another 400 positions over the next two years. This time, however, teaching jobs will be amongst those lost.

“We tried to protect the classroom for as long as we could, but we’ve come to the conclusion that the support side is pretty stressed, so if we went another year cutting deeper ... that just wouldn’t work,” Foster said.

The result is about 120 direct teaching positions being eliminated due to an anticipated shortfall of about $23 million. Currently, there are between 3,200 and 3,300 direct teaching positions in the district. The reduction will mean an increase of one to two students per teacher.

As the grade level increases, typically, the size of classes also increase. However, the district is particularly mindful of transition periods like when the youngest students first start going to school and when students are getting settled into high school.

“We’re really mindful of trying to maintain moderate class sizes when we’re at those introductory levels,” Foster said.

Alaska’s largest school district serves about 48,000 students spread out in more than 100 schools, and it dedicates about 87.5 percent of its operating fund to teachers. That’s second highest out of the five districts analyzed.

The driving force in Anchorage’s budget woes is the rising cost of health care in the area — particularly specialty care, Foster said.

“Even though Alaska has typically paid premiums, those are growing,” he said. “We used to pay 1.5 times what you may pay in Seattle. Now we’re paying 3.5 and 4.5 times other places.”

While the problem of rising health care costs is not unique to public entities like the school district, there is an added difficulty in that the district relies on external funding sources, Foster added.

“When I have flat revenue, and I have a challenge to attract and retain productive and talented people, I have to increase salary benefits to have any hope of pulling people in,” Foster said. “If you don’t, you go into a death spiral.”

The district settled on a new collective bargaining agreement with its teacher’s union earlier this year that allows for increases of just under 3 percent in total compensation (salary and benefits) each year over the span of the three-year deal. While increasing personnel costs is not ideal, the alternative is worse, Foster said.

“I can’t afford to lose ground at attracting new people,” he said, adding that doing so introduces a “high risk that you lose ground in your core function of providing a high quality education.”

Fairbanks, the state’s second-largest district in terms of enrollment, is fearing the largest percentage of cuts out of the five districts. The reasons are largely due to decreases in enrollment, rising health care costs and the inability to balance the budget with reserves, as it had in years past.

About 14,300 students are being educated by the Fairbanks North Star Borough School District, which has a bleak outlook at the financial situation going forward.

“It’s not positive at all,” Superintendent Pete Lewis said of the budget picture. “We’re looking at pretty profound cuts.”

District officials are expecting to have to cut between $10 and $14 million from its $224 million budget. If cuts were to fall somewhere between those estimates, roughly $12 million, it would be 5.36 percent of the district’s operating fund.

In years past, the district typically had a “couple million” dollars rollover from year to year that would help balance future budgets, but that funding isn’t expected to be there next year.

“Health care costs will eat up anything that is left over,” Chief Financial Officer Mike Fisher said. “We’ve cut the last three years in a row now.”

As a result, this was the first year Fairbanks class sizes were increased to offset some of the budget shortfall.

“If health care costs go up a couple million (dollars), and you assume all else is flat, you have to absorb that,” Fisher said.

The district has a unique health insurance program in that it is self-insured. While the plan is good for employees, there is concern that the “Cadillac tax” for premium health care plans looming in 2018 may have dire consequences for the district, Fisher said.

“Without having those rules and guidelines written, there is a lot of unknown,” he said.

Like in Anchorage, Fairbanks school officials opted to give teachers a raise in the most recent round of negotiations. Teachers got 1.4, 1.25 and 1.75 percent cost-of-living increases for each of the three years. It also gave stipends to some teachers at the top of their respective pay columns.

“Living in Fairbanks is not cheap, so we’re trying to make sure we take care of our employees and we’re trying to retain them,” Lewis said. “So we looked at modest increases.”

Still, those raises may come at a cost, Lewis added.

“If you don’t have an increase in your operating dollars, it’s going to be tough to do business,” he said.

