Mat-Su schools face $30 million deficit unless state funding is increased, Supt. Trani says

Mat-Su schools have a big stake in the outcome of the sharp debate in the state capital over education funding.

Gov. Mike Dunleavy has pushed back against an increase in money for schools unless two education priorities or his are included in a package. Those include changes in how charter schools are approved as well as retention bonuses for teachers.

However, Mat-Su school superintendent Randy Trani told legislators last week that without an increase in the Base Student Allocation, or BSA, approved by legislators in Senate Bill 140, the Matanuska Susitna Borough School District will run a $30 million deficit next year.

Trani appeared before the committee with Katie Gardner, the school district’s deputy superintendent and operations officer.

The choice would be to cut programs or tap the district’s unencumbered cash reserves of $5.97 million, Trani told the Senate Finance Committee.

The BSA is the formula in state law that guides funding for school districts including in Mat-Su. The amount is set in statute at $5,960 per enrolled pupil with some adjustments, such as for special needs students.

However, the amount has not been significantly changed since 2017, resulting in a substantial erosion in purchasing power due to inflation.

A $680 increase in the BSA now in SB 140 would fund almost all of the school district’s budget, Trani said, although it would cover about half the losses due to inflation over the last six years.

If the Legislature and governor agree to a smaller increase, such as $340, Mat-Su schools would still be left with an $18 million deficit, Traini said. The choice would again be to cut programs or tap the district’s cash reserves.

Mat-Su’s school board has set a guideline for the district to keep a 5 percent “fund balance,” or reserve, which is similar to goals set by other Alaska school districts.

However, in the present cash-strapped environment many districts have had to draw reserves down and some to zero unencumbered funds, according to an analysis by the Alaska Municipal League.

The problem with tapping reserve funds to balance the budget, absent new state funds, is that it leaves a school district vulnerable to unexpected expenses like the damage to Houston Middle School caused by the 2018 earthquake.

Reserve funds were tapped to get repairs underway quickly, Trani said. Other funds were found subsequently to finance the total reconstruction of the Houston school, but that allowed the district to shift the money to construction of the Mat-Su Central school, which is now underway.

Pupil transportation, or school bus operations, has also been a problem for the district. Mat-Su covers a large geographic area the size of many states in the Lower 84, which requires long school bus routes for children living in outlying areas.

State funding for pupil transportation has also been frozen, but since 2016. This results in the district having to shift about $5 million a year from the education budget to subsidize bus operations. Other geographically large school districts, such as on the Kenai Peninsula, are in a similar situation in having to subsidize buses.

Meanwhile, Mat-Su is the only school district in the state where there has been an increase in enrollment, and that has created its own problems, the senators were told.

On one hand, rising enrollment brings more money through the per-pupil allocation of the BSA formula. But more students bring more costs, too.

So far the district has managed this by not matching the student enrollment increase with a proportional increase in teachers, Trani said. Other funds, such as remaining pandemic aid money, has also eased this.

But when the temporary funds are gone the district will be fully exposed to the cost increases unless there is new state money.

Cost pressures are also being felt by Mat-Su’s charter schools, which operate independently but which are financially supported by the school district and the state funds to the district. An increase in the BSA would help charter schools as well as the district’s traditional schools.

The governor has until March 14, or next Thursday, to decide whether to veto SB 140. Legislators in Juneau are now working to find a way to satisfy the governor’s requests to avoid a veto.