Choice to not fund education to the cap will have lasting implications

Posted: Sunday, April 25, 2010

From time to time we are all presented with moments which are seminal, even pivotal in the grand scheme of our existence. Very quietly one of those moments occurred this past Tuesday evening in the chambers of the Kenai Peninsula Borough Assembly.

For as long as I can recall -- at least 20 years -- the Kenai Peninsula Borough has provided full funding "to the cap" for Kenai Peninsula schools. Please note that the terminology "to the cap" does not indicate anything other than the maximum amount allowed by the State of Alaska in local support for the school district budget. The relationship between the Borough Assembly and the School Board has been the envy of the balance of the state -- the trust and co-operation unparalleled.

In a matter of 30 minutes, however, that all changed. The Borough Assembly unilaterally decided that instead of providing that level of support they would arbitrarily reduce that amount to something that felt more "correct" to them.

Here's the process. In October, the School District begins developing a budget, which goes into effect on July 1 of the following year. After tremendous conversation and fact-gathering, which takes up to five months, the School Board then submits the proposed budget to the Assembly for funding of the local share. In the past, the School Board developed those budgets with confidence that, even though the Assembly could cut those amounts, they would not. Now, for the first time in 20 years, they have done so. The implications of this decision are enormous.

First, in future years the District will be required to guess at funding -- and develop budgets accordingly. This year the Assembly arbitrarily decided to cut funding in an amount equal to half of the value of the District's equipment fund ... next year they could use an entirely different rationale. At the District we believe in "sustainability" in that we resist using one-time funds for on-going programs, yet the Assembly now instructs us to do just that. It makes no sense.

Herein lies the problem. We (as a community) are now presented with a reality where a collection of five Assembly members with their own various outlooks can arbitrarily make huge adjustments on an annual basis to the operations of the School system. A dangerous proposition, indeed. Of course that reality has always been there. Now, the way is paved by this Assembly action. Interestingly, of the six members who voted for the $4 million cut, there were three different reasons stated for their votes:

1.) Because the economy of the peninsula was going to crash and we needed to prepare for it;

2.) Because the School District is just too large and we pay our employees too much;

3.) Because the School District has a fund balance and an equipment replacement account and we should use those funds for our operation.

Clearly, I cannot respond to all those allegations in this space, however, a couple of observations. First, as to item No. 1, it is hard to argue that the Borough is going through some hard times. However, the Borough's contribution to the School District budget as a percentage of both total sales and assessed value has actually fallen over the past five years. That would seem to indicate that compared to economic activity on the peninsula we are generally in line.

My favorite is item No. 3 above. While Assembly members complain that in FY09 we maintained a $4.6 million unreserved/undesignated fund balance compared to our General Fund expenditures of $115,000,000 (KPBSD CAFR 6/30/09 pages 37 and 174); the Borough maintained a $22.6 million unreserved/undesignated fund balance compared to their General Fund expenditures of $28.5 million (KPB CAFR 6/30/09 pages 30 and 32). That is 4.0 percent of expenditures for the School District and 79 percent of expenditures for the Borough. Additionally, while we maintain an equipment replacement fund in the amount of $7.9 million with a total equipment inventory in excess of $30 million (26 percent), the Borough has an equivalent fund of $4.2 million with a total equipment inventory of $11.8 million (35.6 percent).

My point here is clearly not to say that they are doing anything wrong. It is entirely valid to plan for the future and put away funds as you can to soften future unanticipated "bumps in the road." However, if it's good for the Borough, why isn't it good for the School District?

The implications of the Assembly action are vast, and the future which that action brings can be a huge problem. I have advocated, and continue to advocate, that the Assembly and the School Board sit down as equals and consider some mechanism which will provide stability to this process -- and confidence amongst the various participants. We (the School District) will adjust and adapt to whatever the Borough decides to do this year. However, even a cursory look out at the horizon would indicate that this sort of arbitrary, political wrangling can serve no one well.

We are a better community than that!

Joe Arness is president of the Kenai Peninsula Borough School District Board of Education.

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