Juneau School District officials face a unique challenge as the district is currently negotiating with the Juneau Education Association for a new collective bargaining agreement.

Without considering any potential increase in teachers’ salaries or benefits, capital city schools are looking at cutting between $2 million and $3 million in next year’s budget.

Those cuts would come on the heels of about $11.7 million in reductions over the past five years, Chief of Staff Kristin Bartlett said in an email to the Empire.

Contrary to Anchorage and Fairbanks, Juneau did not directly identify rising health care costs as a primary driver of the growing budget shortfalls. Instead, the district pointed to lower enrollment numbers, fewer students that receive special funding, a need to continue to invest in curriculum and increasing costs for things like internet service charges, utilities and replacing obsolete technology.

While negotiations between the district and teachers are currently at a stand-still, the union’s most recent offer would require an additional $10 million in cuts over the next three years — depending on perspective.

Union officials contend a large percentage of their requested boost is already in the budget, but district officials say that is not the case. Both sides are awaiting an arbitrator’s findings after submitting briefs earlier this month.

Regardless of how the dispute turns out, Juneau school officials are not expecting to be able to increase the district’s reserves for at least the next three to five years, Bartlett said.

Unlike Anchorage and Juneau, the local government in Ketchikan does not fund the school district as much as what is allowed under state law. As a result, school officials are left guessing every year at how much will need to be cut.

The district’s message to the city this year will be “either we can make these cuts, or, Borough, you can fund us more,” said Groves, the district’s business manager, adding that the district has identified $2 million in cuts. That’s the second-highest percentage out of the five districts evaluated.

Funding from the borough has dropped every year for the past five ($9.6 million in 2010 to $8 million this year), Groves said.

Preliminary conversations with the borough have indicated another year of funding reduction, he added.

“They haven’t funded to the cap in years,” he said.

Still, the district is not in panic mode, but there are conversations going on to determine where the cuts will come from — should they become a reality, Groves said.

“It’s a big budget,” Groves said. “There’s always money, you just have to decide what your priority is, and you have to make that decision early while people are calm.”

The district saw an increase in intensive students in recent years, which equated to more funding from the state. That has “made things relatively easy in budgeting,” Groves said.

But the district isn’t expecting that increase to continue into the future, he added.

“Next year still has a lot of barriers to go, but we’re being diligent in thinking of the worst-case scenario where we have to identify $2 million worth of cuts,” he said. “The superintendent has a term — ‘surf’ — which means (the budget is) always moving, so you’re constantly making adjustments.”

Kenai schools have largely been sheltered from the shellacking befalling other districts’ budgets around the state, but that may not be the case for long if state funding doesn’t increase in the future, Kenai Peninsula Borough School District Superintendent Steve Atwater said.

“We’re in pretty good shape. We anticipated this better than anybody else did,” Atwater said. “We’ve been balancing our budget with our reserves, but we’re getting to the point we can’t keep doing that.”

The district has pulled between $1 million and $2 million from reserves to balance the budget for the last three years, but with the reserves not as robust as in years past, the school board and Atwater are now looking at cutting from the budget.

“There will be fewer positions, but it’s probable — though not certain — that no one will lose a job because of attrition,” Atwater said. “We’re talking about 8.5 positions.”

Kenai officials are expecting to cut about $3.5 million — or 2.38 percent — from an operating fund of approximately $147 million. The pupil-teacher ratio is being increased by 0.5 district-wide to help alleviate some of the financial burden, he added.

“If we’re going to (cut) that kind of money, then it will have to come from personnel,” Atwater said. “There’s really not other options when you’re dealing with that kind of money.”

Atwater said he is hopeful the More Alaska Production Act oil tax system will reverse the school budgets’ downward trend.

“If it works the way it’s supposed to work, once revenue begins to climb back up they’ll be able to go back and do a BSA increase,” he said. “It’d make our lives much easier.”

Contact reporter Matt Woolbright at


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