Revised school district budget marked by uncertainty and assumptions

Despite the ongoing uncertainty surrounding Alaska’s education funding after Governor Mike Dunleavy vetoed House Bill 57, which addressed funding and policy, only to have that veto overridden by the Legislature, the Matanuska-Susitna Borough School District (MSBSD) school board continued to work on adopting the proposed 2026 budget during the May 21 meeting.

Katie Gardner, Deputy Superintendent, said that there have been a number of ongoing conversations within the MSBSD administration regarding finance even before the spring semester began, and recognized that the district would be faced with what she called “unprecedented uncertainty,” maybe even more than anticipated regarding school funding.

“While I wish I had more definitive news to share with you, we still have uncertainty. But we have a deadline,” she said before presenting the school board with yet another version of a budget proposal for the next school year.

“While we are presenting information with some uncertainty, the reality exists that if there is another veto, even that will likely come very late in the process. It will likely come at the end of June, and we would not be able to bring back another iteration to the board before the end of the fiscal year. And we have to submit these documents,” said Gardner.

While local funding is a known, with the Mat-Su Borough Assembly appropriation set at 4% increase for local education funding, Gardner said all other local revenue is based on a three-year average, such as facility use fees. Though she added that it is a relatively small percentage of MSBSD’s budget.

The current budget proposal has several revenue assumptions. Gardner stated that in terms of state funding, the district has had to make some adjustments, including adjustments for the newly approved Mat-Su Central School Hybrid Learning Academy, which has been formally approved by the state. “We are assuming some increases in revenue to support that educational program.”

She also said they are assuming there will be a $700 increase to the student BSA, there will be no changes to the PFD lottery, there will not be any type of one-time funding, and they are not assuming any revenue for the reading incentive grants.

In terms of federal funding, Gardner told the board that the district has accounted for the E-rate contributions, which helps schools and libraries to obtain affordable broadband, and has also averaged into the budget a slight increase in Medicaid reimbursements.

As for expenditures, Gardner said that similar to revenues, the district budget reflects a number of assumptions. She said that when looking at non-personnel expenditures, the district did provide budget amounts to charter schools based on the same assumptions for revenue for the modified HB 57, and in turn, charter schools built their expenditure budgets around those revenue figures.

Gardner told the board in order to maintain a balanced budget, there were drops in allocations to department budgets, saying on average, department budgets are at 82% of FY2025 amounts. Similarly, with district managed accounts, contracts are funded on average at 87% of FY2025. Meanwhile, property and liability insurance is increased by 9%, though those figures won’t be known for another month, she reported. “Historically, they have been higher than 9%, but we will be able to make an adjustment in the fall revision, once we have actual figures.”

Of course, the biggest concern for most with any budget proposal is the cost of personnel. Gardner said that there were assumptions built into the proposed budget that she reviewed with the board.

“Personnel, as you know, makes up such a large portion of all expenditures within the district,” she said.

There is a projected decrease of 99 certified personnel and 60 non-certified personnel in the proposed budget, though Gardner was quick to point out that if adopted, there would only be 5-10 personnel laid off, while the remaining decreases are positions that have become vacant from resignations, retirements and non-retention for individuals, and the district has not chosen to fill.

“District-wide, we have vacancies that have been accumulating throughout the year and that we have not moved to fill. And then we have vacancies and attrition that is expected at the end of the school year and end of the fiscal year.”

“All of these assumptions all rolled together, the biggest area where we see a decrease and a reduction in the operations of our system is in the total number of FTE that is funded for the 2026 school year.”

Gardner said that in implementing the 159 FTE reduction, none of the layoffs would come from certificated positions, which includes classroom teachers, special education teachers, school nurses, and counselors. Instead the layoffs will come from some classified positions, including instructional and administrative support staff and custodial support staff.

MSBSD Superintendent Dr. Randy Trani said that any further decrease in the BSA from the state could lead to further reductions in staff.

When pressed if the district has any sort of contingency plan if the governor decides to reduce the BSA further, Gardner said that any contingency plan is difficult to formulate without knowing the level of BSA reduction, if one is to occur.

“However, there are a series of things we would look at in support of making sure that the district was solvent and wasn’t bankrupt.” She said among the things they would look at would be the resources that may already exist in the renewal and replacement fund, but if used would have consequences.

She said the district would also look at discretionary areas, though the district has already reviewed those areas “with a lot of diligence.” The administration could also eliminate some existing contracts, and reduce services to students and schools, and look at possibly cutting further staff positions. “We would be limited to looking only at positions where there’s not a contract in place,” Gardner said, referring to more classified positions and resources available to substitutes. Also vulnerable to further BSA decreases could be student activity funds.

There would also be a district-wide hiring and funding freeze, which Gardner said has the potential to put things on hold while the district developed a more detailed plan.

The proposed budget will be further discussed at the next regularly scheduled school board meeting on June 4 at 6 p.m. in the MSBSD administration building in Palmer.